Feature
Sky Leviathans
Michelle Seaton
11/01/2005

Jim Gabbert did not want to pay $60 million and wait 18 months to take possession of the most highly prized large business aircraft on the market, the Boeing Business Jet (BBJ). Gabbert, an entrepreneur and pilot from Sausalito, Calif., loved the idea of traveling in a wide-body aircraft with 1,000 square feet of floor space—he just disliked the idea of paying full price for that luxury. Neither did he want to pay $40 million for a used BBJ. “I looked at the numbers, and it just didn’t make sense,” he recalls.

THE BOEING Business Jet is essentially a converted Boeing 737; the difference is the BBJ has a larger wingspan for agility in smaller airports. The rest of the plane’s body, however, is identical—making it a popular choice for conversion from commercial airliner to private jet.  (Photograph courtesy The Boeing Company.) 

But his Citation Encore was definitely feeling cramped. Slightly larger business aircraft, including the Gulfstream models, Bombardier’s Global Express and Dassault’s new 7X have narrow cabins with ceilings that are just above 6 feet high. When Gabbert checked the market to see if he could upgrade to this level, price intervened again: A used Gulfstream GV can cost $30 million.

Instead, Gabbert joined a growing number of private aircraft owners who are finding affordability, space and luxury in a unique airframe: He shopped for a retired commercial airliner that had been overhauled and upgraded with a VIP interior. Because only a few of these aircraft are on the market at any one time, he hired Wendy Bierwirth of Wentworth & Affiliates, a Potomac, Md.-based aircraft broker and consulting service, to locate some candidates for purchase. He considered a dozen aircraft, including wide-body double-deckers like the Boeing 747. He looked at Airbuses and MD-80s. He also looked at Boeing 737s, which are older versions of the BBJ. Finally, Bierwirth found a Boeing 727, considered a bit of a chestnut in aviation circles. Debuting in 1963, the 727 is a generation older than the 737 and has three engines instead of two. In the 1980s, a few hundred of them were reconfigured into business aircraft for corporate magnates and foreign heads of state. It was the BBJ of the 1980s.

RWR Designs is one company that converts jet cabins into comfortable living spaces. (Photograph by Bud Shannon Photography.)

Bierwirth told Gabbert she had found the only 727 that had rolled off the factory floor in 1973 as a corporate jet and had never seen commercial service. It had flown only 10,000 hours—a pittance by aviation standards—and had been recently equipped with new engines, avionics and a brand new interior that featured a master bedroom and bath, a small kitchen with a two-burner stove and a convection oven, a dining area, two seating areas and an elaborate entertainment system.

In 1998, Gabbert bought it sight unseen for $18 million, “which is less than I would have paid for a used Challenger 604,” he says. Today, he is as happy with his aircraft as he ever hoped to be. He hired himself as pilot and wears a crew uniform in the cockpit while his dog dozes nearby. He takes friends on jaunts to Europe and South America. “They get out the George Foreman Grill and cook some prime rib. It’s perfect,” he says.

Escape Velocity

THIS VIP 727 was renovated inside and out. In addition to its interior redesign, it was retrofitted with Tey engines. (Photograph courtesy Wentworth & Affiliates.) 

The value proposition surrounding the purchase and upgrade of older commercial aircraft for private use is complex, but for some, irresistible. “A new Boeing Business Jet has a lifecycle of more than 100,000 hours, but a typical owner will put just 350 hours on it a year,” Bierwirth explains. “Even if you keep it for 10 years, you are still using a tiny fraction of the hours the plane is designed to fly. Why spend $60 million and then throw away the majority of the usefulness of the aircraft?”

For example, a 30-year-old 727 with 60,000 flight hours is barely middle-aged. It still has considerable use left in it, and a price point that, compared to a new BBJ, is too attractive to ignore. Bierwirth particularly favors the fast and fuel-efficient Boeing 757. She says that a 757 with 30,000 hours on it will still have decades of private use ahead, and can be converted into a luxury private aircraft for far less than the cost of even a used BBJ. “The biggest problem now is that you can’t find a good 757 for sale,” she says. The older, slower, louder Boeing 727s are now so popular and so difficult to acquire that at least one broker is offering quarter shares of one at $2.5 million each.

TOP VIEW
Rather than pay $60 million and wait 18 months for delivery of a Boeing Business Jet (BBJ), some private aircraft enthusiasts who desire the space and comfort of a BBJ are instead opting for used, overhauled commercial airliners. These travelers have found that some members of the Boeing commercial fleet—in particular the 727, 737 and 757—have thousands of flight hours left in them and can be purchased and upgraded with luxury appointments for far less than the cost of a new BBJ. However, costs can easily spiral upward, depending on the age of the aircraft, whether its technology is up-to-date and what amenities one desires.
In fact, the market for many used Boeing commercial jets suitable for conversion is becoming very active, as more private aircraft owners come to appreciate the cost differential between these models and a new BBJ. According to Bierwirth, a used 727 currently commands between $4.5 million and $8.5 million. If, in addition, its engines have been replaced, the plane will sell for anywhere between $9 million and $20 million.
 
The MD-87—a newer aircraft built by McDonnell Douglas (which was acquired by Boeing in 1997) with a longer range than the 727—can command between $12 million and $20 million. Meanwhile, Boeing’s more recent models, the 757 and 767, sell for $45 million and up.

Converted airliners have several advantages, aside from value, over newer corporate aircraft. The first is that they require relatively little maintenance. Airliners are designed to fly thousands of hours and endure thousands of landings each year with minimal time in the shop. The most aggressive private owner will put less than 800 hours on an airplane annually. When repairs and inspections are required, they can be carried out at virtually any airport in the world that is big enough to accommodate a large jet. As a result, labor costs can be $20 per hour cheaper for airliners than they are for most business jets. Moreover, parts are substantially less expensive and more easily obtained. Gabbert will pay $800 for a new tire for his 727, while a much smaller tire for his Citation Encore will cost $1,200; a new windshield on the 727 runs $4,500; for the Encore, it is $20,000.

A FLOORPLAN for the $60 million Boeing Business Jet. (Photograph courtesy The Boeing Company.)

Of course, there are disadvantages. Larger planes tend to be slower than smaller private jets such as Gulfstreams and Global Express planes, and they need much longer runways, particularly at high altitudes or high temperatures. Some smaller regional airports turn airliners away because of noise restrictions, weight restrictions or because the longer wingspan makes these planes a hazard to smaller aircraft, or even to the light posts at the edge of the parking apron. Finally, finding adequate hangar space can be a challenge.

THE TYPICAL interior of a BBJ, which has become the standard for jumbo private jets. (Photograph courtesy The Boeing Company.)

The most significant inconvenience, however, is the cost of fuel. A Gulfstream V, for example, will burn around 450 gallons per hour of flight, while a Boeing 737 or Airbus 320 will burn nearly twice as much in that same hour. The three engines on a 727 will burn a total of 1,800 gallons an hour. As the price of jet fuel continues to rise, so will the cost of operating these larger airplanes.

Discotheques in the Sky
Aviation consultant William Quinn, founder and CEO of Aviation Management Systems in Portsmouth, N.H., recently scanned several databases of aircraft for sale and found no 727s, 747s or 757s—just a single 737 built in 1993 and put into service in Austria. Purchased new off the line in 1993, this jet would have cost $30 million. Now, the same airplane with 10 years of hard labor ferrying commercial passengers along a regional route would run less than $10 million.

The problem is that its new owner will have to gut and rebuild the interior, which will cost $10 million to $15 million. “When you start weighing that option, you realize that you’re going to put more into the airplane than it’s worth,” points out Quinn, who clearly disapproves. “Then you’ll have a $20 million to $25 million airplane that you’re going to fly—for how long?” This scenario assumes that the plane needs no major repairs, new avionics or even new engines.

IN ADDITION to composing the cabin’s aesthetics, interior designers must consider safety and engineering issues, such as the weight and balance of the aircraft, and accessibility to emergency exits and equipment. (Photograph by Bud Shannon Photography.)

Geoffrey Palmer, a real estate developer in Beverly Hills, discovered the high cost of upgrading an old airliner when he bought a used 727-200 for about $1 million in September 2004 and sent it to a conversion center that specializes in this type of aircraft. The expenses associated with his project spiraled upward. Older aircraft, like the 727-200, which debuted in 1967, have engines that tend to be too noisy to meet airport regulations in much of the United States. Current regulations will become more stringent over the next decade. Owners buying aircraft that are more than two decades old have two choices: pay up to $1 million to install a hush kit that will muffle engine noise, or replace the engines completely.

Though Palmer could have purchased like replacement engines for $150,000 each, he decided to spend $5 million to install two brand new engines with 56,000 pounds of thrust that burn just 1,100 gallons of fuel per flight hour. Palmer also added extra fuel tanks and heavier landing gear. He stripped the interior to the rivets to install noise-reduction materials and a new living space complete with bedrooms, pull-out couches, an attractive galley, several bathrooms and a business and entertainment center. All told, the plane will spend 15 months in the shop and Palmer will spend 12 times its purchase price to recondition it. Most aviation consultants—not to mention private bankers—would raise an eyebrow at such numbers, but Palmer is deaf to arguments of impracticality. “There’s no lifecycle to an airplane that’s well maintained,” he says, adding that he plans to keep the aircraft for at least a decade.

Canadian clothing designer and retailer Peter Nygård, chairman of Nygård International, believes that adding new engines to these old airliners actually adds value. “It takes a Ford and turns it into a Mercedes,” he says. Nygård bought a high-powered Boeing 727 last summer—he refuses to reveal how much he spent—which boasted brand new engines. Yet he is still doubling the purchase price by investing in an interior reconfiguration because he wants a king-size bed, a sauna, massage tables, a disco with a karaoke system and a private business center, in addition to seating, dining and sleeping accommodations for his assistants and friends. He also wants a flexible lighting design, top-of-the-line entertainment options and a wireless local area network.

To complete this transformation, he will send his airplane to a shop in San Antonio, Texas, where the work will be undertaken in stages. At first, it will only stay for a few weeks while workers freshen up the interior. Then in a year or so, when the completion center is ready, he will send the aircraft in for the full reconfiguration. Is all of the expense is worth it? “The early answer is yes,” Nygård replies. “In terms of upfront cost, it is still a cost savings over a new BBJ. But when you figure in depreciation, it’s hard to tell. It will be a fair thing to figure out at the end of the day.”

Candidates for Conversion: The Boeing Airliners

727
Midrange commercial jet
Entered service: 1964
Number of engines: 3
Floor space: 1,000 square feet
Cruising speed: 570 mph
Range: 3,100 miles
Cabin width: 11.5 feet
Fuel burned per hour: 1,800 gallons

737*
Short-range, small-capacity jet
Entered service: 1968
Number of engines: 2
Floor space: 885 square feet
Cruising speed: 570 mph
Range: 2,000 miles
Cabin width: 11.5 feet
Fuel burned per hour: 800 gallons

747
Long-range, wide-body, double-decker jet
Entered service: 1970
Number of engines: 4
Floor space: 4,240 square feet
Cruising speed: 555 mph
Range: 7,670 miles
Cabin width: 20 feet
Fuel burned per hour: 2,860 gallons

757
Relatively quiet, fuel-efficient, twin-engine jet
Entered service: 1982
Number of engines: 2
Floor space: 1,000 square feet
Cruising speed: 475 mph
Range: 4,500 miles
Cabin width: 11.5 feet
Fuel burned per hour: 1,050 gallons

767
Relatively quiet, fuel-efficient, twin-engine jet
Entered service: 1982
Number of engines: 2
Floor space: 2,080 square feet
Cruising speed: 530 mph
Range: 5,650 miles
Cabin width: 15.5 feet
Fuel burned per hour: 1,450 gallons

777
Wide-body; smaller than the 747
Entered service: 1995
Number of engines: 2
Floor space: 2,900 square feet
Cruising speed: 550 mph
Range: 5,210 to 9,420 miles
Cabin width: 19 feet
Fuel burned per hour: 2,100 gallons

* The Boeing Business Jet (BBJ) is a converted 737 with a larger wing that allows more agility for getting in and out of smaller airports. Note: Specifications are approximate, based on attributes at time of entry into service. Fuel burn varies depending on weight, altitude, mission length and speed. 

Michelle Seaton is a pilot and a regular contributor to Worth.

Additional Information
 Soaring Expenses
 Does Size Matter?