Preowned sales enter chartered territory

A growing number of longtime charter customers are becoming aircraft owners. The continuing slide in preowned prices is one reason, but equally important is heavy demand for charter lift. That has led more charter management companies to offer generous revenue deals, to entice clients to buy an airplane and put it on the operator’s charter certificate. The agreements typically promise a minimum number of charter hours for the aircraft per month or year, providing income to offset operating costs. That can make ownership a viable proposition even for some customers with only limited need for lift.

“We have a good demand for airplanes [for charter], and with aircraft values continuing to go down, it creates a perfect storm for people who have been on the sidelines,” says Priester Aviation president and CEO Andy Priester.

Some Part 135 operators have even established financing and other programs to assist customers in buying aircraft compatible with the provider’s fleet needs. With demand for lift at current levels, such programs can make sense for operators, who are less concerned with losing one charter client than with gaining an aircraft that can serve multiple customers.

Even charter brokers are helping clients enter the preowned market. Houston-based Horizon Air Group, for example, has formed a sales-and-acquisition arm and recently helped a customer buy a jet and choose a management company to operate it. Horizon founder and CEO Luis Barros says its sales commission takes the economic sting out of losing a charter client, and he hopes that such deals may result in Horizon being given preferential pricing or access to the aircraft from the operator.

Meanwhile, some charter customers see a business opportunity in this ownership model beyond helping to subsidize their own travel. Priester reports that one client has purchased several aircraft and put them on the company’s certificate. The goal is to resell them, with their charter agreements, to buyers who like the idea of having a charter income arrangement adaptable to their needs from Day One of ownership.

But operator demand has limits. Delta Private Jets, which in 2014 inaugurated a program to help customers buy aircraft for placement on its charter certificate, now has a sufficient fleet and is not actively seeking more financing customers, according to David Sneed, the company’s executive vice president and COO. Developments like that suggest why it’s important to remember that revenue agreements typically aren’t ironclad; the margins on charter are thin; and if that market suddenly goes flat, owners will have to find a way to pay the bills without charter income.

Skeptics note that aircraft sellers could likely negotiate such charter agreements, but are opting to sell instead. “I see more people getting out of owning their planes than the other way around,” says aviation attorney James Butler. One reason he cites: “They’ve run the numbers on what it’s costing to own and operate the airplane, and they feel it’s less of a headache to let somebody else take that over.”

THANK YOU TO OUR BJTONLINE SPONSORS