““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
Finding Your Way in a Forest of Options
As with real estate, the options available to business jet travelers fall into two main categories: rent and own. Civil aviation regulations around the world dictate this.
Most people who enter the world of private air travel do so via charter, because, on a strictly per-kilometer basis, it is the least costly way to fly privately on an infrequent basis.
Using air charter means renting an aircraft. You might pay by the hour or by distance or by some complicated formula that incorporates both of these factors. You might be charged numerous add-ons, such as for fuel, catering, positioning, landing, ramp use or overnight parking. Or you might find a company that offers flat-rate charter. It is all still renting.
Booking a charter flight is much more complicated than buying an airline ticket. Air charter brokers can help make this less complicated, by trying to find the best aircraft and operator for you at any given time.
There are Web sites that seem to offer online booking of air charter flights. Many of these belong to charter operators themselves and others to brokers. Try booking a flight online and eventually you’ll be directed to a telephone and a real person. Most customers prefer it that way, and you should, too.
Brokers aren’t regulated, though many in the industry think they should be. They can be 30-year industry veterans who can provide expert knowledge on the various types of aircraft available and how to get the best deal. But others are just newcomers operating from a laptop and a cellphone, who simply want to get rich quick.
Good brokers will provide valuable information, find the best aircraft and charter operator for your needs, coordinate all aspects of the flight, be ready to find you a replacement flight at a moment’s notice, give you a transparent invoice and charge you a reasonable fee, about 5 percent of the charter bill. The bad ones–let’s just say there are scary stories about them.
If you book directly with a charter operator, you can probably get a lower price than if you use a broker. But charter operators do discount their prices for brokers who give them business and the brokers may pass on some of their savings to you. This price may still be higher than what you could get directly from the charter operator, but having the broker as your agent could be worth the extra cost.
Of course, your travel needs–destination, schedule, number of passengers, baggage requirements and, of course, budget–will dictate the size and performance capability of the airplanes and helicopters you request. Quite likely, several aircraft models could suit your trip in various ways, some better than others, and their charter costs will likely differ significantly. So having a knowledgeable person advising you–a good, honest broker, for example, or perhaps a trusted consultant or a friend who knows a lot about aviation–could save you a lot of money.
Cheaper Ways To Travel?
What about empty legs, those charter airplanes flying without passengers on their way to or from a paying charter flight? Theoretically, empty legs should cost less than booking a standard one-way charter, because someone else has already paid the roundtrip cost of the one-way charter leg that generated the empty one. But if they can do it, operators and brokers will charge the unwary traveler as much for the empty leg as they do for the originally chartered leg.
Another reason for more costly empty legs could be supply and demand. According to some charter operators, fewer empty legs are available now than previously. This could be because flying is down, or operators are becoming more efficient in booking these legs, or because the legs are getting filled more quickly by brokers, Web sites and other charter operators. Another reason could be the emergence of chartered airplanes without fixed bases. Instead of “coming home” empty after a charter (and thus creating an empty leg), the airplanes and crews overnight at the destination airport or reposition to other airports close to busy charter markets.
Brokers and charter operators can find empty legs for you. You can find them yourself on many Web sites. If you do, how will you know this is the aircraft you need and an operator you’d want to fly with? If your answer is “I don’t know,” don’t book an empty-leg charter, or any charter. You need help or more experience.
When You Charter a Lot
As you gain more private-flying experience, you may want to look into block charter with an operator you know and like. Block charter usually involves a down payment, a reduced hourly rate and a customized agreement. These agreements work best when the operator has several aircraft of the model or models that fit your needs and you make regular trips that you can schedule ahead. Of course, the operator will be happy to accommodate your ad hoc trips, too, but there’s always the chance he’ll have to cover a trip by engaging another operator.
Jet cards are a more generic and formalized form of block charter. While cards offer various features and flexibilities, the big difference when compared with block charter is cost. Where block charter typically provides a discount to buyers for the commitment and down payment they make, jet cards usually cost more than straight charter. What you get for the premium is preferential treatment and other perks. Despite their relatively high cost, jet cards have proved popular among travelers who prefer not to make big financial commitments and want the peace of mind of flying with a known entity.
Moving Up To Aircraft Ownership
Fractional-ownership, while not yet available in China, may well be introduced here quite soon. It is popular in other parts of the world because it provides many of the advantages of ownership but fewer of the responsibilities.
Fractional is ownership, because you actually buy a share of an aircraft. You can purchase several shares and even a whole aircraft, if you care to. Fractional also involves aircraft management, because you pay the fractional provider to take care of all aspects of owning and operating the airplane for you, including hiring, training and managing the pilots, dispatching and tracking flights and handling maintenance.
A key factor with a fractional program is that all other owners in it, even those who don’t have a share in the aircraft you own, may fly on your airplane. Of course, you get to fly on all the other airplanes in the fleet, too. In fact, depending on the size of the fleet and scheduling, you may never actually fly on the airplane you partly own. But that does not matter because all the airplanes usually look and are equipped the same, more or less.
Fractional ownership, whole ownership and partnership arrangements are alike in that large sums of money change hands, several contracts need to be signed and the process requires time and at least several and sometimes numerous attorneys, accountants and consultants. Taxes, laws and financing all play a part, influencing decisions about where the contracts are signed and where the aircraft is based. Other basic decisions involve such matters as what aircraft model to buy, whether it should be new or used, what personnel you may need to hire and what modifications to make to the aircraft. Moving into aircraft ownership, whether after long experience with charter or from a dead start, requires solid advice from aviation professionals in many disciplines.
In the forest of business aviation options, how do you find the tree that’s best for you? Talk to friends who use private aviation, charter brokers, aviation consultants and representatives of the aircraft manufacturers. Go to trade shows like ABACE in Shanghai. Research online. Read Business Jet Traveler.
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