00:10:03 · Molly O'Shea, Israel Slodowitz
[00:10:03] S1: Do you have to put that in an LLC? How do you actually make that tax advantaged? [00:10:09] S0: Yeah, typically all aircraft are in a single purpose LLC, like an SPV, and they'll usually be under the business. So an LLC is owned by the business, and then the LLC will have a lease agreement in place with the business for tax efficiency. But yeah, so I think on the other side of the spectrum, owning an airplane's complicated. There's a lot that goes into it. We'll talk more about that. So we're seeing people that are even flying three hundred hours a year. They're like, don't wanna deal with owning a plane. And I think actually, like, that's one of the big differences in this new generation of wealth. These people don't want complexity. Most of them are able to book well in advance. They're not last minute people. Are willing to book seven days in advance, two weeks in advance. They don't need that four hour call out most of the time. If they do, they can find other options. And those people would rather simplicity, ease of use. They don't want to deal with the complexity of owning a plane. So in some cases, even above three hundred hours doesn't always make sense to own. But typically, you know, in that sort of range the second reason you own a plane is for cost efficiency. So once you start hitting the two hundred and fifty hour range, the cost of owning and spreading the pilot costs and all the fixed costs around around one aircraft flying three hundred hours a year starts to make much more sense.
00:11:24 · Molly O'Shea, Israel Slodowitz
[00:11:24] S1: Okay. Let's go through a scenario. You just bought a Global 8,000. Walk through the financing of that and the maintenance. This is an extreme example, I'm aware. [00:11:33] S0: It's an extreme example. [00:11:34] S1: But let's shock the people.
00:11:35 · Israel Slodowitz
[00:11:35] S0: Yeah, well I think, first of all, Global 8,000 is like a $75,000,000 airplane, just to put things into perspective. So that's like extremely expensive airplane to buy. It's really like you're going for the top of the line. Most people don't actually buy brand new. Even if they can, they don't. So the maintenance for a brand new airplane looks very different than a maintenance on a used airplane. Most people tend to buy used aircraft, aircraft that are pre owned, that's what it's called. Whereas a new aircraft, you'll have warranties and all sorts of, the manufacturer will give you all sorts of stuff like that, make the maintenance costs a little bit less expensive. But say you bought a global 8,075 million dollars. Typically, the first thing you have to think about is depreciation costs. So the aircraft do generally go down in value. They generally do not go up in value. So if you factor in a 10% a year reduction in value, when you go to sell the plane, you're not gonna be able to get as much money back. So a lot of people kind of ignore that, but you really wanna bake that into the cost of running the plane. Then you need to hire pilots. So you'll have to go out and find pilots. Typically, you'll want at least three pilots, especially if you're gonna fly longer missions. Pilots get sick. Pilots need to go on go to training twice a year. So you'll need to hire three to four pilots. That might run you 1 to 2,000,000 a year. There's insurance costs, there's hangar costs, and then there's maintenance costs, of course. And maintenance costs is kind of where everybody gets, they buy the plane, they think it's like it's a great investment, and then they're like, now the plane's down for six months because the windshield breaks or they can't get a part for the engine. So maintenance is like another area. This is kind of where people maybe try it out and then swear off after doing it for some time.
00:13:30 · Molly O'Shea, Israel Slodowitz
[00:13:30] S1: Go through the different prices of Citation G450. We obviously just went through Global eight thousand, but maybe just talk through the starter kind of prices. [00:13:42] S0: First of all, there's a journalist called Doug Gohlen who has a website called Private Jet Card Comparisons. He does a great job. If you are very serious about flying private and you do want to get the latest pricing on jet cards and different aircraft categories, highly recommend looking into Doug Gollin. But I think the pricing is somewhere around $7,500 for entry level light jet per hour to fly, about $9,500 an hour for a midsize. So most people are actually buying not something they can't buy new, they don't buy new. Because buying new is like very, very expensive. But if you're buying sort of pre owned airplane, a light jet will run you around 3 to $5,000,000. A midsize something like this will be anywhere from 10 to 20 and a heavy jet maybe 20 to $30,000,000. Just the sticker price just to get into airplane. Buying the plane is just the beginning of the journey, right? That's the cheapest part of owning a plane. Then you have the pilots, the fixed cost, the mains cost, the fuel cost. You're probably looking at anywhere from 2 to $4,000,000 a year to run the plane just to keep it running for you. So as you could see, it's very expensive. Unless you really have a need for it or a real business need for it, it's something that a lot of people will do and then they'll swear off of it.
00:15:07 · Molly O'Shea
[00:15:07] S1: Since we just went through what full ownership looks like, let's get more to what people really, most people actually do. And so there's a couple different options where you can charter, you can get a jet card, and then you can also do fractional ownership. What can you just define for people who don't know? Define what each one of those are and then how the pricing changes.
00:15:29 · Israel Slodowitz
[00:15:29] S0: Yeah. So typically, the way people first experience private aviation is maybe they've heard of, like, an empty leg. Right? They've jumped on an empty leg. What an empty leg is is where the plane maybe has one trip landing in LA, another trip the next day is departing out of San Francisco. So the plane will need to move or reposition between LA and San Francisco. And sometimes companies will sell that as an empty leg and and for a significantly reduced price because they have to go anyways. So sometimes people get experience to private aviation through these empty legs, but I think it's probably worth glossing over because it's not really the utility and the reason people would fly private. Right? Like, an empty leg is more of a luxurious, more of an experiential type of transaction. People buy airplanes or people fly private. They typically do it as a utility, as a way to conduct business or for ease of comfort with their family. And they wanna be able to go on their schedule. They don't wanna be flying on someone else's schedule. So typically the way somebody will enter the market is through charter. Usually the first taste they'll have in private aviation. We operate a charter company. We charter our airplanes out. Chartering a plane can be great because you don't have all the commitments, but you really have to be careful of safety. It's very hard to know what you're gonna get and the prices can fluctuate quite drastically. So one day it might cost you like $12,000, the next day it's costing you $24,000 for the exact same flight. So a lot of times people will charter and then say, you know, why are the prices fluctuating so much? And then they'll upgrade to what's called JetCard. I'll explain to you what a JetCard is. A JetCard is essentially prepaid charter. So you're giving a deposit to somebody and they are essentially sourcing charter for you at a fixed price. So rather than one day paying 12,000, the next day paying 24,000, they'll charge you $18,009.09 9. Right? And and you'll pay for both flights $18,009.09. So actually, you're actually paying a little bit more than you would have paid during charter, but you at least know when you wanna fly, it's gonna cost you $18,009.09. So you're really getting essentially more expensive charter.