Fazal-Karim featured on Bloomberg Surveillance

On 20 February 2018, Jetcraft Chairman Jahid Fazal-Karim spoke with Francine Lacqua on Bloomberg Surveillance. Below is a transcript of the interview.

Host intro:

Have you ever fancied owning your own private jet? Now might be the time to buy with the global economy picking up. Broker Jetcraft says supply is back to pre-recession levels and the U.S. tax cuts are also set to benefit buyers worldwide. Joining us now is co-owner of Jetcraft. He is Jahid Fazal-Karim and his company is the worlds biggest international buyer and seller of business aircraft. Over the last 10 years it has facilitated more than 550 transactions worth $10 billion. It has also recently opened an office in London. Jahid, thank you so much for joining us.

Jahid: Thank you.

Host: So most, or 80%, of what you sell is second hand aircraft. What is the lifespan of alot of these aircraft?

Jahid: You can fly these airplanes for 20 years. So it really depends on what people want to do with their airplanes. But you can fly them, buy them new and fly them for 20 years. Most of the airplanes that we sell are between 3-5 years old. That is the sweet spot for whoever would like to buy a pre-owned airplane and then keep this plane for another 10 years and then resell again.

Host: So if I buy a second hand plane, how much of a discount do I get after 3 years as opposed to buying it new?

Jahid: When you buy a new plane it is like buying a new car, as soon as it leaves the garage you are going to have a big hit.

Host: How much? 30%?

Jahid: The first hit you will take is probably going to be around 10-15% and then the average depreciation of airplanes over the next 10 years will be around 10% a year, that is what we use as a depreciation.

Host: Do you mainly have private clients and where are they coming from? Is it the U.S.? Or are you seeing a lot in China?

Jahid: We have private clients from everywhere in the world really. 60% of our sales are actually still in North America, in the U.S. The U.S. is still the biggest market with the largest installed base but we have in the emerging markets a lot of growth. Our growth is coming from Asia right now, China is actually picking up again. In the past 5 years it was a bit slow but in the next 5-10 years we’re expecting a lot of growth in China. So we’re focusing really worldwide, that is why we have a worldwide organization. At Jetcraft we have 20 offices, we have 50 people around the world serving our clients. We want to make sure that we’re no more than an hour away from a client that wants to buy or sell an airplane.

Host: How much does it cost to actually have an airplane? I buy it, and I don’t know, how much do I pay for an aircraft? On average, give me a middle range, nothing fancy.

Jahid: Our average transaction is about $20 million.

Host: Okay $20 million. How much do I have to pay per year for upkeep? So this is licenses, airport fees, and all of that.

Jahid: So it will cost you… so you have fixed cost and variable cost. So your fixed cost, you have your parking, your storage, your pilots, your maintenance. So your fixed cost will be in the $1-1.5 million range depending on the size of the airplane that you have. And then your variable cost, which will depend again on the size of the airplane, will cost you between $3,000 and $6,000 an hour to fly your plane.

Host: And people buy these or in certain cases rent these to save time I imagine, or is it also showing off – a little bit showing off.

Jahid: It is mostly time. We sell time. In the end people buy jets to save time. It is the value of time. If you are a CEO or an entrepreneur or a high net-worth individual and you can do 3 or 4 things in one day that you couldn’t do if you didn’t have a private jet, that is really the major reason why you buy a jet. Of course there is also the luxury part of it, some people just buy it because they are wealthy and they want to have their own planes, but our majority of clients are business people and they buy it to save time.

Host: What is your best seller? Is it different if you’re Chinese buyer, or if you’re speaking to a Chinese buyer, than if it is a U.S. buyer?

Jahid: Yes it is different because it depends on their needs. Usually when you’re an international buyer like in China or Asia or Africa, you tend to buy larger and longer range airplanes. If you are in the U.S., the U.S. market is more of a mid-sized market because it is mostly transcontinental so you buy a plane that is maybe 8-10 passengers and will fly transcontinental, so 3,000 nm. So depending on where you are and what your needs are you have to choose which plane fits the best.

Host: Okay, and your growth market, do you think China will surpass the U.S. in the next 5-10 years or is it a bit too soon to tell?

Jahid: No I think it’s too soon to tell, frankly in the next 10 years we’re forecasting that the U.S. will still take about 60% of the units delivered from the manufacturer, and 40% will go around to the rest of the world. So the growth rate in China and the emerging markets is still higher than in the U.S. but as far as volume is concerned the U.S. will still stay the biggest market for us.

Host: Alright thank you so much for coming on, Jahid Fazal-Karim, the Jetcraft co-owner. I’m very glad you came in.

Click here to view a portion of the interview.