Issue #4

Learn to Fly Private

Welcome to the fourth issue. I have been overwhelmed (in a good way) with the amount of outreach I've gotten on how much learning happens from this. I'm learning too, and I really enjoy conversations I get to have with you. If you're new, welcome! To catch up on how we got here you can view all (I say that like there's a lot. There's three) past issues here.

Some of you have been asking if I broker airplanes and the answer is no, but I know a lot of brokers. I am the Chief Commercial Officer of FLYING Finance, which is an aviation finance business.

This newsletter is scratching my own itch after helping a few dozen friends fly private for different reasons. I hope that it is helpful. I'll always disclose if I know someone or if there is any incentive for me in any way. As I've said before, there are some shady players in this space and I strive to be a good one.

Here's what we'll cover this week:

• How to spend less than $3m flying private
• Anonymous Jet Card Review is Back!

As always, I love your feedback and I want to make this stuff useful. Reply to this email or DM me on X at @prestonholland6.

How to spend less than $3m flying private

Let's face it, most people don't have enough free cash laying around to buy a $19m Challenger 350 like the one I tweeted about the other day. Even if you were going to put leverage on it, you're going to get 70% LTV and a sweetheart financing rate on a jet right now is 7.8%, so your down payment is $1.33m and monthly debt service of around $145,000 before the plane ever leaves the ground. As a reminder, you cannot "house hack" your way into a private jet, especially with that kind of debt service. Although this is a fictional example, the math works as you move up and down the spectrum of private aviation, whether you're looking at a $1m Cirrus SR22T or a $45m Gulfstream G650ER.

So what do I do if I have enough to fly private, but not enough to buy a big jet? Let's break down some questions to ask first. As a warning, these are brief overviews and each of these sections could be their own newsletter.

What if $3m is way over my budget? In private aviation, everything scales to a certain point... it can scale up to a $30m and down to a $300,000 budget. At the $300,000 budget, I suggest chartering. Even if you financed a smaller jet, you're going to pay $300,000 in payments.

What is my mission?

We've discussed this before, but as a reminder the word "mission" is aviation jargon for "how far are you going, with how many people, and how fast do you want to get there?" The answer to this question can be different depending on the situation. If we're assuming buying, find the most common use case. If its 4 people going from Aspen to LA, you don't need the G650ER unless you just really want one. If you're buying into an asset, I'll save you some time. Charter aircraft for one offs and find a good broker. Don't travel on "peak days" or you'll pay peak price (Thanksgiving, Christmas, New Years, 4th of July, F1 races, etc.) to optimize your use. You can charter a lot of times before you spend $3m. If you need help, I'm happy to make an introduction.

What is my individual financial situation?

If you're looking for depreciation or using private aviation for business, then the equation is different than if you're flying buddies for a golf trip. As a business tool, the equation becomes about productivity and effectiveness. As a leisure activity, it is about convenience and comfort.

4 Ways to Maximize Spend Under $3m

This is my best attempt at summarizing in a few words the answer to the question "how would you spend less than $3m?" For each example, I am trying to maximize something, whether that is all in cost (including cost of capital), hourly cost, comfort, or cash position.

1. Buy a Turboprop

Here, we're maximizing our dollar to take 4 people as often as possible. We aren't optimizing for speed and we aren't optimizing for comfort. For regional travel, especially with 4 passengers, its really hard to beat the turboprop market. They can land in short runways, are economical to operate on a per hour basis, don't require too much additional pilot training, and offer comfort on the 2-4 hour trips. Anything over 4 hours and it starts to get cramped but for under $3m, its really hard to beat. Expect to pay between $700 and $1800 per hour to operate one of these if you own it. The beloved PC12 is going to likely be out of that price range, unless you get one that will need major maintenance in 1 to 2 years. Here's some for sale (full disclosure, these are our marketplaces).

2006 Beechcraft King Air C90GT - $2,875,000 | Aircraft for Sale2006 SOCATA TBM 850 - $1,995,000 | Aircraft for Sale1984 Beechcraft King Air 300 For Sale | MD, US. 9683.1 hrs. | AvBuyer

Here are some advantages to think about:

• There is a terminal value: you can sell it for something after you use it (you'll want to step up as your income grows)
• Depreciate an asset while financing it: On the TBM 850, it would be $399,000 down and ~$13,250 per month. You can take the bonus depreciation this year, so from a tax perspective that may be very attractive to you.
• Finance, insurance, hangar, and other fixed cost are lower on a Turboprop versus a jet. Back of the napkin math says ~$1.2m total for 4 years, then you can sell the asset and upgrade. That leaves you $1.8m of flight time. Even at $800 an hour thats 2250 hours or 562.5 hours per year. That's a lot of flying, by the way.
• You will fly at the lowest variable cost per hour possible. Fuel + maintenance reserves + pilots.

2. Buy A Challenger 3500 Fractional

We're maximizing here for a mix between depreciation, comfort and our demand for flying. The Challenger 3500 is not the largest jet but its also not small by any means.

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If we're spending all $3m in a year, the best of both worlds is in fractional ownership. You get the tax benefits of owning while not having to pay as much overhead expense. The numbers below are for a 1/16th share of a Challenger 3500.

These are real numbers:

• Purchase Price: $1,455,000
• Monthly Shared Expense: $216,000/yr
• Per Flight Hour: $6,091
• Total Numbers of Days: 20
• Averaging 3 hours per day: $365,460
• Yearly Budget: $2,036,460

There's advantages and tradeoffs. In a good fractional program, you should pay the lowest dollar operating cost per hour. This is not always true. Be sure to check your operating agreement and compare against the cost to actually operate the jet. If the delta is too high, keep shopping. The tradeoff is, you only get 20 days. Thats only 10 round trips. If you're traveling more days, you'll either need to up your fraction (to 1/8th or 1/6th) which will put us past the $3m budget, or travel out and back on the same day (not great when you're taking your kids to Disney and they can only stay for the day.)

If you want to stretch the $3m across multiple years, consider a fractional at Nicholas Air. PC-12 through Challenger 350. If you want to flex up, consider the Flexjet G450 or G650 fractional. As always, tell them Preston from Twitter sent you. Nicholas Air actually might know me, as I'm friend with some of their executives, but the Flexjet folks may look at you funny which is always fun.

3. Buy Older

There is a huge asterisk with this option, because there are a lot of unforeseen issues when you buy an older jet. Its risky, but if we're maximizing our $3m, its something you have to consider. You can get in to a proper jet for a lower purchase price the older you go. Personally, I am a bit risk averse, and deferred maintenance comes in to play with these in a big way. Selling brokers will tell you it isn't a big deal, but it is real cost and real risk incoming.

Let's take this citation for example.

1981 Cessna 501 Citation ISP - $700,000 | Aircraft for Sale

Can you buy this airplane for $700,000? Yes you can! It'll cost you around $800,000 to $1.3m per year depending on how often you fly. Pilots are going to be a hassle to get because it is going to require specific training, and you will not be able to charter a jet this old. The interior on it is 22 years old.

You'll need to write the terminal value on this to scrap parts. You will also need to overhaul the engines in 2400 hours (which will likely "total" the value if you think of it like a car, where the repairs are more costly than it is worth).

4. Split a $12m jet with 4 friends

This is the nirvana, right? You and 3 of your college buddies all have successful businesses, all need jets for 91.25 total days, and none of those days ever overlap (i.e. only one guy needs next Wednesday, the day before Thanksgiving). You see my point, its hard to share a jet with a bunch of people. The ideal partnership is a leisure owner (it doesn't matter which exact days I travel) with a business owner (I need it on demand and on these days). My suggestion, and this will be an entire newsletter, is treat your plane partner like you would a marriage or business partner: with a whole lot of vetting.

Let's say you've got your partners though and you want to look at this Falcon 900EX.

The advantage you'll get:

• More plane than you could afford on your own
• Lower monthly fixed costs
• Your annual golf trip just got split 4 ways

The tradeoffs

• Finite supply (there is only one plane, what if 3 guys want it on the same day?)

The Conclusion

If you're looking to maximize your aircraft purchase sub $3m, there are some values to be had. Private aviation is inherently a step up market, and as one friend in Private Equity who owns a plane put it, "no matter what jet you own, every time you get on you look out the window and think about how to get the next size up. Maybe thats why they have windows."

Get started and unlock the world of private aviation, assuming your budget allows for it. As always, please reply to this if I can help in any way.

Anonymous Private Jet Card Reviews

Every week, we're going to give you a piece of confidential real life X (twitter) information that I've gathered in my DM's. It is always 100% scrubbed for confidence and always 100% real. If you have a review, I would appreciate you sending it my way. This week is enlightening.

We have talked a lot about Phenom 300 pricing, as it is the most popular jet in private aviation. This is a great example of the disparate pricing on different jet card pricing. Some have great capped rates and others have exorbitant rates, but when the service is completely commoditized which are you going to choose? Or, is there truly a customer service differentiator between the two? We'll see. If you have experience with either company, would love to hear it to share with everyone else.

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Until next week,

Preston Holland

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p.s. Call For Price sucks. I hate it. If you have experience with call for price, I want to hear about it. We're talking jet valuations next week.