““[Bill Gates] has been historically one of my best supporters…One of my favorite e-mails he ever sent me…I proposed this crazy project. And he sent back this two-line response: ‘This has got to be the craziest thing you’ve ever suggested. Please proceed.’” ”
You Don't Have to Buy an Airplane
If you're like many business jet travelers these days, you may not feel compelled to own an aircraft but still want to enjoy the benefits that having one can offer. The good news is that several options-such as chartering and buying a jet card or fractional share-make it easy to do just that. Each option has different costs, benefits and drawbacks, and it's up to you to determine which best fits your needs. Chartering is the choice that involves the least commitment. But while charter prices may at first glance seem relatively low, hourly rates must be doubled for most flights to pay to return the airplane to the operator's base or to wherever it normally is kept. Some charter companies, like XOJet, offer flat-rate fares for certain trips because they are able to fill seats on what otherwise would be so-called "deadhead" or "empty-leg" return flights and pass the savings on to customers.
There are hundreds of charter companies operating a huge variety of aircraft, so you can find a flight to meet your exact needs-anything from a four-seat, piston-powered single-engine airplane for local jaunts to a massive Airbus A380 if you have to carry, say, the entire Big 12 football conference. On a business trip, baggage space may not be an issue, but speed might be critical, so you can look for a fast, small jet. For a group golf outing, however, you might want to opt for a load-hauler like a King Air 350 turboprop, which can handle more gear and people but at a slower speed and lower price.
Should you use a broker when shopping for a charter flight? Charter companies would rather deal directly with you because they generally pay brokers 15 percent of the trip cost. However, you don't pay extra when you use brokers and they can sort through hundreds of operators to find the perfect fit for your flight, eliminating the need for you to call around.
Whether or not you use a broker, be sure to check the charter company's qualifications. One way to do this is to look for ratings by CharterX/Wyvern, Argus and the Air Charter Safety Foundation's Industry Audit Standard Registry. All charter operators must meet FAA regulatory standards, but many choose to exceed those requirements.
Jet cards require more financial commitment than charter and cost more per flight hour, but arguably they can deliver more consistent service. They also save you from having to shop for a deal each time you want to fly. Fractional operator NetJets services the Marquis jet card. Sentient Jet works with a variety of charter operators to provide jet card flights for its clients. Most fractional operators offer a jet card, too, or like NetJets, partner with an independent company such as Marquis Jet.
Like charter, jet cards eliminate the need to buy a capital asset, but they do require a significant up-front investment. Purchasing a jet card is like buying a block of charter time, and indeed, most charter operators will be happy to sell charter time in chunks, which usually nails down a price that won't change during the use of those hours. No matter who provides the jet card, all flights are conducted under FAA Part 135 charter regulations, and thus you will have to pay the 7.5-percent-per-leg federal excise tax.
One reason hourly costs appear higher for jet cards than for charter is because you can use your hours one-way; you don't have to deduct time from the hours on your card to return the airplane to home base. The hourly card cost necessarily reflects that the operator may sometimes have to fly deadhead legs to get the airplane where it is needed next.
Jet cards are flexible. The Flexjet 25 card, for example, comes in a variety of levels, starting from 25 hours over 275 days to 35 hours and up to 365 days. (Flights are operated by Jet Solutions.) Cutting out the additional 90 days drops the price by $22,000 for 25 hours in the fleet's lowest priced jet and by as much as $64,000 for 25 hours in its largest jet.
CitationAir sells a single-aircraft jet card as well as one that provides access to three jets; it also offers lower rates for 355 non-peak days per year, with the option to pay a higher rate on the 10 busier days. Another CitationAir benefit is that the company will refund unused portions of jet cards at the end of the contract term with no penalty. (Those who want a refund prior to the end of the contract term pay a fee of 10 percent of the unused balance.)
Although Marquis Jet is an independent company, it works exclusively with NetJets and thus can offer jet card buyers access to any of 10 NetJets models, from a Cessna Citation V to a Gulfstream G550.
Avantair's Edge entry-level card commits the buyer to only 15 flight hours and costs $67,500, which comes to $4,500 per hour (not including government fees) with no fuel surcharge. Avantair also offers a block time program called Axis Club. The club runs for a three-year term, charges a membership fee ranging from $75,000 in the silver program to $225,000 in the platinum program and requires a minimum purchase of 25-hour blocks (three in the silver program, nine in the platinum). For a three-year membership, the hourly cost for the silver program with the minimum three-block purchase would be $4,200 per hour. The maximum 18-block purchase (450 hours) in the platinum program with the membership fee would bring the average hourly cost down to $3,500.
The Flight Options JetPass Select 25-hour jet card comes in three varieties, depending on the aircraft type. The cost of the card ranges from $99,250 (for a seven-passenger Hawker 400XP) to $211,625 (for a 13-passenger Legacy 600), and buyers can fly with as little as 12 hours' notice.
Fractional shares require more up-front commitment than jet cards, but they may offer relative bargains in today's economy. Fractional-share operators resell preowned shares, and many of these have seen prices drop 30 percent or more because of dramatic used-aircraft valuation declines in the past year.
Buying a fractional share of a jet means purchasing a portion of a specific airplane, usually at least 1/16th, which typically covers 50 hours of flying per year for a five-year contract period. While you may well never fly in the airplane that is officially part yours, one advantage of fractionals is that you have access to all aircraft of the same model in the company's fleet. Unlike chartering and jet cards, moreover, a fractional share gives you a true ownership interest, so you can take advantage of any tax benefits such ownership provides.
Fractional shares work only if the provider's fleet is large enough to meet its availability guarantees, and this benefits you because you'll never be stuck without an airplane. You also have the option in most cases of flying in larger or smaller aircraft than the one in which you own a share. (When you do, you're charged more or less than an hour of flight time for each hour in the air, depending on the model you select.) With fleets of airplanes spread throughout the U.S., also, fractional providers do not charge for deadhead flights needed to move an airplane to a location to pick up the next owner.
Sales of fractional shares in new aircraft have leveled off during the recession, as have sales of new aircraft in general. While some fractional operators have canceled purchases of some new airplanes, you may still be able to find a bargain on a share of a new airplane that an operator has on order. Keep in mind that when buying a preowned share you generally have to sign a contract to pay the current monthly management fees, not the lower fees paid by the previous owner. In some cases, you may be able to purchase a preowned share in the private market and take over the lower monthly management fees on an existing contract, if the owner is quitting the contract before the end of the term. This depends on the good will of the fractional share operator, however, so read all the fine print when considering a third-party deal.
Special circumstances govern each fractional provider's operations. These include blackout dates, fuel surcharges and other not-included fees, areas of operation, how flight hours are billed (rounding up to whole hours, for example) and how fair market value is calculated to determine share-repurchase prices when a contract ends.
The four largest fractional operators-CitationAir, Flexjet, Flight Options and NetJets-cover the entire U.S. and some areas outside the country. Avantair is a national fractional operator with just one airplane type, the roomy and fast twin-engine turboprop Piaggio Avanti. There are also regional fractional providers that serve specific parts of the U.S. These include PlaneSense, which focuses mostly on the Eastern U.S. using Pilatus PC-12 single-engine turboprops, and Executive AirShare, which operates in the Midwest and Southwest using Hawker Beechcraft King Air turboprops, Beechjet 400A jets and Embraer Phenom 100 and 300 jets.
A traditional rule of thumb is that if you fly fewer than 50 hours a year, you should charter or buy a jet card; for 50 to 400 hours a year, fractional shares are advised; and above 400 hours a year, you're better off owning a whole airplane. Recession-related bargains notwithstanding, this may still be true, but rather than generate a complicated analysis that takes all the variables into account, look at the hourly costs in the chart on this page. Remember that the charter numbers need to be doubled.
While the figures in the chart deserve consideration, keep in mind that there is something much more important than cost savings: your safety and comfort. Your relationship with the aircraft provider is the key to a satisfying experience. No savings will ever compensate for a lack of confidence in the people charged with flying you and your colleagues and family.