Know Your 5 Cs
The fact that flying private offers unmatched comfort compared to the commercial alternative goes without saying. But there is also greater convenience for you, your team members and above all—your clients. Expect greater privacy and fewer hassles: no airport crowds, no lost luggage, and fewer flight cancellations or delays. But before you put a business jet on your company radar, know your 5 Cs.
WHY ARE MORE COMPANIES CHOOSIN G TO FLY PRIVATE aircraft during the ongoing pandemic? As you can imagine, the benefits are numerous. Think of them as the five “Cs”:
• Convenience
• Capacity
• Comfort
• COVID-19 responsiveness
• Cost-efficiency
Business aircraft deliver a measurable increase in your organisation’s overall capacity, allowing you to expand your reach to places you never thought possible and providing an opportunity for your organisation to get more done in less time, while exceeding client demands.
The first 3 Cs are evergreen benefits of business aircraft, but another benefit to flying private has emerged during the ongoing pandemic: COVID-19 responsiveness. Businesses with access to their own aircraft can stay agile and avoid potentially unhygienic or restrictive commercial flights. Minimising the COVID threat during travel and side-stepping the hassles and potential risks associated with pandemic-era commercial aviation are significant advantages.
Of course, the fifth C – cost-efficiency – is perhaps the most challenging for C-level managers to realise. It isn’t a term one associates with operating a business aircraft. One financing tool, however, has the potential to change that: the operating lease.
Operating leases are becoming more popular because they mitigate a range of issues associated with obtaining a business jet. In an operating lease financing structure, you can enter into a sale and leaseback arrangement for your pre-owned jet, identify a jet to purchase, or assign your purchase contracts to your new, on-order jet. In each of these scenarios, you do not take ownership of the aircraft, but have full use of it as if you do. This means you retain your crew, your pilot and your flight path—all
with less risk, more freed up capital and the ability to change aircraft easily at the end of the lease.
Using traditional loan financing represents a significant allocation of capital into a depreciating asset. In contrast, up to 100 per cent of the aircraft’s market value can be funded in an operating lease. Clients typically only have to fund the security deposit, import duties and VAT (Value Added Tax), and certain other transaction costs at closing. This gives high net worth individuals and corporations an opportunity to access a long-range jet without tying up significant amounts of capital in a non-core asset. Furthermore, importing an aircraft on an operating lease can significantly reduce the impact of applicable taxes and duties, ultimately saving you money.
SHIFT THE RISK
Operating leases shift the risk of ownership to the lessor and away from the lessee. At the end of the operating lease, the customer simply returns the aircraft. The value of the asset at the end of the lease is the lessor’s issue, not the customer’s. Other factors that may make an operating lease more attractive are things like a slump in global equity markets or an excess supply of pre-owned aircraft, both of which can affect the future value of private aircraft. Operating lease customers aren’t exposed to these risks. At the end of a traditional loan term, when it comes time to sell your aircraft, cost of ownership can increase if it remains unsold for a long period of time or if the net proceeds fall short of your expectations.
With an operating lease, residual value risk shifts to the lender, which provides the customer with a certainty of cost associated with the term of use for an aircraft. In short, you know what you are getting into—and getting out of.
Along with allocation of capital, no residual value risk and certainty of cost via a fix set of lease payments that will not change over time, you get an additional benefit with an operation lease: flexibility. If you are interested in moving into a different aircraft model at the end of your lease, an operating lease makes that process seamless. You can upgrade to an aircraft with the latest technology, adjust the size or capabilities of your aircraft to reflect a changing mission profile, or extend the lease on your current aircraft.
Operating leases continue to gain in popularity around the world because it’s simply more efficient to lease an aircraft than it is to buy one. Operating leases also reduce the complexity of regulations that typically make purchasing aircraft more of a challenge in certain regions. With a lease provider who is familiar with structuring deals in South East Asia, India and the Middle East, such as Global Jet Capital, you are more likely to navigate regulatory issues with ease and access favorable terms for your unique situation.
So, now that you know your 5 Cs of business aircraft operation– comfort, convenience, capacity, COVID-19 responsiveness and cost-efficiency – as well as the advantages of an operating lease, private aircraft ownership in your corner of the world should seem more accessible than you may have imagined.
Operating leases continue to gain in popularity around the world because it’s simply more efficient to lease an aircraft than it is to buy one