Decision Points: Finding the Right Private Jet Program for You

For collectible auto auction impresario Dana Mecum, the decision to break away from the airlines came while waiting at a passenger gate at Chicago’s O’Hare International Airport, he told Business Jet Traveler a few years ago.

“It took me two hours to drive to the airport. I’m in the security line for an hour, get pulled out for a pat down in a private room and that takes a while, and finally, I get to the gate, where I decide to use my mileage to upgrade to first class. They tell me I owe an additional $5.43 in tax, but they won’t let me pay it there. They say I have to go back to ticketing and come through security again. So, I refuse and tell the gate agent to call security because either I’m getting on the plane in first class or I’m going to jail. Meanwhile, the plane is delayed an hour for some other reason, and finally they let me on. We back up from the tarmac and sit there for two hours. My two-and-a-half-hour flight winds up taking nine hours when you count the drive to the airport.”

Two Cessna Citations and a Learjet later, Mecum has no regrets. While he opted for whole aircraft ownership, that solution doesn’t make sense for everyone. There are exceptions, but the general rule of thumb is to avoid whole aircraft ownership unless you are flying 300 to 400 hours per year—or more. There is a large menu of fractional, membership, and prepaid charter and card programs available for those who want to make the switch to private aviation without whole aircraft ownership. And demand for fractional programs is surging. (See sidebar.)

“Fractional is quite strong and doing well,” says Brian Foley, principal of aviation market analysis consultancy Brian Foley Associates. “It’s still a very popular option. I attribute that to fliers wanting to avoid environmentalists, the tax man, and shareholders,” and people who want to fly anonymously and not have to worry about the headaches that come with owning, operating, and managing a multimillion-dollar aircraft, he adds. Foley wryly notes that people who want to fly privately won’t be dissuaded by political or public relations considerations. “People who can afford it won’t fly less, they’ll just find ways to do it that aren’t as public.”

But what should be your decision criteria in selecting any program? Business Jet Traveler solicited the advice of industry experts, who delivered the following advice: 

Know your mission

“How frequently do you travel, where do you go, and with how many people?” is the first question to ask, says Foley. “If you’re just going between Albany [New York] and New York City, maybe a turboprop will do from a regional operator.”

“If you are flying 10 hours a year or less, it makes no sense to buy into a [national] program,” counsels Nick Copley, president of the Sherpa Report, since those types of programs offer all kinds of amenities you don’t really need. Your local charter operator may be a better bet if you just “do a handful of flights here and there and they’ve got the right airplanes for you. It can be much more economical.” 

Put a toe in the water

Our experts suggest a “try before you buy” strategy before jumping head-long into what could be a seven- or eight-figure commitment strung over multiple years. And that typically means chartering a few individual flights to get a feel for the purchase.

“Go and do a few flights,” says Copley. “It will teach you so much if you’ve flown privately before [you make a decision].”

“If a user isn’t familiar with private aviation, it might be worth chartering just to get a taste of it first. It gives you the opportunity to try different models of aircraft and kind of understand how the process works,” says Foley. 

Manage your expectations

Some people jump into the charter or fractional space thinking that the make and model of aircraft they prefer, or bought a share in, will always be available on the day and time they want it. The system doesn’t work that way, even at large operators such as NetJets or Flexjet.

“Let’s say an operator has 100 airplanes,” says Rolland Vincent, principal in the aviation consulting firm of Rolland Vincent Associates and a director of the JetNet iQ business aircraft intelligence service. “On any given morning, somewhere between 20 and 30 percent won’t be available due to maintenance, being out of position, in front of scheduled events, or something else is going on. So, if a customer is buying a share because he wants to use it on a specific day, the so-called peak demand days such as the Indianapolis 500, the Kentucky Derby, or the day before Thanksgiving, they could run into a blackout restriction and be disappointed.” 

Do your homework

“People spending this kind of money really should be doing their due diligence on the organization running the program that they’re considering,” says Vincent. “Talk to trusted advisors who understand this space well. There’s a lot of zeroes on the table and the most important people on earth are on that airplane with you.” Vincent urges customers to get granular by obtaining program performance data and most importantly “talking to customers who’ve been in the program. I want to talk to someone I trust who is already a customer and ask them about their experience and how service promises match up with delivery.”

Vincent says he personally would lean toward a program that provides a healthy selection of different aircraft models and a program on the larger side with its own back-up aircraft. “The brochures will tell you that you’re always going to be in that beautiful airplane that you see in the pictures. That’s not always the case due to availability. Larger companies have the potential to lock up higher quality back-up aircraft from the charter market. They are going to have that ability to reach out into the supply chain.”

Copley emphasizes the need to look at safety factors. “What is the training for their pilots, what kinds of systems are on the planes and how are they maintained, and do they have a safety management system rated by a third party?”

It may seem obvious, but Foley counsels to check company finances and not be lured in by big discounts that seemingly provide service below costs, especially if they require large deposits or an inordinate amount of prepaid flight hours. While a select few start-up programs that have engaged in these practices have failed over the years, Foley doesn’t think the associated odor from those isolated events has driven customers from the market.

“A lot of folks who buy these shares are pretty high-net-worth individuals. No one wants to lose money [if a program fails], but they’ve got the financial wherewithal to find a program that is more stable.” Nevertheless, he says, “You want to find a good balance between discounts and risk and not pay too much upfront.” 

Understand charges, finance, and resale

“Sometimes people pick a ‘brand’ name because they have heard it before without fully understanding all the costs,” says Foley. Those include “deadhead” charges (flying an empty airplane to either pick you up or return it to base after it drops you off). “I think you need to understand regional differences between providers and which ones have the strengths to best cover your travel area. And there’s always the fine print in the contracts. Know what the prepayment terms are and if those assets are held in an escrow or a trust account for those funds.”

Foley says that it also is important for program customers, particularly fractional owners, to understand the financial variability involved with exiting a program and/or disposing of an aircraft share. “Market values of an aircraft can fluctuate quite a bit. Shortly after COVID hit, resale values were pretty darn good—in many cases were even more than the airplane was worth a few years before. But then again, there was the 2009 financial crisis. Then a lot of fractional owners ran for the exits and had to sell at a market low.”

In general, a company that owns a lot of the same model of an aircraft should not be a concern to owners when it comes time to dispose of a share, he adds, specifically that too many of those aircraft would flood the market at the same time and depress resale values. Foley uses the example of industry-leader NetJets. “They’ve been very measured in their approach to the used market. They haven’t been known to dump a bunch of certain models [onto the market] all at once, something that would upset the preowned market. They’ve been a good steward of that over time.”

However, Foley argues that some “other providers may not be as financially stable [as a larger operator]. In that case, you do risk losing your principal on the share that you bought.” 

Have a back-up

Even the best programs can run into problems. If you find your travel needs trend to the short-notice and exigent, or occasionally you need more than one airplane at the same time, maybe you need multiple programs. It is an increasing trend, according to Vincent. “We’re finding that some people actually have more than one program. They may have a fractional program and a jet card, or they’ll have one or the other and also occasionally charter.” He says this is even the case with whole aircraft owners, noting that six to seven percent of those surveyed by JetNet iQ also have a jet card.