Dr Axtmann's Cost of Operation
The owner of FAI Rent-a-Jets, who also owns the 50m QM of London, Dr Sigfried Axtmann, offers his insight and analysis on how to assess your yacht’s running costs and the value of a refit…
Yacht salesmen are probably not disclosing what it costs to run a yacht, says Dr. Siegfried Axtmann, owner of the 15-year old, 50m, 490gt Benetti motor yacht QM of London. But, he says, that’s no different than it is in his industry: private aviation.
“Fifty per cent of the buyers in private jets would not sign the contract if they really knew what it was going to cost them to operate their aircraft,” Axtmann insists. His company, FAI Rent-a-Jet is a business jet fleet operator that manages and operates aircraft for charter and private use on behalf of their clients. Third party individuals and companies own the aircraft, while FAI takes an operational fee and a percentage of the charter fees. He’s expertly positioned to draw comparisons between aviation and yachting sales.“The standard yacht or aircraft salesman’s job is to make a deal happen,” he says. “If the prospective buyer doesn’t ask deep questions about the operational costs, I can assure you, they won’t be answered. Everybody wants to close the deal, otherwise there is no commission.”
Dr. Siegfried Axtmann (right), Chairman and owner of FAI Group, shown here with Martin Mühlmeyer, CEO
It’s foolhardy to rely on sales chat to gauge a prospective yacht’s running costs, Axtmann says. He suggests spending the money to hire independent consultants to assess the real costs. “Ask for a worst-case scenario, then you’ll face no surprises,” he says. “Consultants are paid for their insight regardless of whether a deal happens of not, so they should deliver a neutral picture.”
Owners, he says, should dictate operational costs: they should have an idea of the level of service they want and what they’re prepared to pay, then find the yacht that meets their criteria. “If you want a six-star hotel service, as I do, then the maintenance of a yacht is certainly more expensive than if you want country kitchen lifestyle,” he points out.
Axtmann explains that the business model that has worked so well for him with jets cannot work for yachts. “In the aircraft business, you can be in the air twenty four hours a day, seven days a week, 365 days a year, minus maintenance days which are not numerous,” he says. “But the yachting business is seasonal and maintenance is on-going over twelve months. Refit periods are weeks at a minimum, and commonly about half a year. A yacht can’t generate the income necessary to run as a business. Then there’s the loss of value in the vessel itself. Take this into consideration, and no matter what, you’ll end up with a loss.”
50m Benetti QM of London is available for sale with Edmiston and charter with Yachtzoo
Aircraft, too, lose value with time and use. “If you’re a fleet operator as I am, running aircraft owned by third parties, it’s the third parties that take the losses,” Axtmann says. “The owner pays for everything, I get eight per cent of the charter revenue as commission—this is industry standard—but at the end of the day, the owner takes the losses. They have to book these losses on lifestyle, just the same as yacht owners—but there, the losses are higher, and the opportunity for revenues significantly lower.”
Axtmann’s lavishly refit QM of London is based in Monaco and typically cruises the south of France. Axtmann says it makes no sense to go to the Caribbean for charter purposes because they can’t sell enough weeks there to justify the expense of the trans-Atlantic crossings. For personal use, he says, it’s cheaper for him to charter in the Caribbean.
“More and more people are finding out that owning a yacht probably is not the best business and they are getting tired of owning these boats and trying to sell them. Now, there are more sellers in the market than buyers. This drops the prices on the used yacht market. It’s very simple. The purchase price for a used yacht is secondary: The primary decision point is what it costs to run it.
The old thumbnail calculation about the annual running cost of a yacht was ten per cent of its value. Axtmann thinks that’s way off. “I don’t think you can operate a yacht to a high standard for ten per cent of its value,” he says. “Depending on the age of the yacht, I’d say a fairer estimate would be fifteen to even twenty per cent.”
Axtmann also advises all owners to make sure to invest in a good refresh refit, but warns that investment will have no impact on the value of the yacht. “It’s the same with an aircraft: When you refit an older aircraft with a new interior and paint, the cost of the work isn’t added to the sale price,” he says. “It’s simply necessary work to facilitate the sale. Refitting an aircraft takes six months: Nobody will buy an aircraft and then have to take it into refit and wait six months before they can use it. The exact same thing is true with yachts. We just did a four million euro refit on QM of London, and she’s for sale at a great price, but it’s not the pre-refit price plus the cost of refit. Not at all. But, if you don’t refit and just wait for a buyer, but no buyers come, then you are stuck. So when it’s time to refit, do it.”
Issue 12 of The Superyacht Owner, out mid-April, will look at the realities of creating a realistic budget for your yacht. To subscribe to the magazine and receive your copy, click here.
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