Joseph Lau, the Hong Kong billionaire who holds stakes in Hong Kong property developer Chinese Estates Holdings Ltd. (0127.HK) and department store owner Lifestyle International Holdings Ltd has ordered a Boeing 787 for his personal use. According to Forbes, his net worth is a very cool $2.1 billion dollars.
The price tag on this machine is a cool $151mm (but I’m sure he’ll either get a discount or could end up paying more for customization). I guess when you are worth $2.1 bn, throwing away $151mm for a transport is OK. This is in contrast to most mere mortals (us) who actually take out a loan for our cars (most people have to invade their emergency fund if they fully paid their cars!).
Somehow, I am wondering how much does it cost to maintain this beauty. Rather than taking a speculative guess, I did some research into how much a fractional ownership on a much smaller plane will cost and arrived at a rough estimate.
To own a one-eight share in a Learjet 31A, you will roughly need to cough up about $700,000. Monthly fees are about $5,500 a month and you pay $1,500 per hour on the airplane. As far as maintenance goes, that means it cost $66,000 a year in maintenance fees. This is for a one-eighth ownership. Assuming you fully own the jet, that will work out to $528,000 for maintenance fees. Now, assuming you fly 500 hours a year, that will work out to $750,000 a year. Fractional Jet companies have to cover their cost and make a profit too. So let’s assume eight owners will pay $750,000 X 8 = $6 million. Total cost is $6.528 million to maintain a private jet. That is just an estimated cost of owning a small LearJet 31A. With a Boeing 787, I’d guess it probably runs to about $10mm ?
But since Joseph Lau is worth about $2.1 billion (though they are concentrated positions!), I guess $10 million a year is nothing to him. Look at it this way, if you have $500 million in tax free municipal bonds, then the interest you will get is about 3.8% or $19 million on a $500 million portfolio. So it looks like the aircraft maintenance is easily covered.
For someone who s a private jet, I don’t think you can ever justify the cost based on hard numbers. But rather, you can only justify it by the time you save. How much is your time worth ? Presumably, Joseph is worth thousands of dollars an hour. As he is probably a frequent flyer, the time he saves, the ability to conduct business in his private jet will probably cover the cost of the plane and the maintenance cost as well.
How I wished I could fly a private jet !
P.S – Think of how much reward points he would rack up if he paid his aircraft loan with an American Express Card!