How to Offset the Costs of Owning an Aircraft

How to Offset the Costs of Owning an Aircraft

jet-openSchubach Aviation manages an extensive fleet of aircraft for on-demand charter services. For those who fly privately a handful of times per year, charter is often the most fiscally practical option.

When you’re in the air and on the move more frequently, however, full ownership may make more financial sense. The Sherpa Report, for example, recommends that anyone flying more than 400 hours per year consider whole ownership over fractional ownership or on-demand services.

Acquisition Costs are Just the Beginning

The investment in an aircraft is substantial and encompasses much more than the initial asset purchase. Some owners are unprepared for additional operating costs that come with an aircraft, such as hangaring, routine maintenance, crew training and certification, salary and benefits for flight crews and maintenance technicians, insurance, inspection fees, and a host of other expenses required to keep your aircraft operating in compliance and maintained at peak performance.

The single biggest cost of aircraft ownership proportional to use is fuel. Beyond that, there are maintenance costs. Personal aircraft require routine and repetitive maintenance to remain in compliance and in an airworthy status for flight. Additionally, there are costs for frequent washing and waxing to protect the aircraft from the elements. Even though a plane is housed in a controlled environment when at Schubach, operating exposure to weather, in-flight exposure to rain and ice, and parking on the ramp away from base all take their toll on the finish. A quality aircraft detailer is a necessity, but also an additional cost. All of these costs need to be taken into consideration before purchase.

Offsetting the Cost with Schubach

One of the most advantageous strategies for mitigating costs associated with aircraft ownership is to place it on a charter certificate. This will put the management and operation of the aircraft in the hands of a professional management team to generate revenue from under-performing assets on charter flights when not in use by the owner.

One of the major benefits of chartering your aircraft is the hourly rate paid back to the owner by the charter company for use of the aircraft. The aircraft owner can set the maximum amount of charter flight hours they would like per month. In many cases the revenue earned from charter hours will more than cover the operating expenses of the owners personal flights.

Part 135 Certification Benefits

Placing an aircraft in FAR Part 135 service with an experienced, professional management company like Schubach Aviation alleviates many of the regulatory compliance, maintenance, and operational expenses normally assumed by private aircraft owners. The FAA charter conformity process, in compliance with Federal Aviation Regulations, provides for a more demanding maintenance schedule. In addition, a professionally trained and FAA Part 135 certified flight crew allows owners to make their aircraft available for hire when not in use for personal travel.

Flight operations, maintenance and training are held to a higher standard under FAR Part 135 where the aircraft is offered to retail clients as an on demand charter basis than it is under traditional FAR Part 61 and Part 91 standards, where the aircraft is not chartered. For many aircraft owners this higher standard provides additional peace of mind.

A company like Schubach already manages a fleet of aircraft – possibly even models similar to your own – so it may already have the necessary technical manuals, trained pilots, and experienced maintenance technicians. This could result in significant savings on crew training, mechanic school, salaries and benefits packages, and pre-and post-flight maintenance. The overall cost of ownership is much lower with this option.

Return on Investment

Creating a steady stream of income to offset owners’ expenses reduces personal financial liabilities. Aircraft owners can easily expect to receive 28% to 35% ROI under a professional charter management agreement with Schubach Aviation.

Further, there are four tax exemption strategies during the first year of use for aircraft owners. The most advantageous is the sales tax avoidance exemption for charter services. The California Franchise Tax Board allows owners to avoid sales tax if the ratio of charter service exceeds personal use. If at least 51% of your aircraft’s flight time during the first year’s use is documented for charter services, sales tax is waived.

We are not accountants. Schubach does not assume responsibility for the exemption strategy used by the owner and does not file taxes for the owner. We will, however, provide documentation of flights through flight logs and other verifiable documentation to the owner. With decades of experience, Schubach Aviation can recommend an expert in tax and tax law if the owner would like more specific information on tax implications associated with aircraft ownership.

Schubach compiles data collected from flight logs comprising the details of every flight, both owner’s use and charter flights. The flight logs are a permanent record of each flight containing flight time aloft, called Hobbs time, which is a time counter used whenever aircraft engines are running (including taxi plus flight time).

The flight log data is kept for every flight and computed for charter invoices, crew flight and duty time, maintenance tracking, and tax information, summarized in hours once the trip is completed. Schubach Aviation provides the tax or legal professional to prepare the tax exemption filing, and all the documentation from the flight logs to assist in their accurate filing on behalf of the owner. This added benefit to the owner is an important service, alleviating the additional record keeping burden of keeping flight records during the first year to file for exemption from sales tax, and afterwards to amortize the asset.

Your Aircraft, Professionally Managed

For owners who want to have a professionally managed asset without the burden and time associated with the necessity of regulatory compliance, maintenance, crew training, record keeping, and aircraft detailing, Schubach Aviation offers a turnkey solution. We offer discounts on fuel, crew training, insurance, hangar rent, navigation chart subscriptions, and parts for required maintenance, to name a few of the many ways that we can lower your cost of ownership. Schubach Aviation is a one stop source to effectively manage an owners’ jet, providing a simplified solution to the complexity of aircraft ownership.

Our comprehensive approach includes consultation during acquisition, operational support, and certification for Part 135. These services ease the buying process, saving you the time and resources in acquiring and operating an aircraft. We are always happy to offer a consultation for any of your flying and ownership needs.