Business Aviation Buyer’s Overview

A summary of the considerations involved

in purchasing an aircraft from model type selection

to entry-into-service

May 2012

Business. Aviation. Intelligence.

There are many issues and services a prospective business aircraft buyer needs to consider

Selecting

an aircraft

Production

&

completions

process

Aircraft

operations

issues

Entry into

service

The aircraft acquisition process

• Needs analysis to

determine your

mission profile

• Aircraft selection

• Aircraft financing

• Aircraft insurance

• Managing the transition

from green (production)

to interior completion

• Interior completion

oversight

• Securing certificate of

export

• Selection of country of

registration e.g.

defining minimum

equipment list (MEL)

• Selecting base of

operations

• Aircraft operations:

Corporate flight

department or aircraft

management firm

• Deciding on maintenance

program coverage and

other related maintenance

services

• Securing European

importation

• Understanding the support

from Bombardier Business

Aircraft Customer Services

2

3

The first order of business is to conduct a needs analysis of your flight profile to assess which

aircraft suits your requirements

Range: which city pairs / routes will you do most frequently.

Cabin volume: In terms of configuration and layout, you have

a choice between practical, professional or luxurious.

Price: Price variations exist even for models within the same

segment.

Base of operation: Where your aircraft is based may influence

your aircraft choices e.g. range, hot & high performance, etc.

Factors that define your aircraft selection:

Denotes in

development

4

Price range $2m -$4m $5m -$6m $7m -$9m $10m -$12m $12m -$17m $18m -$24m $25m -$30m $35m+ $45m-$65m $30m-$80m

Range (nm)* 900 – 1,100 1,100 – 1,550 1,300 – 2,000 1,700 – 2,000 2,000 – 3,000 3,000 – 3,400 3,300 – 4,100 4,000 – 5,200 5,800 – 8,000 3,000 – 6,700

*4 passengers with available fuel except for ULR segment which is with 8 passengers and available fuel. Source: BCA 2011

(Note: the omission of some aircraft programs

means that they did not qualify for the forecast)

OEM/Category PERSONAL

JETS VERY LIGHT LIGHT

SUPER LIGHT

MIDSIZE SUPER

MIDSIZE LARGE

SUPER LARGE

ULTRA LONG RANGE

CONVERTED AIRLINERS

BOMBARDIER

G6000

L40XR L45XR L60XR CL300 CL605 G5000 G7000 CL850

L85 G8000

CESSNA

M2 Latitude

Mustang CJ2+ CJ3 XLS+ Sovereign Citation X

CJ4 Citation Ten

DASSAULT F2000S F2000LX F900LX F7X

GULFSTREAM

G650

G150 G280 G350 G450 G550

HAWKER BEECHCRAFT

Premier IA H900XP H4000

Hawker 200 H750

EMBRAER

Phenom 100 Phenom 300 Legacy 450 Legacy 500 Legacy 650 Lineage 1000

OTHER

BBJ I/II/III

HondaJet ACJ

Sukhoi SBJ

The major players in business aviation and their current product line-ups

5

After deciding on a aircraft model type, hiring a consultant to manage your aircraft’s interior completion is the next

order of business. Ideally, this should be done before the aircraft is ready to transition from green (production)

completion to interior completion

To advise the customer in detailing the specifications for

their aircraft. NOTE: A good consultant must have intimate

knowledge of the aircraft options list to do so;

Manage the transition from green completion to interior

completion of the aircraft;

Advise on the most appropriate country of registration given

the customer’s disposition;

Arrange for the certificate of export as well as for European

importation documentation;

Advise on maintenance program coverage offered by the

manufacturer and other maintenance related services;

Be able to effectively direct your interior designer in helping

them consider issues related to the aircraft’s safe operation

and resale value;

A completions management consultant’s mandate:

Have a track record of successful deliveries of your

aircraft model type;

Be able to navigate issues within the manufacturer’s

completions organization;

Ideally be co-located with completions centre to ensure

regular and constant access to the aircraft;

Have a secure web enabled login page on their site

where customers can access reports and view photos of

their aircraft’s completion status in real-time.

A competent completions consultant should:

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Your completions consultant should be able to advise you on the following:

Floorplan (refers to the layout of your cabin)

Interior fabric and materials Cabin accessories

Selecting options for your aircraft

Aircraft options: Your consultant must know which options are a “must-have” as they

impact the aircraft residual value at resale e.g. extended range, satcom, paint scheme,

etc.

Floorplan layouts and interior arrangements.

Interior fabrics, materials, woods and finishes: Here is

where the customers have the greatest discretion in terms

of style and personal preference. Some hire interior

designers. If you elect to do so, make sure that your

completions consultant advises you on whether your

choice of styling will adversely affect the aircraft’s cabin

environment (e.g. dB SIL sound levels) and resale value.

&

Selecting aircraft financing & insurance

7

Very few business aircraft manufacturers currently

extend financing to their customers;

Manufacturers have Structured Finance Groups that

provide a valuable service to customers by scrutinizing

whatever third party financing deal the customer

secures for their aircraft;

There are many financing services “boutique” firms in

the market. To ensure that that you’re referred to a

qualified financing professional, confer with your sales

representative, broker or NARA (the National Aircraft

Finance Association).

Aircraft financing Aircraft financing providers that specialize in business aviation

Aircraft insurance

Customers can procure very good aircraft insurance

coverage through brokers which deal with large

insurance companies that underwrite the policies.

Customers will be asked to provide the following

information: aircraft model type: e.g. Global Express XRS

country of registration: e.g. G-AAAA

price: $52m

passenger capacity; 2 crew + 14 passengers

base of operation: London, UK

Caution note #1: Always deal directly with an aircraft

insurer…never allow a third party to arrange insurance on your

behalf as insurers provide volume discounts for referrals that the

middle man seldom passes on to the client.

Caution note #2: Don’t undervalue your aircraft just to get a lower

premium. If you suffer substantial damage that is repairable, the

insurer can elect to take possession of the aircraft, repair it and

then resell it on the open market for more than they paid-out to

you.

Important considerations when procuring aircraft insurance

Production Interior completion

Aircraft green production & interior completion process

EIS with customer

Post delivery items

Cold soak

flight

8

Commencement of the completions management mandate

Flight test

• During this phase, about the time the

green aircraft is coming off the

production line and is preparing to enter

the interior completions phase, the

aircraft completions management

consultant will start preparing all the

necessary documentation focusing on

the aircraft contract, logbook and

completions spec.

• Preparing for entry into service means

that the consultant has facilitated the

country of registration, arranged for the

export certificate and advised the

customer whether he should execute a

European importation of the aircraft.

• In addition, the completions consultant

shall keep in close communication with

the customer during the first 100 hours

of operation to keep track of post

delivery snags that will require warranty

adjudication with Bombardier.

• The brunt of the completions consultant

mandate will be executed in this phase.

Typically, they will conduct the following:

• Ground inspection

• Acceptance Flight

• Documentation Review

• Manage the final closing

(aircraft handoff to the customer)

Maintenance program coverage (power by the hour enrollment)

9

SMART PARTS

• Facilitates budgeting for aircraft operations by setting aside a provision

every flight hour to cover unscheduled maintenance events. Provider

fronts money to cover unscheduled events and then reconciles amount

from customer’s current account;

• Airframe & Systems programs like Smart Parts, Falcon Care, etc. are not

like insurance policies. If at the end of the year there is a negative

balance, the owner is expected to reconcile with the coverage supplier.

Positive balances are carried over into the subsequent year.

• Engine programs work like conventional insurance programs where a flat

fee is paid in return for reimbursable labor and parts coverage and is

provided irrespective of cost or frequency of the unscheduled event;

• Even though your aircraft is under warranty, it makes sense to enroll in

power by the hour coverage as the manufacturer (Bombardier in

particular) covers consumable (spares) items as an incentive for

enrollment, and because securing coverage after your warranty has

expired requires a sizeable buy-in.

• When comparing coverage by manufacturers against third party providers,

a good rule of thumb is that manufacturers have more expensive

premiums but better coverage, as opposed to third party providers like

JSSI who have less expensive premiums but limited coverage. Some

programs offer different coverage options based on variable rates while

others have flat fees which are adjusted accordingly based on your flight

profile for that previous completed year.

How it works: List of some of the major service providers

(mostly OEMs other than JSSI):

Airframe & Avionics APU

SPEC

Engines

Corporate Care

On Point

MSP

MSP

Cessna

Cessna

Independent 3rd

party provider

Their system should be web-enabled on a secure and redundant

server;

They should have analyst services; ideally, you should be dealing

with the same analyst that has been assigned to your aircraft;

They must have a responsive customer support organization;

Familiarity with your model type: Having a track record in

supporting your particular model provides them with the insight to

troubleshoot issues when communicating with maintenance

personnel on your behalf;

Timely reporting. They provide monthly updates (either

electronically or hard copy);

Pricing for an annual subscription for a narrowbody aircraft

ranges between $2,000 to $4,000 and for a widebody aircraft

from $10,000 to $$12,000;

What service levels should you look for in an aircraft

maintenance tracking service provider:

Maintenance tracking service provider. A critical service for your aircraft

• Provides information to aircraft operators on:

What service they need to perform

When they need to do it

How the maintenance should be done

• Maintains currency of information

Tracks revisions issued by the manufacturer and/or

aviation authorities e.g. Airworthiness Directives

(ADs) and Services Bulletins (SBs)

Confirms which Airworthiness Directives (ADs) and

Service Bulletins (SBs) apply to your aircraft

• A maintenance tracking service provides aircraft

operators the ability to:

Operate aircraft safely

Comply with regulations, and

Preserve the value of their aircraft

What is aircraft maintenance tracking ?

Two most prominent maintenance tracking service

providers in the industry are:

• CAMP (Computerized Aviation Maintenance Program) and Avtrak are business aviation’s most reputable maintenance

tracking service providers. Both have excellent services for all Bombardier products and both provide the first year free.

• Upon final delivery of your aircraft, representatives from both companies will contact you regarding their services and the

submission of a quote for Year 2 and beyond. Note: Some customers have negotiated multi-year deals in exchange for

better rates and/or additional years of free service.

Operating base considerations

Airport operating hours: Will operating restrictions limit any of your planned trips

Hangar space: While not requiring hangarage all the time, shelter from the elements for the aircraft is necessary on occasion.

Credit card usage: Aircraft operations are expensive and many fixed base operators require payment up front until you can

establish a relationship with them.

Aircraft handlers: The quality of the aircraft handlers. Usually, the flight scheduling service is the best source for which FBO

provides the best service on the ground

Airport facilities: How modern are the airport’s customs processing area, lounge, communications infrastructure and

maintenance facilities.

Repositioning costs: If the owner does not reside where the base of operations is situated, reposition costs need to be

considered. There must be an operational advantage in not co-located the aircraft with the owner.

Securing landing & overflight permits: Each trip requires permission to enter through other countries’ airspace. The lead

time required to secure these overflights is sometimes adversely impacted from where the aircraft is coming from.

11

Crew considerations: Your crew needs to have adequate accommodations at the base of operations. Inadequate

accommodations or crew consideration will lead to excessive rotation of your crew.

Items:

How will you operate your aircraft? Establish a corporate flight department or hire an aircraft

management firm?

12

First time buyers into business aviation must decide who will operate their aircraft for them. The choice is

between establishing a corporate flight department of their own, or hiring an aircraft management

company that will take care of all the operational decisions.

Corporate flight dept. Aircraft management company

Cost

Crew

Commercial

certificate

Maintenance

• Involves securing a dedicated hangar (either purchased or

leased) sustaining an organization staffed with a general

manager, schedulers, support staff, crew and maintenance

personnel.

• Another option is an aircraft management company that will

take care of everything you require to operate your aircraft.

• Your crew is dedicated 100% full-time to you as they are

salaried employees that are part of the company that you’ve

set up for your corporate flight department.

• Your pilots and flight attendants are contractors that operate

your aircraft based on cycled rotations usually 6 to 8 weeks.

During that period, you are responsible for their

accommodations and transportation to and from the base of

operation.

• If you wish to make your aircraft available for charter,

operating under a commercial certificate provides a revenue

stream for you to offset your operational costs but increases

your liabilities.

• Opting to place your aircraft under a commercial certificate

with an aircraft management company mitigates the liability

issue as operational control is primarily with the operator.

• You must maintain a certain level of in-house maintenance

capability both in terms of personnel and resources.

• Maintenance services are provided as part of the aircraft

management fee. No maintenance infrastructure investment

of any kind is required.

Issues

Opting for private operations,

Part 91 and its equivalent in other

jurisdictions, generally does not

allow for the revenue operations

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European importation (why every owner should consider importing their aircraft in the UK)

• All European registered aircraft must have official documentation

issued by a European member state that proves the asset has been

duly imported;

• Even if your aircraft does not carry a European registration, you

should consider importing your aircraft if you intend to fly to Europe,

even for a tech stop, especially if your flight satisfies one of the

following conditions:

There are EU passport holders (passengers or crew) on

board; or,

There are passengers or crew on board that have the right

to reside in the EU;

If either of the aforementioned conditions are met, then the aircraft

owner must be able to show that they have accounted for tax within

the EU. Otherwise the aircraft is considered to be un-taxed

transport, and even if you are not charging people to be on board, is

contrary to the EU regulations EU 2913/92 relating to the free

circulation of aircraft.

France and Italy, for example, have 17.5% & 23 & VAT rates

respectively.

Issue:

UK’s value-added tax (VAT) exemption status

The UK is considered to be a tax haven because it

extends an exemption of its otherwise 17.5% VAT to all

aircraft weighing more than 8,000 kgs (17,000 lbs);

All that is required is to send a copy of the certificate of

registration and the insurance to a broker authorized to

file the necessary documents on your behalf;

The cost is approximately 450 GBP and usually requires

4 to 5 hours lead time to secure the documents.

Recap

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Define your flight profile e.g. city pair destinations, frequency, cabin requirements, price etc. to your

sales team in order for them to help you select the right aircraft for your needs.

Have you engaged an aircraft completions management consultant?

Have you professionally defined your aircraft’s specifications?

Have you made a decision on what maintenance coverage programs you would like to subscribe to?

Have you selected a maintenance tracking service provider?

Have you selected a country of registration for your aircraft?

Have you had your aircraft financing and insurance coverage reviewed by a neutral third party?

Have you selected your base of operation.

Will you set up a corporate flight department or have an aircraft management firm operate your

aircraft for you?

Do you wish to have your aircraft available for commercial charter?

Have you executed a European importation of your aircraft?

For more information on these issues, please contact the following….

Business. Aviation. Intelligence.

Nick Houseman –President

Email: nick@zenithjet.com

Tel: +1.514.273.3929

Cell: +1.514.449.0877

Fax: +1.514.273.7771

Kevin Rodgers –VP Aviation Services

Email: kevin@zenithjet.com

Tel: +1.770.499.6582

Cell: +1.770.714.9805

Fax: +1.770.234.6768