Flying privately without buying a jet

Buyers' Guide » 2009
Upgrading or downgrading to larger or smaller aircraft tends to be much less
Saturday, August 1, 2009 - 5:00am

"I just spent eight hours in the Atlanta airport waiting for a delayed airline flight. I missed my connection, wasted a day and had to reschedule the trip. This has happened too often. I want to fly privately and I have brochures from fractional and jet card programs. But I'm not sure which one is right for me and I can see that making the wrong choice would cost me a bundle. What should I do?"

I hear a version of that story all the time. The airline experience is so off-putting that it pushes weary travelers into the private jet market. But the decision to fly privately leads to more questions: Is fractional ownership right for you? Or would a fractional jet card program, a charter card program or perhaps on-demand charter be your best choice? Most importantly, how do you decide?

The first step is to look at your travel profile, budget and investment preferences and then answer several important questions, including the following: How often do you fly? Where and when do you fly? How far in advance do you plan trips? How many passengers and how much luggage do you take? Do you prefer to fly on a fleet managed by a single operator? Is there a good charter operator in your area? Do you have specific aircraft preferences? What's the best use of your capital? Can you take advantage of depreciation tax deductions?

A rule of thumb that passes for common wisdom is that if you fly between 50 and 400 hours per year, fractional ownership is likely to be your best option. (Under 50 hours, you're better off with a jet card or charter and, over 400 hours, you should consider buying a whole aircraft.) That, however, should be only the starting point for your analysis.

When a Fractional Share Is Best
In addition to flying at least 50 hours per year (the minimum size of most fractional shares), other factors militate in favor of fractional ownership in programs like those from NetJets, Bombardier Flexjet, CitationShares and Avantair, which involve owning a share of an aircraft that a single operator manages as part of a fleet. Consider a fractional program if:

  • You fly predominantly within its prime service area. That way, you won't routinely incur ferry fees and other extra charges.
  • You fly predominantly on non-peak travel days. This is so you'll be unlikely to experience delays or wind up on a charter aircraft because all the fleet aircraft are in use.
  • Most of your flights will be one hour or more. The fractionals charge a minimum of one hour even if your flight is shorter, so if all of your flights are 30-minute hops, you'll lose half the time for which you're paying, effectively doubling your cost per flight hour.
  • You expect your flying to be fairly constant over the next several years. If you misjudge how much you fly, you may buy hours that you'll waste or, if you buy too few hours, you'll have to supplement them later with another investment.
  • An aircraft model in the fractional fleet suits your needs. You won't be happy if your aircraft can't make your favorite trip without a fuel stop, hold your ski equipment or land on the closest airport's runway, and upgrading or downgrading to larger or smaller aircraft tends to be less cost-effective than choosing the right one up front.
  • You're willing to live with not knowing the cost per actual flight hour up front. With a fractional share, you'll bear much of the risk of operational cost increases. More importantly, there's the risk that the value of your aircraft (and thus your share) may change significantly from the time you buy it to the time you sell it back to the program-a key factor in determining your overall cost.
  • You're prepared to make a substantial capital outlay. Remember, fractional ownership means buying a share in an actual aircraft.
  • You can use the depreciation deductions that are applicable to a capital asset. Keep in mind that in most cases, this means showing your fractional share on the books of your company. In the current political environment, that may raise the hackles of some shareholders.
  • You can identify a financially sound fractional provider that has a track record of sustained excellence in operating its program. After all, you're not just buying flight time, you're going into business with the program operator and relying on that operator to run the business and buy back your share at the end of your term (generally five years).

When Fractional Jet Cards Are Ideal
If you can't satisfy the above criteria, a fractional jet card through programs like Marquis, Flexjet 25 and CitationShares' Vector may better suit your needs. You're a good match for the offerings of fractional jet card companies if:

  • You fly about 25 hours per year.
  • You fly trips with stays that last at least a couple of days. Unlike the alternative of traditional charter, fractional jet card companies won't require you to pay extra positioning charges to fly the aircraft back to its home base after it drops you off and then comes back to pick you up.
  • You schedule trips on fairly short notice. This makes the guaranteed availability offered by jet card programs of value to you.
  • You fly to destinations that are within the primary service areas of the fractional jet card programs.
  • You fly on days that aren't "blacked out" by the programs.
  • The aircraft within your budget satisfy your requirements.
  • Your flights are one hour or more. This way, you can avoid the one-hour minimums that balloon your cost per hour.
  • You're uncomfortable flying through charter card programs that operate via a network of independent charter operators. Such programs, including those from Sentient, BlueStar Jets and Skyjet, don't offer uniformity in fleet management, pilot experience, aircraft type, fleet age and so on.
  • You don't want to make the long-term commitment that fractional ownership requires.
  • You're willing to pay a bit more to fly than you'd be charged as a fractional share owner. For you, the extra cost is more than offset by the return you can realize on the capital you'd otherwise invest in purchasing a fractional share, and the fact that you will avoid the risk of fluctuations in the jet market that can adversely affect the value of fractional shares.

To be sure, fractional jet card programs charge hourly rates that are significantly higher than those of established charter operators. Indeed, you should consider that this may be a more expensive way to fly privately.

If your profile otherwise fits within the parameters for a fractional jet card, but you're amenable to flying through a network of charter operators that have been approved by one or more reputable safety rating services like ARG/US and Wyvern, you may realize some cost savings by utilizing a charter jet card service like Sentient, BlueStar Jets or Bombardier Skyjet. These services generally do not own or operate aircraft. Rather, they make arrangements with independent operators to service your flights. You won't be able to specify the type and vintage of the aircraft on which you'll fly, which may vary widely, but you should realize some cost savings over fractional jet card programs.

The Best Candidates for Charter
If your travel profile and investment preferences don't gibe well with the fractional ownership model or jet card offerings-whether fractional or charter-you can go with traditional air charter, which offers a "pay as you go" option with no commitment beyond each individual flight that you schedule. Charter can be a good option if your travel profile and investment preferences are as follows:

  • You fly roundtrips on the same day. Thus, you can minimize your deadhead costs.
  • You make your travel plans well in advance. That way, you can thoroughly investigate the market.
  • You can identify reputable and safe charter operators. You want one near your home base that flies aircraft you like and that has the aircraft inventory to deliver reliable service and availability when you need it.
  • You don't mind doing a bit more legwork for each trip than you have to do with one of the programs.
  • Your usage may vary substantially over time. If that's the case, "pay as you go" charter is better for you than locking into a program with a "use it or lose it" commitment.

As is often the case, you may find that there is not a simple match between your needs and the available options. In such situations, your best bet may be a combination of investments that satisfies all your needs in the most cost-effective way. For example, you may fly mostly one-hour flights for business but longer flights for family vacations. In that case, a fractional share in a light jet or a turboprop that provides depreciation deductions may service your business needs, while a charter jet card program utilizing a midsize jet may be the way to go for your family ski trips to Aspen and your trip with your golfing buddies to Florida.

Your goal should be to purchase maximum flight time on aircraft that best fit your needs from reliable and financially stable companies at a minimum cost. Making the wrong choice can cost you hundreds of thousands, if not millions, of dollars. Making the right choice can free you from the horrible service offered by the airlines in a way that does nothing less than change your life for the better.

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