The Keys to the High Way
Professionals of all stripes, from your physician to the pilots you fly with, undergo regular retraining, buffing their skills and learning new procedures that improve operations. As a business jet traveler, you should undertake a periodic review of your own, re-evaluating your travel patterns and access needs, and learning about developments that can add more efficiency, economy, and satisfaction to your bizav use.
Similarly, if you’re considering an upgrade from public to private jets, you should make sure you understand the basics of how to get onboard, so you can ask the right questions and avoid stumbles on the way up the air stairs. Whether for business or leisure travel, private aviation can be a liberating, exhilarating, and intensely fulfilling option. Yes, it carries a premium price tag, but there’s real value for those with the money and the savvy to spend wisely. Consider this your refresher course on the choices available to you.
Charter is bizav’s most basic access route: you rent the aircraft, crew included, for each trip as needed, with no commitment beyond the contracted flight. It can be a one-way, a round trip, or a multi-stop juggernaut possibly requiring more than one category of aircraft along the way.
Charter provides access to the entire world, unlike jet cards and fractional-ownership programs, which limit their service areas. It’s also ideal for special missions like moving a large entourage or a medical flight.
But charter doesn’t guarantee access; if no suitable aircraft is available when you want to travel, you’re grounded. In practice, however, this is rarely a problem, even when you’re making 11th-hour bookings, except during peak holiday travel periods. (“Guaranteed availability,” a feature touted by many a jet-card and fractional-share provider, was a bigger deal in the high-demand era that preceded the 2008 economic downturn.)
For many private travelers, charter is the most economical choice. Aircraft are typically priced by the hour, though flat rates are often quoted. Today, one-way pricing has largely supplanted the round-trip rates that were previously the norm (though charter providers may offer round-trip discounts), making flights more affordable. The advent of “floating” fleets, whose aircraft have no permanent base, and improved scheduling and tracking software have helped fuel the changes.
You arrange flights through a charter operator or broker. The operators manage, crew, and control aircraft, and their fleets may range from one to dozens of airplanes, based at one or many locations. More than 2,500 operators are licensed in the U.S., and many have fleet-sharing relationships with other operators to help them meet demand.
Charter brokers have no control over aircraft, but typically have contacts with multiple operators from which they source lift for charter customers. When you call, click, or text to inquire about a trip, the broker will find available aircraft appropriate for the mission from operators’ fleets, leverage availabilities to negotiate with operators, and present you with one or more proposals, including the exact aircraft, cost, and other trip details.
Quality operators and brokers can both provide personalized, dedicated service, so which should you work with? Whichever you have the best relationship with is the simplest answer, but keep in mind a couple of rules of thumb: If you reside in a metropolitan area where a major charter operator is based, you may have access to all the lift you need through that company, and fostering a direct relationship can pay off in situations when a call from a broker may carry less weight. Conversely, it you live off the beaten flyways without a local operator to call, a broker will have the knowledge and contacts to find suitable lift.
Consider charter if:
- You use 25 or fewer flight hours per year.
- You prefer pay-as-you-go access.
- Your missions call for a variety of aircraft types.
- You want to find the best value for each trip.
- Your operations don’t require guaranteed access.
Membership programs include private flight clubs, closed charter fleets, and discounted brokerage services. All involve an upfront payment or initiation fee and monthly or annual dues that allow access to a pay-as-you-go or all-you-can-fly service.
California’s Surf Air and Texas’s Rise offer unlimited service for a monthly subscription fee on scheduled flights aboard small aircraft plying high-demand routes, some of which are poorly served by airlines. These carriers operate from general-aviation terminals and are exempt from TSA screening procedures. You can book flights via smart devices within 15 minutes of departure and enjoy free parking and a club-like atmosphere en route.
The model hasn’t been entirely successful. Surf Air cofounder Wade Eyerly launched Beacon, with service between Boston and the New York City area, in 2015, but the company quietly folded early this year.
Wheels Up, a membership-based charter provider, offers access at discount rates to its fleet of Beechcraft King Air 350i twin turboprops, Citation Excel/XLS light jets, and other aircraft through partnerships with operators such as Jet Aviation and VistaJet. Wheels Up members pay an initiation fee of $17,500 and annual dues (beginning in the second year) of $8,500.
Membership programs typically tout their social benefits, saying they provide camaraderie and networking opportunities, in some cases via ground-based events. Wheels Up, for example, offers a “Wheels Down” activities program for members that includes private parties held in conjunction with the Super Bowl and other major sporting events.
Charter broker JetSmarter offers both ad hoc charter flights and a membership program ($5,000 initiation; $10,000 annual dues) that provides discounted rates and free access to listed empty legs, and seats aboard scheduled charter flights conducted under the company’s JetShuttle program.
Consider a membership program if:
- The offering matches your need for lift.
- Discounts on flight time will offset membership costs.
- You find the program’s social aspect worth while.
Jet cards are debit-like instruments that provide flight time aboard one or more types or categories of aircraft. They are sold in denominations of dollars or hours, and the provider deducts the cost or hours for each flight from the sum held on account. (Twenty-five-hour cards have long been a standard, though some companies offer 10-hour cards.)
Initially modeled on fractional-ownership programs, jet cards provide guaranteed access and charge only for occupied time; you never directly pay the repositioning fees that charter customers still sometimes face. In reality, however, all customers share repositioning costs and the expenses associated with the elevated service that card programs promise, making jet cards a more expensive option than charter. Other program features being equal, the cardholder who flies one-way trips between out-of-the-way locales gets a better value than the one whose typical mission is a round trip that requires no repositioning.
The basic model aside, card programs exhibit vast differences, starting with the aircraft they offer. A card may limit you to use of a single aircraft model or category, or impose relatively high fees for upgrading or downgrading within a category for a particular flight; others offer unfettered access to three or four cabin sizes, selectable trip by trip.
Providers may also offer multiple card types. Massachusetts-based Sentient Jet sells one card that provides aircraft from model year 2000 or newer and a less-expensive one that gives you access to older aircraft. Delta Private Jets offers cards in $100,000, $250,000, and $500,000 denominations, with hourly rates inversely proportional to the card’s cost. NetJets’ Marquis program’s X-Country Card provides travel between more than two-dozen East and West Coast locations at a savings of more than 20 percent over the rates charged with the company’s standard Citation X jet card.
A variety of variables besides fleet and price also impact choice. Card programs typically have 10 to 30 “peak” days per year, when access may be priced higher, restricted, or even unavailable. Minimums also vary widely: some cards impose minimum times per flight; others have minimum flight hours per day. Magellan Jets sells a jet card with minimums of one hour—approximately the flight time between New York and Boston or Washington, D.C.—to supplement its regular jet card, which has a two-hour flight-time minimum.
How long hourly rates are locked in and how long the card is valid also vary, as do refund policies. Just as important is the treatment of funds on deposit; some card providers put the money in segregated escrow accounts while others mingle deposits with operating income. Perform due diligence before buying into any program.
The benefits a card may provide include discounts on round trips and select one-way routes; access to all Wi-Fi-enabled fleets; and free ground transportation and/or catering.
Consider a jet card if:
- You fly at least 25 hours per year.
- You value the consistency of service a card company delivers.
- You want to ensure lift in peak-demand times.
- You have many one-way flights to or from out-of-the-way locales.
- You don’t want to be bothered negotiating for each trip you make.
Aircraft leasing provides the access level that goes with whole-aircraft ownership and some of its tax benefits without tying up nearly as much capital. Leasing also offers flexible contract lengths, ranging from several months to the life of the aircraft. Additionally, lessors can lock in the exit value going into the contract, eliminating reverse sticker shock when the lease period ends. Leases can be designed to avoid the sales or use tax that accompanies a purchase and to simplify use of an aircraft by affiliates of its owner without incurring unintended tax consequences. Leases can also include option-to-buy clauses.
For these reasons, leases have become increasingly popular and are today offered by numerous financing institutions and even some access providers. NetJets now has a leasing program analogous to its fractional-ownership plans but requiring less capital investment.
Aircraft leases may be “wet” or “dry.” Under a wet lease the lessee crews the aircraft and retains operational control. In a dry lease, the lessor provides the crew and operates the aircraft.
Consider leasing if:
- You need unfettered access to an aircraft for months or years.
- You want the access benefits of ownership but don’t want to tie up capital.
- You want to protect yourself against the value loss ownership entails.
- You want to simplify use of the aircraft by affiliate parties.
Fractional shares remain the option of choice for private-jet customers who seek the flexibility of ownership without its headaches, along with the highest service levels. Fractional programs also often provide first access to new aircraft models, for which their fleets serve as launch customers. But the fractional ownership arena has undergone profound changes that are impacting owners and fractional ownership’s very value proposition.
The basic business model remains the same. You buy a share in a specific aircraft (a 1/16th share, providing 50 hours of flight time, is the usual minimum) at a prorated fraction of its full cost, then pay a monthly management fee, plus an operational fee for flight time. When you want to use your airplane anywhere in the service area, you call and it (or much more likely, an identical aircraft) will be waiting. At the end of the contract period, which typically runs three to five years, the fractional company buys back your share.
In the heyday of fractional programs, aircraft shares were projected to retain 70 to 80 percent of their value at the end of five years. But in the wake of the 2008 economic collapse, those values proved ephemeral, and many owners found their shares worth much less than anticipated.
Bombardier, Beechcraft, and Cessna have all closed down their fractional programs. Directional Aviation, which bought Bombardier’s Flexjet fractional business in 2013, is now eliminating its own Flight Options fractional program, bringing further constriction to the industry. Aircraft shares continue to lose value at rates of “10 and even 12 percent per year or more when all costs are factored in,” says consultant Michael Riegel of AviationIQ.
Meanwhile, current owners with shares in aircraft that serve them well but that are being retired from fleets are faced with receiving little for their surrendered share while being asked to pay premium prices for shares of newer aircraft with a similar anticipated value trajectory. Aviation attorney Daniel Herr of the firm Fractional Law recommends that prospective owners carefully determine whether the aircraft and the program are the right match for their needs, and “confer with current customers in order to get a reality check on their expectations.”
Consider fractional ownership if:
- You fly at least 50 hours per year.
- You want access to the latest-model aircraft.
- You demand consistency and the highest quality of access.
- You want the benefits of ownership but don’t need an aircraft to yourself.
- You can accept the potential for steep loss in value of the asset.
Whole ownership provides the ultimate freedom of access and customization of the flight experience. You can select and outfit an aircraft to your exact needs and preferences and select the crew, determine the schedule, and, if you’re a heavy user, spend less per trip than you would with other options.
A former rule of thumb held that 200 flight hours per year was about where whole ownership began to make economic sense, but plunging prices of used aircraft combined with charter demand have skewed the equation. So too have upgrades that allow an aircraft with dated avionics and interior to be thoroughly modernized at a fraction of the cost of a new airplane.
Aircraft brokers and consultants can provide a needs analysis and lay out the economics. Options for financing purchases, which dried up after the post-2008 bizav-market collapse, have increased, though lenders often require buyers to put up 20 to 50 percent cash. Lending specialists can help with interest-rate hedging strategies and can finance retrofits and refurbishments. Historically, about half of all business jet and turboprop transactions were cash deals, but as of 2014 that percentage rose to more than two-thirds.
Once you buy, you may be able to offset ownership expenses: charter and jet-card providers are offering revenue guarantees to owners who can make their aircraft available for agreed-upon periods. If you own certain Cessna models or an Embraer Legacy 600 and can make do with just 30 flight hours over 20 days per year (at no charge), for example, Delta Private Jets’ Ownership Assist program will guarantee income covering all operational and maintenance costs and 80 to 100 percent of monthly payments.
Consider whole ownership if:
- You fly at least 200 hours per year.
- You put a priority on being able to fly whenever and wherever you want.
- One aircraft type meets at least 80 percent of your need for lift.
- You want an aircraft that is personalized to your exact needs.
- You can craft an ownership arrangement that makes financial sense.
- Michigan’s Pentastar Aviation has introduced a fractional-ownership program for the Beechcraft King Air 250. A quarter share, the minimum buy-in, provides 150 flight hours per year and includes gourmet catering.
- NetJets has debuted the limited-edition Red Card (100 available in the U.S.), good for 25 flight hours on the Phenom 300 light jet. The company contributes $5,000 from every card sale to the Global Fund initiative on HIV in Sub-Saharan Africa.
- Some Delta Airlines SkyMiles Medallion members can now upgrade, for a fee, from first class to seats on a private jet operated by the company’s Delta Private Jets subsidiary. The program, which includes complimentary catering, is available for select flights and markets.
- For ground transportation in some U.S. cities, NetJets customers can rent a Mercedes-Benz GLE sport-utility vehicle, E350 sedan, C-Class sport sedan, GLC-Class coupe, or SLK coupe. The autos are available, with tarmac delivery, through Avis.
- California’s JetSuite has launched JetSuiteX, a “public charter operator” offering a “private jet experience” aboard 30-seat Embraer 135s. Flights operate between major West Coast cities and use general-aviation terminals, avoiding TSA security lines. Service from the L.A. to San Francisco areas costs $109 each way, with no membership fee. Weekly flights to Las Vegas have been added, and seasonal service to San Jose, California and Bozeman, Montana commences this summer.
- New York’s ExcelAire is among the latest charter operators to get FAA approval to serve the Cuba. JetSuite inaugurated charter flights to Cuba earlier this year.
- Los Angeles-based Jet Edge has added a Tokyo office, joining its recently opened facility in Narita, Japan. Jet Edge also operates charter flights for China’s Asia Jet and now manages more than 40 large-cabin jets, including such recent additions as a pair of Gulfstream 650s and a Bombardier Global 6000.
- Asia Jet, an early promoter of jet cards in its region, recently based a Gulfstream G200 in Subang, Malaysia to meet growing demand for its block hour programs there. The jet card, launched in 2009, is available in two membership levels.
- Lily Jet of Shenyang, China has launched a jet-card program for its new Bombardier Global 5000. The minimum buy-in is 50 hours, and the maximum is 300. The Global will also be available for ad hoc and block-charter programs, without the guaranteed availability the card provides. Lily Jets operates a mostly Bombardier fleet, including Challengers and Global Express/XRS/6000.