April 3, 2024
Having bought my Mega Millions tickets last night, and then checking that my lump sum payout would have been nearly $700 million after taxes, of course, I started to think about what would be the best private aviation solution for my needs. And that’s the most important advice I can give anyone who is shopping for new or used aircraft, fractional shares, and leases, jet cards or just thinking about chartering. There isn’t a one size fits all solution, so writing out where you anticipate flying, with how many people and when is a good start. My second point is perhaps 50% of private aviation users have at least two solutions so don’t fret, you may not find one provider that meets all of your needs.
You might own a King Air 350i, great for taking up to eight or nine people on flights up to two hours where you don’t lose a lot of time flying a turboprop but can save money over a jet. You use it to visit your 15 dealerships spread across three states, and it works well. However, for those five-hour trips you make to your vacation home in Los Cabos four or five times a year, you charter or buy a jet card for an aircraft type that can fly faster – giving you more vacation time – and fly nonstop – giving you more vacation time.
Other examples are owners of large-cabin jets who charter when they need to fly into an airport with a runway to short to handle their plane or you might own your plane, but use it for business, so you buy a jet card so your family can meet you for the weekends at your vacation home when you are coming from different directions. In other words, even aircraft owners often charter or buy jet cards – and even fractional shares and leases.
With that in mind, below are some top-line thoughts about which solutions might make sense for you:
Changes in the tax laws have given new reasons for buying your own jet. The still depressed prices of used aircraft has meant the entry point for full ownership has never been lower. I recently wrote about an interesting pitch claiming even if you fly 50 hours or less per year full aircraft ownership of used jets can make sense. It’s a far cry from the pyramid that used to show ownership should only be considered if you are flying at least 400 hours per year. The idea was that from 50 to 400 hours fractional ownership or a lease made the most sense, from 25 to 50 hours, buy a jet card and less than 25 hours, go with a broker and charter as you go, referred to as on-demand charter.
Owning your own aircraft – new or used – gives you a lot of flexibility to go where you want when you want. Operating under a Part 91 certificate means fewer restrictions on duty limits for your pilots. That said, crewing your own aircraft typically means hiring three pilots so there is a back-up for vacations or illness. Virtually all individual private jet owners hire a management company to handle the hiring of the flight crew, keeping up the maintenance and complying with government regulations. They can help you offset expenses by chartering out your aircraft when you aren’t using it, although it will need to be Part 135 compliant to do so.
While chartering out your private jet may have been the original Airbnb, you have a lot of choice on who you will let rent your jet. Some owners won’t allow pets, others won’t rent to rock bands or bachelor parties. Minor damage to the cabin can be expensive to repair and take your aircraft out of service for days or weeks.
Of course, the benefits of owning your own jet means you can decorate the cabin to your personal tastes, including seating configurations. The larger the aircraft, the more options. When you get to super-midsize and large-cabin jets, you might find two of the same type of aircraft, one with eight or nine seats and the other for 11 or 12. Some owners divide the cabin up so they can have a private office or bedroom even a shower. Others want a full dining table with pairs of club seats facing each other while others want multiple couches that can be converted to beds. If you are a smoker, you set the terms. Obviously, it’s just dumb to push your pilots to fly in weather that concerns them, and they should refuse, however, you do need to make sure you exert self-control when you own your own aircraft and remember the pilot is the boss.
If I had won the lottery, I am not sure I would have purchased my own aircraft, new or used, but then again I don’t have a staff set up to manage the businesses I own and my various residences. Hiring a management company still means monitoring a P+L and essentially owning a business. If it’s something you can give to your CFO to manage, it probably makes more sense than if you have to spend your time tracking everything. The other holdback for me is I am not really sure where I would be going and how often. It doesn’t make sense to buy a midsize or super-midsize jet if I end up wanting to go to Europe since neither have the range from where I live without a refueling stop. Yes, I could charter a long-range jet for those trips, but since I wasn’t planning on using it on a weekly basis and really didn’t want to charter it out, I am thinking for me, as much as having my own jet would be boss, it probably wouldn’t be a fit for me. That said, if you are using it for weekly business trips and getaways on the weekend and you can buy a jet – new or used – that fit most of your flying needs, why not?
Fractional ownership and leases provide many of the benefits of owning your own jet – typically you can fly on just four hours notice which could be even less than if you own your plane – and there are none of the hassles of having to manage your own jet. Yes, it could cost you a premium – fractional companies will argue that it depends a lot on how much you fly and other factors – and yes, you have to worry about residual values as you would in buying a new jet. That said, you can usually upgrade or downgrade the size of the aircraft you bought – depending on the other aircraft types your provider operates.
If I buy a share of a midsize jet, but now want to fly to Europe, I can upgrade to a Bombardier Global Express or Gulfstream G650. When buying a share, depending on how you use it, there can be tax benefits. Most fractional aircraft have similar interior designs and configurations to give you a standardized experience, although that’s not always the case. In terms of security – being a high profile lottery winner – flying via a fractional fleet – or for that matter jet cards or charters – means folks I don’t want to encounter won’t be able to track my tail number, although perhaps I would have to get my own security services so maybe a moot point.
Terms are typically at least three to five years, so if you know you will be flying a specific number of hours per year, and it’s at least 50 hours per year, fractional ownership or a lease is worth investigating.
The number of jet card programs and providers has more than doubled since the Great Recession at the same time the number of national fractional providers has waned and new aircraft deliveries have yet to recover to 2008 levels. The reason is the increasing diversity of the programs and their short-term nature.
There are now over a dozen programs that offer turboprops and in addition to buying into size categories – light, midsize, super midsize, large – some programs allow you to buy a jet card for a specific type. Jet cards from owned fleet operators offer the same standardized experience of fractional share programs and most fractional share providers also sell jet cards, although not on all of their aircraft types.
Diversity also means you can buy cards starting at just five hours and up to 100 hours. Typical lead time for booking ranges from eight to 24 hours so a bit longer than fractional shares. Jet card programs typically offer fixed one-way rates and guaranteed availability like fractional providers so you can budget your flying. Most don’t charge for ferry fees to get the plane to your or somewhere else afterward when flying in your primary service area, the same as fractional ownership. For quite a few programs, your funds don’t expire so unlike fractional there isn’t pressure to your flight time. Best of all, when you are done with your hours, you can buy more, or not.
The main pitch for on-demand charter is two-fold: You pay as you go – although there are now jet card programs that offer that feature – and brokers say they can beat jet card rates – something I find varies.
The challenge with on-demand charter is, first of all, it’s only as good as your broker, and good brokers are hard to find. I often get a kick out of concierge services and others who think they can offer private jet charter as an incremental revenue stream. If you can develop a relationship with a good broker who knows the type of aircraft you like, the different operators – what you want in terms of the operator and the pilots – I would say on-demand charter is a good option.
In terms of on-demand charter pricing versus charter pricing via jet cards (yes – jet cards are a form of charter), if you are flying from or to airports where aircraft normally have to be repositioned before or after your flight, jet cards are probably going to be better since with on-demand charter you pay for ferry flights. If you give a broker a lot of business – let’s say several hundred thousand dollars a year, that broker will probably eat any re-quotes if you proposed aircraft can’t make the flight. Of course, finding a really good broker is not easy.
Alas, I didn’t win, however, apparently, there is a winner in South Carolina. If it was me, with over $600 million after taxes, I probably would go with fractional ownership. My logic would be that I don’t know how much I plan to fly but will guess around 50 to 100 hours per year. While it might make financial sense with tax benefits to explore full ownership, it wouldn’t be necessary. If I needed extra hours I could also buy jet cards, and if my children or girlfriend needed to fly I could also buy them jet cards – although fractional programs will usually offer you access to more than one aircraft at the same time. To me, it would just be easier than having to worry about wiring money to brokers and double checking the aircraft. Of course, sitting on more than a half billion dollars in cash would give one more options than somebody with a net worth of $10 million to $50 million.
If you are going to buy a share or full aircraft, I recommend working with a consultant or lawyer who specializes in aircraft acquisitions and management. It’s not something to dive into the deep end without professional assistance. Jet cards are easier – we offer comparisons of over 250 programs by more than 65 variables. I do recommend that you have your regular attorney review the contract as you probably do with all legal agreements. If you can find a good charter broker, that’s an option too, although I think charter works best as a fill-in solution or for those of you who once per year get together with two other couples and pool together to splurge.
