Exploring Your Options

Buyers' Guide » 2009
Saturday, August 1, 2009 - 5:00am

On a recent airline flight, a CNBC reporter noted a businessman, whom he did not know, sitting one row ahead and across the aisle from him. "For nearly the entire five-hour flight from Newark to Los Angeles," the businessman's laptop computer "was wide open," wrote the reporter, who covers the pharmaceutical industry. "I didn't have to lean forward, squint or put on my glasses to see what the guy was working on: a presentation on the marketing plans for a new drug-one I had never heard of. We're talking dozens of pretty PowerPoint pages."

For many business jet travelers, privacy is reason enough to justify their use of business aviation. Many people add time savings, inadequate or total lack of airline service, security and even comfort. You can likely name additional reasons for considering travel by business jet, turboprop or helicopter.

Whatever your personal reasons, the more time you spend investigating your business aviation travel options, the better the result will be. While airline travel has become a commodity, travel by smaller aircraft still appears exotic and confusing to many people.

Look at all the advertisements about private flying in newspapers and magazines aimed at the high-net-worth market, and all the hits you get when you search online for "business jet," "air charter" and "fractional jet ownership." There are numerous shapes, sizes, names and models of aircraft to choose from, all with different capabilities and some even sporting propellers. And there are lots of ways to climb aboard, including charter, jet cards and fractional and full ownership. How can you possibly choose what is best for you, your company or your family?

The good news is that while there are certainly many aircraft options, which is to the customer's advantage, there really are only two basic ways to get involved in business aviation: renting and buying. Everything else is just a variation of those options.

Chartering aircraft is the equivalent of renting a house. Owning an aircraft is the equivalent of owning a house. Owning a fractional share of an aircraft-the option developed and popularized by NetJets-is the rough equivalent of owning a timeshare in a vacation condo. Unless you hitch a ride on a company airplane or with a friend, ad-hoc air charter is the least expensive option for your first foray into business aviation.

But before you start searching online or in the Yellow Pages, neither of which are the best approaches, you need to decide a few things:

• Where do you want to go?

• How many people will be going with you?

• How much are you willing to spend?

• How long will you be gone?

• Are you bringing unusually large objects or pets?

If your departure and destination are well served by airlines, you are traveling alone and money is a consideration, flying first class with a favorite airline may be your best choice. If one or more of the above factors aren't part of the equation, chartering an aircraft may be the better option. How long you'll be traveling is important for the air charter operator to know.

If you're flying out in the morning and back in the evening, the crew and airplane will likely wait for you. If you're staying overnight, the pilots might wait, but this will cost you extra. Much longer and the operator will likely send the airplane off to fly another client. Large or oddly shaped cargo, the number of passengers and the length of the trip will determine the model, size and type aircraft (jet, turboprop or helicopter) that will fit your mission best.

What Aircraft Do You Need?

You can leave it to the charter broker or operator to decide which aircraft suits your trip best. But just as it helps to have an idea of your needs before you walk into an auto showroom, it's smart to know what you require before you shop for private jet transportation. With a little effort, you can do this on your own. Use this Business Jet Traveler Buyers' Guide. Or go online and search "air charter." You'll find links to sites that provide basic, useful information about the passenger capacity, range and speed of various business aircraft models. The National Business Aviation Association's website is also helpful. It's worth reading the NBAA's Aircraft Charter Consumer Guide, which you can download.

Getting advice: Friends with Benefits

Friends and acquaintances with experience in business aviation-especially those who own aircraft-are valuable resources. They might even be willing to give you a lift. Talk to them. Ask them to give you industry contacts.

Charter brokers can be a good source, too. Amazingly, they aren't regulated and it is often hard to tell the good from the bad. One tip: No matter what their ads may suggest, brokers don't have thousands of aircraft in their fleets, because brokers don't have fleets. Brokers work with charter operators who have the airplanes.

Another approach is to visit charter operators based at your local general aviation or commercial airport, one with scheduled airline service. A good place to find them is at the private aviation terminal building, also known as an FBO (fixed-base operator). Good charter operators will gladly show you around their aircraft and facilities and introduce you to the flight crews and other people who would help organize your flight. The NBAA charter guide can help make your visit productive.

Moving on Up

If you fly less than 25 hours per year, ad-hoc charter is usually your best bet. But many business jet travelers happily fly many more charter hours every year and never see the need to consider other options, all of which require an upfront investment of some kind.

Entering into a so-called "block-charter agreement" with an air charter operator is one such option. Basically, you pre-purchase flight time by placing a deposit with the operator. Because there are so many variables, there's no such thing as a boilerplate block-charter agreement. Therefore, it helps to get expert advice before signing a contract. The upside is that you should get a better per-hour rate than for typical ad-hoc charter with that operator.

Some air charter operators, aircraft brokers and fractional aircraft providers offer a standardized form of block-charter, often referred to as jet cards. As with block charter, you make a fixed prepayment to the jet card company for flight time in a given-size airplane-typically about $60,000 to $300,000 for 25 hours, depending on the aircraft. In return, the company promises to make an airplane available to you within certain time limits. Details of the plans differ, so it makes sense to investigate several jet cards and read the fine print. A loyal and savvy block-charter user can usually negotiate a better deal than the jet card companies offer. When you start chartering 25 to 50 hours a year, consider both block charter and jet cards.

All the major fractional ownership providers offer, or are affiliated with, jet cards. The first and perhaps best-known jet card is offered by Marquis Jet, which buys fractional shares in NetJets-operated aircraft and remarkets the shares with its Marquis Card. The larger charter operators also offer jet cards, partly as a defense against the fractional competition.

Owning a Piece of an Airplane

When you get to 50 to 100 hours a year of flying-though block charter and jet cards may still fit your needs-it's time to consider fractional ownership.

If you buy a fractional share in an aircraft, you become an aircraft owner, even though you may own only a one-sixteenth share, which normally provides 50 flight hours a year. Depending on the size of the fractional provider's fleet, you may never actually fly in the airplane that you partially own, because you share it with all of its other part owners and the owners of every other airplane in the fleet. If the provider has a jet-card affiliation, like NetJets has with Marquis Jet, then jet card buyers may be flying in these airplanes, too. But to most fractional shareowners, this doesn't seem to matter.

What they like is the consistency provided by fractional ownership and the elimination of some of the hassles of full ownership. These include maintenance, dispatch and hangaring of the aircraft; the hiring, training and scheduling of the pilots; dealings with the FAA; and insurance. You pay for these services via the initial purchase price of your share, a monthly management fee and a fixed flight-hour charge. The term of the agreement is typically five years, after which the provider promises to buy back your share at a fair price based on current market value.

The Top of the Pyramid

When you consistently find yourself flying more than 300 hours a year, full-aircraft ownership becomes a realistic consideration. Full ownership gives you added flexibility and control compared with the other options discussed, but adds costs, responsibilities and headaches. You can pay someone else to handle your airplane for you. This is "aircraft management," and is done by companies that often also offer aircraft for charter. All fractional aircraft are, in fact, managed aircraft as well.

Buying a business jet, turboprop or helicopter requires significant expertise, as does setting up and running a flight department and finding a reliable aircraft management company. Questions you must answer include:

• Which model aircraft should I get? What equipment should it have? What's a good price? Should I choose new or used? Should I lease or buy? Should I partner with someone?

• How do I finance the purchase? What taxes must I pay? How can I get a tax deduction for the interest I pay on my loan? What and how much insurance do I need?

• What are the pros and cons of chartering out my airplane?

• Where should the airplane be based? Who will do the maintenance?

As you may suspect, buying an aircraft is almost impossible without the help of several professionals. Fortunately, there are many aviation lawyers, consultants and brokers who can take you through this complex process.


Pre-takeoff Tips for Air Charter Passengers

• Know all possible costs and get a firm-as-possible estimate in writing from the charter operator. Find out the terms and how and when you will be billed.

• Be sure the operator knows exactly how many adults, children and pets will be on the trip. If your passenger list changes, inform the operator right away.

• Discuss your special needs, such as dietary requirements, with the operator well before the flight.

• Determine the exact departure and destination airports and the private air terminals (FBOs) that will be used at each (many airports have more than one). Get a contact name and telephone number and directions to the FBOs. If you drive yourself to the airport, find out where you can park.

• Ask about security procedures. Some airports have more stringent requirements than others. Special rules cover firearms and ammunition, including hunting rifles. Bring a photo ID for each passenger.

• Get the names of the pilots and contact numbers. Ask for an after-hours contact and number for the flight operator.

• Arrive at the FBO at the appointed time. If you'll be late, inform the pilot asap. Departure and arrival reservations with air traffic control may need to be adjusted. Not calling the pilot could cause you to be delayed even longer.

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Quote/Unquote

“When you get into the larger aircraft it becomes like a hotel, with dozens of staff supporting the plane based in a galley area down below. You have very comprehensive cooking facilities, and on larger aircraft we have looked at theatres, with spiral staircases and a Steinway grand piano. The limitations for what you can put inside a plane are pretty much the limits of physics, and even money cannot always overcome that. Even so, people are still always trying to push [the limits]. ”

-Howard Guy of Design Q, a UK-based consultancy