W e all remember the journalistic outrage in 2008 when the senior automotive executives arrived in Washington, begging bowls in hand, aboard their multi-million dollar business jets. What were they thinking? How could they justify this extravagance when their corporations were so severely under-capitalised it threatened the foundation of the US economy?

More disturbing still, when one of the three wise men from Detroit was confronted by a journalist on the subject, he stammered, blushed, deflected and tried everything possible to avoid the question. Why did they not travel commercially at a more reasonable cost when ostensibly they were implementing ‘strict cost-cutting measures’?

On the face of it, this seems like a reasonable question, especially given that the operating cost of the business jets in question clock in at around US$10,000 per hour. Here in South Africa, we have similar concerns around our incumbent president and certain cabinet ministers using private jets. Most recently, a Global Express was allegedly used simply to shadow the presidential Boeing Business Jet, which had just been released from a major overhaul with some question marks around its continued serviceability. Naturally, the press had a field day with this, with some nonsensical remarks about our beloved JZ wing-walking should the Boeing prove to have a problem.

So let’s take a reality check on this whole issue of private jets and whether they are an extreme luxury, there just to service over-inflated egos – or a necessary safety precaution and a beneficial business tool. 

And where better to begin than with a review of the motor company saga in Washington. Corporate flying is a way of life in the US, especially for senior executives who need to travel extensively, both domestically and internationally. This has evolved due to the hub-and-spoke structure of the US carrier system, which often necessitates multiple connecting flights. Add to this the old adage that ‘time is money’, and one can quickly see why the National Business Aviation Association of the US is predicting global deliveries of another 10,000 business aircraft worth $230bn over the next ten years. Not surprisingly, the largest growth areas are the Brics economies, although the US and Europe still show significant growth over the next five years, of 3% and 11% respectively.

Clearly a lot of companies will be spending a lot of money on business aviation in the coming years, despite the economic crisis. How do they justify the squandering of investor/tax-payer funds on such an unnecessary evil? Let me answer this by way of example, using an exercise I recently performed for a corporate client who had briefed me to find a solution to the following problem.

The brief

“I need to find a solution to fly our CEO, COO and CTO to multiple domestic and African destinations for client and board meetings over the next 12 months. Safety is obviously paramount, but equally important is the cost. The executives in question obviously cost the corporation a significant amount [the amount was not revealed] and we need to use their time as judiciously as possible. The destinations concerned are the major centres in SA and further afield, places such as Lusaka, Blantyre, Nairobi and Kinshasa. From time to time, these will be multi-leg journeys and sometimes simple return trips.”

The approach

So my brief was a little cryptic, and obviously I spent a fair amount of time collating other information about how and when these executives travel. The major variables to this calculation would be the cost of the executives’ time, the cost of the various modes of travel, and the actual door-to-door time.

My references would be:

  • Executive Pay in South Africa – Ann Crotty, Renée Bonorchis
  • Various airline websites : SAA, Kulula, British Airways
  • My own calculation of road travelling time from Sandton
  • Clearly, I would have to make some estimates and use some averages, but these will not affect the calculation materially and should be within 10% accuracy. The figures I used are as follows:
  • Average remuneration of C-level executive per hour: R2,000 (includes bonuses, salary etc)
  • Average cost of return business class flight from Johannesburg to:

Cape Town: R6,500

Durban: R4,900

P.E.: R4,400

Africa: (other: R16,300 )

  • Average delay on airlines: add 20% to proposed flying time (Flightonline)
  • Average travel time to/from airport: 40 mins
  • Average cost of light business jet per hour: R15,200 (Conklin & De Decker)
The calculation 

The calculation below compares airline cost against private jet operation, initially showing that the private jet option is, on average, eight times more expensive. However, when one takes the cost of executive time into the equation, along with airline scheduling and road travel/parking costs, it is possible to make a fair comparison between these two modes of transport. In this particular case (and I acknowledge it will not always be so), given that three executives are making the same trips, the private jet option is more cost effective.  In addition, the flexibility the private jet offers will greatly reduce executive stress and thereby improve productivity, not to mention safety. Business Aviation is the safest aviation category globally. 


Ownership versus charter

Once an organisation has compiled a realistic and defensible business case for private jet travel, the next question is whether to purchase an aircraft outright, or simply to charter. There is no single answer, as in most cases the varying requirements will dictate which option makes the most sense. 

The benefits of ownership:

  • Availability – generally the owners’ flying takes precedence, thus the aircraft is always available.
  • Safety – whilst the SACAA strictly monitors charter aircraft, it is always comforting to know that the aircraft in which you are travelling is maintained and operated to your requirements.
  • Operating cost – as the owner, you will be paying the actual costs without any of the margin typically earned by charter operators/owners.
  • Tax efficiency – the Section 12C allowance provided by SARS allows depreciation of the capital cost of the aircraft at 20% per annum. Hence, given adequate cash-flow, owning an aircraft can make sense. There will be an ultimate recoupment once the aircraft is finally sold. 
  • Dollar hedge – maybe not so relevant at the moment, however, an aircraft is valued in US dollars and can therefore provide a nice piggy bank.
  • Charter income – when the aircraft is not being used by your organisation, it is always an option to charter it out. Contrary to what many aircraft brokers will tell you though, it will generally not be fully self-sustainable through charter, but may offset some of your own flying costs.

The advantages of chartering:

  •  Capital commitment – in current economic times, tying capital into an aircraft may not be the most prudent decision for your business right now.
  • Mission variety – in some instances you may need a long-range jet, in others a turbo-prop to access unimproved airfields. There is no one-size-fits-all business aircraft, so charter may be more viable.
  • Stakeholder optics – as mentioned in the opening paragraphs, owning and flying your own aircraft still creates negative perceptions in certain folks’ minds. Were you to invest $10 million in upgrading your IT infrastructure this would probably be quite palatable to shareholders, but procure a business jet and the proverbial will fly. Charter protects you from this to a degree.
  • Management issues – an aircraft needs to be operated as any other business entity, with income statements, maintenance, regulatory requirements etc. While charter is a bit more expensive per kilometre, it does remove this responsibility.
Buying a jet – Caveat emptor 

This is definitely one purchase that you want to proceed with caution on, as the stakes are high and recovering from a bad purchase can be nigh on impossible. Obviously this applies predominantly to the purchase of pre-owned aircraft, but even when buying a new aircraft there are many pitfalls to be avoided, not least of which is failing to match suitability to your requirements. With due respect to the manufacturers of business jets, their marketing material often shows parameters such as performance and costs under ideal conditions. For example, a manufacturer may claim a 2,000 nautical mile range for their aircraft. They may even state the conditions in which this is viable – atmospheric conditions, winds, passengers etc, but may omit to say that this is for the most basic rendition of the aircraft with absolutely no options. These options may be luxury items or may even be regulatory requirements that you must have to operate in a specific location. The net result is that the aircraft you ultimately take delivery of may only be able to uplift a lesser amount of fuel due to weight limitations; hence your actual range may only be 1,800 nautical miles. This is just one of a multitude of factors that you should familiarise yourself with.

Work with someone who knows the process – it could save you a fortune in the long run

In the case of a pre-owned aircraft, the industry abounds with horror stories of aircraft being delivered with a ‘sugar-coat’ of paint applied to hide extensive corrosion or aircraft with cracks in the pressure bulk-head, which are basically a total write-off. The list is endless, and these are aircraft that have ostensibly had thorough pre-purchase inspections (PPIs) by supposedly reputable authorised maintenance organisations (AMOs). Unfortunately, as in every other industry, the business aviation sector has its fair share of unscrupulous players, but they are thankfully a small minority.


Clearly define the aviation requirements

Where to start

The most important exercise in procuring an aircraft is to go through a thorough needs analysis. These are some of the primary things that need to be considered:

  • What is the typical mission you will fly?
  • What are your cargo and passenger requirements?
  • What is the approximate budget – both capital and operating?
  • Do you plan/require charter hours for income?
  • Is there a corporate regulatory policy – for example two pilots/engines?
  • What financial structure is most appropriate?
  • Are you partial to a specific manufacturer?

Simply by answering these few questions, you can create an initial scope of the various aircraft that suit your particular requirements. From here, the flow chart becomes a bit more complex as we start to explore issues such as serviceability in the locations you wish to fly to. Does the aircraft offer a stand-up cabin, and does it do this by use of a dropped floor? What is the fleet safety record and the dispatch reliability of this aircraft type? What is the relative cabin pressure altitude at 41,000 feet?

There are literally dozens of questions that should be asked before you make a commitment to pursue a specific type. Once this has been defined, it is very easy to go online and find numerous aircraft on the internet, along with specifications, prices, pictures, and everything you need to know… or is it? Brave is the soul who embarks on procuring their aircraft without the requisite acquisition skills. Some typical pitfalls can be avoided by asking the following questions:

  • How current are the pictures of the aircraft?
  • Is there any damage history and, if so, what impact should it have on the price?
  • Who is the registered owner of the aircraft… really?
  • What is the maintenance history and what does it reveal?
  • What inspections are due and when – could this be very costly?
  • What sort of deposit do the sellers want and is it refundable? If so, under what conditions?
  • Who should do the PPI and how professional are they?
  • From the findings of the PPI, what is reasonable to ask the owner to rectify?
  • Who is the escrow agent holding the funds?
  • What is the contracting process? Does it follow the typical industry course?
  • What is the tax position in the location where the transaction would close?
  • How easy is it to get an Export Certificate of Airworthiness?

In all honesty, this is about 10% of the list of check-points one should go through in the acquisition. Getting this wrong could see your deposit of hundreds of thousands of dollars forfeit, while remitting your VAT to SARS at the wrong time can attract a penalty of many thousands of Rands. The message here is work with someone who knows the process – it could save you a fortune in the long run.

Once the aircraft is delivered 

Having navigated all of the technical, contractual and regulatory issues the aircraft will be ferried to you, but ownership will most likely transfer at its original home base. However, there may be taxation advantages by transferring ownership elsewhere. Suffice to say that it will be encumbent on you as the new owner to ensure that insurance is in place for the ferry flight.

Assuming all goes to plan, the aircraft will arrive in South Africa and could be bonded by SARS, as with all other imports. Once SARS is satisfied that the VAT and duties are receipted, the aircraft will be cleared. The SACAA will also perform an inspection on the aircraft, and it will then be released to service with all of the requisite documentation and regulations having been complied with.

Prior to this, it would be prudent to identify aviation service providers who will hangar, maintain and operate the aircraft on your behalf. Often this will also involve multiple contracts, and again it would be wise to be cautious about signing up to ‘our standard agreement’. Some of these agreements are one-sided and can leave you with exorbitant, unapproved maintenance costs, your aircraft being used for training without your prior consent, and a plethora of other unpleasant surprises. Expert advice is the watch-word. Retaining the services of an aviation attorney to represent your interests from a contractual perspective could be money well spent in the long term.


To dismiss the thought of owning or chartering a business aircraft simply due to cost may not be justified once you factor in all of the considerations. There are also always the intangible benefits such as not being bound by airline schedules, especially when you are in protracted business negotiations. Not to mention the ability to have confidential on-board meetings, the flexibility to re-route to other destinations on demand, or simply the additional luxury and comfort that business jets offer. Whatever your specific set of business requirements, it is advisable to get a team of experts on your side to help you clearly define the aviation requirement and the commensurate costs, and they should not be remunerated on the basis of commission of a sale.   

About the author
Chris Rodgers is the proprietor of Rodgers Aviation Consultants (RAC), a specialist, independent business aviation consultancy. RAC assists prospective aircraft owners to define their requirements and understand the commercial, legislative and operational issues surrounding aircraft ownership. Services include market analysis, performance considerations, contract facilitation, operational budgets and all aspects related to helping you make an informed acquisition.

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