July 2018 Newsletter
When Does it Make Sense to use Charter, Fractional or buy a Private Jet?
Though there are many different variations of these options, there three basic options when considering private jet services: Charter or Renting, Fractional Ownership or buying a Private Jet. Each option has its own pros, and each has its own cons. Below are some things to consider about each option and when they should be considered.
Charter: Chartering or renting an aircraft in the US is often the least expensive option and has the lowest commitment of any of the options. A private jet flyer can charter a private jet with less than 24 hours notice and just use it once and not use it again. For the right type of private jet travel, chartering can be the least expensive option regardless of how many hours are flown annually. Charter is well suited for round trips that are 2-3 hours or more in duration and last 1-4 days. Remember, there are always exceptions to every rule; however, if a private jet flyer is not hit with minimum flight time or cancellation penalties, chartering is hard to beat on price.
Fractional Ownership: Buying a fractional share in a private jet is a simple way to get consistent one-way travel. The aircraft in a fractional jet program are outfitted the same and are difficult to tell apart for the average passenger (except the tail number is different). The fractional jet companies have done this to create the feeling that fractional share owners have a consistent experience. Fractional jet ownership is an expensive way to travel. The fractional share is typically in a newer private jet and there is an acquisition fee, a management fee and an occupied hourly rate. The benefits of fractional jet ownership are that it is based on a one-way model so if the manager picks up a private jet flyer in New York and the fractional owner goes to Florida for six weeks, there are no extra fees for staying 2 nights or six weeks. In fact, their cancellation policies are typically very friendly, so an owner can extend or shorten a trip with ease. Fractional Ownership is still relatively expensive; however, it is financially competitive when the owner stays in a location for more than 4 days. The ancillary benefits of having a consistent experience on each trip and the flexibility of one-way travel make fractional worth a premium and can be a great solution for private jet flyers with the right profile.
Whole Ownership: Buying a private jet is a large commitment and should be done with the help of a competent and transparent broker to guide you through the process. The option requires planning, commitment and the management of another complex asset. Yes, there are many high-quality management companies that will assume most of the responsibilities, but this option does require more input than the other two basic private jet options. Based on the number of flight hours flown each year, private jet ownership can be financially similar with charter and much less expensive per hour than fractional jet ownership. Typically, when a prospective owner is flying more that 150 hours per year, whole ownership should be considered. The benefits of owning a private jet include the increased flexibility of owning your own aircraft. Also, the owner can change their schedule and the private jet is there for them. Additionally, once the fixed costs are paid or “sunk”, the incremental hours on a private jet are comparatively inexpensive when compared with the other options, so those end of year or extra trips are relatively inexpensive.
There are many variations on these basic private jet options like the card programs or whole jet partnerships. The card programs can be good options but are typically more expensive per hour though they may have “one-way” pricing which can work in the right situations. In the end, there is no rule that applies to every private jet flyer. Typically, if the flyer is under 50 hours, use charter or card; under 150 hours, use charter or fractional; and over 150 hours, use charter or whole ownership. Each travel pattern should be reviewed because the billing mechanism along with the scheduling habits of the private jet flyer must be analyzed.