Selecting the right aircraft for you mission is one thing, buying it with a minimum of fuss is another. There are enough pitfalls in the journey to turn your dream into a nightmare. In this article, SA finance broker Savvy shares with us their tips to making a smooth transition into aircraft ownership.
Australia occupies almost 7.7 million square kilometres of the globe, and that vast expanse represents a considerable number of potential business opportunities – if you can cover the ground. It’s perhaps no surprise then that many modern Australian companies choose to own aircraft. Indeed, flying makes sense in sectors as diverse as mining, agriculture, and construction.
So, how do you go about purchasing and financing aircraft? How much do you need to invest, and where do you even start looking? Let’s answer those questions and learn how asset finance can be part of the solution.
The price for an aircraft will depend on performance, the level of equipment, and whether or not you buy used. In that sense, buying a plane is not so different from buying any other asset. Newer pre-owned single-piston engine examples can be had for under $500,000. You can stretch up over $5,000,000 for a jet – and there’s a price point on that scale to suit every company budget.
Funding the purchase
The theory behind funding the purchase of a flying asset will be familiar to anyone tasked with buying a range of other vehicles, equipment and machinery. Doing that effectively means using commercial asset finance – and getting your funding in place, so you can take advantage of a great deal when one presents itself.
Bill Tsouvalas, CEO of Savvy, says the correct type of funding can offer some significant benefits.
“Aircraft are relatively high-value assets," he points out, "so it’s important to consider tax when you examine a broad available range of finance options. The ATO allows companies to claim depreciation until an aircraft is ten years old.
"That fact is going to make a chattel mortgage structure a lot more viable than, for example, leasing an aircraft for many organisations out there.”
The potential cost savings on aircraft are no different to cars when it comes to buying pre-owned – and there are always a large number of available options on the market. Tsouvalas says there’s much help out there for buyers.
“Approach a used aircraft like you would any other pre-owned asset. Enlist help from a specialist dealer or other industry professional and ensure you get an appropriate independent inspection carried out. There are detailed requirements in terms of logbooks, so take the necessary precautions in verifying all the available information.
"Remember also that most aircraft out there will have had some form of commercial finance attached to them. Aircraft can have separate claims registered on both airframes and engines, so a specialised Personal Properties Security Register (PPSR) check is a no-brainer.”
Local or imported?
For Australian businesses, importing an aircraft offers a few distinct advantages. Europe and the US offer far bigger markets and more competitive prices. However, there’s a right way to go about buying an aircraft from overseas.
Tsouvalas says, “Steer clear of chasing small cost savings by trying to import an aircraft yourself. You’re buying in a very specialised field, and–just like with finance–it’s likely any extra costs you incur by using a specialist broker or agent will be money well spent."
- Don’t buy more seats than you need. not only will the price tag be higher but so will insurance and running costs. Aircraft premiums can range from less than 1% to more than 5% of replacement costs.
- Range and durability. Consider what distances you need to fly and don’t buy more aircraft or power than you need. If you need to land on unsealed strips, remember that not all aircraft can handle that.
- Fuel and maintenance. Expect fuel costs to range from $150 per hour for a piston-engine craft with four seats up to $1500 for a high-powered jet. Aircraft maintenance covers airframes, propellers and engines, plus communication equipment and instrumentation. The more sophisticated the machine, the more complex requirements get.
By keeping these key criteria in mind, including seeking the best possible finance option for your company, you can fly away in your new aircraft with confidence.