Can you make your jet pay for itself?
By Curt Epstein - April 1, 2008
After BJT quoted Long Island, N.Y. businessman Michael Pascucci’s claim that his flights on his three aircraft are “free” based on the offset revenue he earns from their charter, we received feedback from readers questioning whether this is truly possible. (See Center Stage, October/November 2007, and Your Letters, December 2007/January 2008.–Ed.) Pascucci’s accountant subsequently insisted that charter indeed covers all his costs–right down to the pretzels and peanuts–but we decided to talk to some industry experts to get their opinions. Is it really realistic for an aircraft owner to expect charter to offset all his expenses? Responses from those we interviewed ranged from highly skeptical to guardedly optimistic.
“We’ve certainly seen a lot of people try,” said Steve Hankin, CEO of Sentient Flight Group in Weymouth, Mass. “There are more people who thought they’d be able to do it and didn’t than people who have been successful at it.”
David Rimmer, executive vice president of Ronkonkoma, N.Y.-based airplane management company Excelaire, agreed. “It’s hard to achieve, and I think it’s not a goal I would go into aircraft ownership with,” he said.
Others, including Cyrus Sigari, president of the recently formed very light jet management company Jetaviva, took a more positive slant. “If the owner is flying 100 hours or less [per year] and the operator has good scheduling control and can utilize the asset, it’s very possible for it to get close to breaking even or even making some money.”
Many expenses require evaluation before you can calculate whether you’re flying for free or at greatly diminished cost, however. Along with the fixed and variable costs of operating the aircraft, you must account for acquisition costs as well as tax depreciation and any real depreciation. Tax depreciation in particular is “a big part of the puzzle,” said Sigari.
But while tax situations and aircraft depreciation vary widely and play crucial roles in determining whether you can achieve zero-net-cost flying, our experts agreed that you must follow certain ground rules to even have a shot at covering your ownership costs with charter revenue. Here’s what you must do:
1. Find the right management. “Your revenue stream is only as good as the company that charters your aircraft,” said Kenneth Starnes, CEO of Woodstock, Ga.-based Cerulean Jet. If a company is aggressively marketing your aircraft to its clients, [covering all your costs] is certainly achievable.”
Rimmer agreed. “You’re depending on the business that your charter company has,” he said. “You want to make sure that it has the demand to keep your airplane as busy as you want it to be.”
2. Say goodbye to easy access. To maximize charter revenue, you’ve got to make your aircraft available for customers as much as possible, which can be tough. New owners “don’t always want their shiny airplane to be in the hands of strangers,” said Rimmer. And the times when demand for charter is highest may also be the times when you most want to use the aircraft yourself. Considering how rarely the aircraft might be available to you, said Hankin, “you have the question of, ‘Are you better off just being a charter client yourself?’”
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