Part 135 Aircraft Financing

FlyMarines09

FlyMarines09

Well-Known Member
Hey guys, I'm Vince and I'm new to the forum. I work on F-18's in the Marine Corps, but when I get out (with my A&P license) it's straight back to flight school. I've got about 25 hours towards my PPL, of course I will be starting over. Hoping to make a career out of a very rocky aviation economy...

I was just looking around and came up with a few questions. How do air taxi's and charter companies finance their aircraft? Some aircraft are managed by companies for individuals and then used for charter, but what about smaller companies? Do they own their aircraft? Do start up business loans cover the expenses for aircraft and acquisition or are they separate loans (like a car loan)?

Also, does anyone know what the general public's feeling are toward air taxi companies? Most people probably have never flown on small aircraft like the Cessna 414 or TBM-700. From your experience, do people tend to stick to the airlines because of a fear of smaller aircraft?
 
If the general public could afford to fly in a 414 everywhere, I guarantee a lot of them would.
 
As a general rule, most 135 companies just manage aircraft (people charter anyways). They use the airplane as a tax write off. Most airplanes barely make enough money to pay for themselves, so the owner gets to write it off as a loss. At least thats what I see.
 
FlyMarines09 said:
Also, does anyone know what the general public's feeling are toward air taxi companies? Most people probably have never flown on small aircraft like the Cessna 414 or TBM-700. From your experience, do people tend to stick to the airlines because of a fear of smaller aircraft?
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Yes, it's a terribly irrational fear that mostly women seem to suffer from. I see it on a daily basis and for the most part do my best to assuage their fears by making the flight as pleasurable as I possibly can. Sometimes, however, I've found it best to tell them to get in and just be quiet. Other times you've just got to let them freak out because they're really only doing it for the attention.
 
In some rare instances investment firms. They have been burned recently with Dayjet and some others, so it's harder to get that. Mostly you will find leases from owners of the aircraft.
 
Most business people start a separate company that purchased the aircraft. Then their air charter company leases the aircraft from the said company and/or uses it as a subsidiary to the charter company.

This helps with liability problems and gives the company more lee-way.

As to financing the aircraft, there aren't many companies out there that do this process.
 
I'm still trying to figure this out... I know that I could utilized $300,000-450,000 from a business start up loan towards a light twin aircraft to initially start up my business. I'm not sure if I want to partake in the aircraft management side, so in order to acquire another aircraft, say a VLJ or turbo prop, besides paying cash or leasing, how else could I acquire the aircraft? What is the smartest way to run a charter business? The air taxi idea more or less failed right? Private air travel that has been more or less run like airlines (no other third party aviation services). So FBO, maintenance and management services are needed to off set the cost of owning and operating aircraft, right? Do you see what I'm getting at? I'm kind of lost in this category. I was thinking that I could go to the same bank that gave me my initial start up loan and ask for more money towards another aircraft, right?
 
The way to make a small fortune in aviation is to start out with a big one...

No seriously, I would focus your money on maybe an FBO with a gas pump to start. That would get something going first and give your company some revenue and cash flow. Its still expensive to get the permits to dig, put in the pump and the gas tank but not nearly as much as going from zero to 135 charter company and THEN make a profit...

All that said, if I was going to start my own 135 I would probably use a PC-12. When I flew it we had the executive configuration which held 6 seats, but I think there are 8 to 9 seat versions as well. It has a great safety record, is relatively cheap to operate for a turbine, can get 265 true in the cruise and you can land her pretty much anywhere...
 
For financing, many commercial loans are amortized over 10 years. The idea is that a charter aircraft would fly enough to get devalued (not just depreciated on the tax returns) quicker than one just used for personal/pleasure flying. That makes your p/i payment greater. FWIW, for operators without in-house fuel or maintenance, the direct operating cost of something like a Baron 58 is $300/hr. This does not include the loan payment. Insurance will run (based on hull value) ~$14-16k/yr. So, at 10yrs, 6%, on $300k you are looking at over $3300/mo for the P/I and about $1300/mo for the insurance.

HVY's FBO plan is good because you can expense your fuel at cost-plus and you can perform the maintenance. That will save on the hourly costs.

G'luck!
 
FlyMarines09 said:
I'm still trying to figure this out... I know that I could utilized $300,000-450,000 from a business start up loan towards a light twin aircraft to initially start up my business. I'm not sure if I want to partake in the aircraft management side, so in order to acquire another aircraft, say a VLJ or turbo prop, besides paying cash or leasing, how else could I acquire the aircraft? What is the smartest way to run a charter business? The air taxi idea more or less failed right? Private air travel that has been more or less run like airlines (no other third party aviation services). So FBO, maintenance and management services are needed to off set the cost of owning and operating aircraft, right? Do you see what I'm getting at? I'm kind of lost in this category. I was thinking that I could go to the same bank that gave me my initial start up loan and ask for more money towards another aircraft, right?
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The right way to do it is to find an owner who wants to foset some of his costs. It's VERY hard to make money with an airplane hauling people. Trying to do it as an owner is a good way to lose money. What most people do is find owners who are looking for a person to handle the airplane and just use it when they want. The best place to meet people like that is at NBAA functions, Oshkosh, etc. It's a very hard buisness to break into, but if you do it right, you can do well. If you do it wrong, expect a lot more stress and financial pitfalls.
 
mshunter said:
The right way to do it is to find an owner who wants to foset some of his costs. It's VERY hard to make money with an airplane hauling people. Trying to do it as an owner is a good way to lose money. What most people do is find owners who are looking for a person to handle the airplane and just use it when they want. The best place to meet people like that is at NBAA functions, Oshkosh, etc. It's a very hard buisness to break into, but if you do it right, you can do well. If you do it wrong, expect a lot more stress and financial pitfalls.
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:yeahthat:

Get some investors to purchase the plane that are comfortable loosing money on it. Problem solved.
 
FlyMarines09 said:
I'm kind of lost in this category. I was thinking that I could go to the same bank that gave me my initial start up loan and ask for more money towards another aircraft, right?
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The simple answer is you need to work in this buisness for a while and see how it is run from the inside, rather than asking a bunch of airplane dirvers on the interweb. Try getting a job running an FBO for a while and see what it takes to run an operation like that, then launch out on your own.

Starting up a 135 operation will eat up a TON of money and take 2+ years, and likely fail within 3 years of it's first flight. The only other industry I've seen eat up dreamers worse than aviaiton is the restraunt buisness. Getting out of the Corps, borrowing a half million dollars, starting a buisness on what you THINK will work is a recipe for disaster.
 
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