Whistleblower Bounty - Is $279 million enough for a private jet?
G650 has a list price of $75 million so you can buy one with $279 million but what level of wealth makes it practical to buy a private jet?
The recent SEC whistleblower reward got me thinking about this but it didn't seem like the appropriate topic of discussion during my internship
https://www.sec.gov/news/press-release/2023-89
Bonus question, what would it take to rat out your MD? Forgot your name?
No - putting up ~30% of your net worth in a depreciating asset is not a wise financial decision. Plus the $5m+ of annual upkeep. Depending on how much you travel, chartering private planes is likely a much wiser alternative.
If time is very important and you can't waste time flying commercial, private jets make sense. That's the reason why a lot of large companies have private charters for their C-suite.
At that level of wealth, you wouldn't buy one new. But yes you can have a private plane.
It is very dependent on who you are, what you're buying it for, and how smart you are about taking advantage of the tax code.
To buy a jet for personal use is not wise, or I don't think so. But not a lot of people with $279mm (and I am very curious why you landed on this number) are W2 employees. You likely own your own business. So a sale-leaseback is a good way to get the benefit of using a jet and having your company pay for (and deducting the running cost as a business expense).
Anyone calculating the cost as just a percentage of net worth doesn't know what they're talking about. Doesn't mean they're wrong not to buy it, but it's a complex question
You're no fun.
That's only true if you think I'm wise. For all you know I'm some YOLO rich kid of instagram who is posting from his private jet right now.
And thanks for informing me about the $279mm source. I didn't read the filing since it didn't seem relevant to the question
The whisleblower in that link he posted got $279M.
With a much higher net worth, even Trump Force One was purchased used (3rd hand, I think). It was bought from Paul Allen.
Not the Paul Allen from American Psycho, the other one.
His plane looks pretty nice. It's a 757.
Bone.
The operating costs are where it gets you. $9k an hour to run that G650 - plus challenging logistics around crews and storage - you can get an international first class ticket for that.
I think only worth it if you are a celebrity and being in the terminal would be an issue - or are traveling so much that fixed flight times/airport wait times cost you more money than it does to run a jet (hence why many top CEOs use the jet)
For your average rich guy who isn't getting mobbed at the airport, you're better off flying first class everywhere. You'll get top tier airline status and they'll treat you like a king
Yes, absolutely. Is it smart? Depends on your ethos on money.
Expanding on another post I wrote previously on this site ...
First, consider that you finance it.
You aren't coming out of pocket $78m for the G700. You pay the non-refundable deposit (about a million) when you sign the purchase contract. There are milestone payments between signing and actual delivery, and for those you typically draw on your aviation finance facility from your bank. This means you pay only the interest costs on your LOC.
Your LOC is secured by the asset itself. The depreciation schedule on these things is so formulaic at this point (age, total time in air, total landings) that the collateral value is well established. Add in the fact that the queue for new craft delivery is so long (currently about three years in the 'ultra long-range heavy' class) and you can understand how willing a bank is to lend against the purchase of a new vessel.
Let's do the math. The default configuration for the G700 is $78 today. Assume a cost of capital of 6% and that your line covered the full purchase, deposit included. That's a $4.68 carry cost annually.
That $279 is presumably pre-tax, so let's assume half of that, or $139, is your actual principal capital. If you put that into a conservative strategy returning 5% yearly, you're looking at $6.95 in annual investment income.
So yes, you could buy the top of the line ultra heavy without dipping into your principal.
Second, consider the benefits of depreciation.
There's a very tax advantageous aspect to plane ownership. The 2017 Tax Cuts and Jobs Act provides for 100 percent bonus depreciation, allowing taxpayers immediate deduction of the cost of aircraft acquired and placed in service between September 2017 and January 2027. You can Google for more details on this, but even used airplane purchases allow the owner to write the whole thing off that year's tax bill depending on their usage qualifications, meaning what portion of the total usage is for business. Apparently 2022 was the last year for 100% eligibility.
In summary, you're effectively paying only the interest costs and the hourly operational costs.
Hourly operational costs can be $10,000 for a craft like the Challenger 350 or $20,000 for a Global 6000. This is the total cost of fuel, pilots, attendant, and ancillary expenses.
So if you fly 100 hours a year on a Global, you're looking at about $2m in direct operational costs. Then add whatever your interest expense is.
Then remember you can monetize this asset. You can contract with an aircraft management company who will oversee the logistics of including your craft in a fleet available for charter. Anytime you are not flying, your plane can be earning you money.
A lot of people buy a plane because it ends up being a net-positive or neutral financial outlay for them, similar to buying a vacation home in a popular destination. You use it when you want to, otherwise it pays you.
Thanks for the detailed response. Tax advantages for these things is amazing.
Like anythig, "it depends". You can easily afford a jet with that kind of payout, does it makes sense to purchase a new G650? No. However, as others have mentioned given the global demand is so high you can put down deposits on these planes and then sell them to buyers who will pay you a premium for your place in line.
Pretty sure that everyone here would answer "Yes" to part two of OP's question.
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