Upgrade or start fresh?

At a time when the business aviation industry is showing signs of recovery, you may be wondering whether it makes more sense to update a used airplane or buy a brand new one from a manufacturer. Some brokers, analysts and consultants say you're now often better off putting money into a good used aircraft-one you buy or one you already own-than opting for a factory-fresh model.

One dramatic recent example of how this can pay off involves a Boeing 777 that the buyer purchased shortly after an airline retired it. The total cost-which covered acquiring the jet and having it gutted and finished in a government executive/VIP configuration-slightly exceeded $70 million. The big twinjet is now for sale in the $110 million range, and a representative for the buyer expects that if the market continues to recover, its value could approach $170 million by 2013. Others caution, however, that aircraft are depreciating assets and that one should never count on their values increasing over time, as the past two years have painfully illustrated to some owners.

A major cabin upgrade can make more sense than buying new even for those who want the latest and greatest, said Kevin Hoffman, president and CEO of Aerospace Concepts in Montreal. He noted that the wait for a new airplane, even now, might be two years, during which time the definition of "latest and greatest" could evolve, prompting work-order changes and delivery delays. On the other hand, if you purchase a low-time used jet, for which the upgrade isn't likely to take more than six months, the technology you have added will still be relatively new when the airplane is delivered.

But the best reason to buy used and refurbish, said Hoffman, is that it simply costs less. You can purchase a relatively low-time Bombardier Global Express these days for about $24 million, and a major interior upgrade will bump up your cost by about $2 million. And that's including the latest in high-speed Internet connectivity, a cabin-management system with Blu-ray video, a couple of 42-inch HD video screens, satellite television and docks for such carry-on entertainment as iPods and video games. Add another $500,000 to $1 million for cockpit avionics upgrades and exterior paint and you end up with nearly the equivalent of a new $53.25 million Global Express XRS at about half the price. The range will be about 1,000 nautical miles less, but if that limitation isn't mission-critical, you've got yourself a bargain.

On the negative side, the crop of good used business jets is starting to dwindle and prices of some models are rising. According to brokers, a lot of buyers sat on the fence for the past year waiting to see how low the market would go. It did get low enough to buy a good used Gulfstream GIV-SP for about $20 million, some $10 million less than it was going for 18 months ago. But prices are inching up again, arousing interest among those fence sitters. Gulfstream Vs that were selling in the $20 million range are already up to $27 million, according to Bryan Comstock, a BJT columnist who is president of Jeteffect, a jet sales and acquisitions firm in Long Beach, Calif. Hoffman noted that clean, low-time midsize jets are also starting to move.

Another factor to consider when deciding whether to refurbish or upgrade a used aircraft is the cost of the work. The recession has driven at least six small- and medium-sized refurbishment specialists out of business. Most of those that remain have cut refurbishment and upgrade charges down to little more than what they need to keep the doors open and a core of skilled employees working. But that's starting to change as used aircraft inventory begins to shrink.

A refurbishment or major upgrade is one of the first things a used aircraft buyer considers, and according to Jerry King, chairman and founder of King Aerospace, "We have more quotes out right now than we've had in years," he said.

His company isn't the only one keeping busy. "Maintenance shops are back up to about 75 percent of what they were before the recession," said Randy Keeker of Comlux, whose Indianapolis-based business has seen an increase in maintenance and overhaul work and who expects refurbishment orders to follow suit. "It sure looks a lot better than 18 months ago."

Despite these trends, refurbishment or a major upgrade of an older model can save you a substantial sum. But that doesn't necessarily mean they're the best solution for you. Refurbishing or upgrading can be time consuming and require lots of decision-making. And there's nothing quite like a brand-new airplane-especially for the kind of buyer who wants to just say, "Here's the money, give me the keys."