Are you looking to offer your private jet for charter, read more here! see more
A growing number of private jet owners are chartering their aircraft when not in use to reduce the cost of ownership. Before a jet can be chartered, it must conform to a specific set of rules set forth by the FAA (known as Part 135) and be listed on an FAA air carrier certificate. The best way to offer your private jet for charter is through an aircraft management company who holds a Part 135 air carrier certificate.
Once a private jet is acquired, a series of steps, both practical and regulatory in nature, must be addressed before the aircraft can conduct its first charter flight. The most effective way to conform a private jet for charter is with an aircraft management company who holds a Part 135 certificate. Within the aviation industry, the process of adding a jet to an air carrier certificate is termed conformity. This refers to the time after purchase, close of escrow, but before the first revenue producing charter flight.
The conformity process typically takes between thirty and ninety days and includes a long list of deliverables. From hiring and training of crew members, reviewing of maintenance records, conducting FAA inspections and more. To avoid delays or complications, the team managing the conformity process should be one with deep experience, a detailed organizational structure, and one who remains in regular communication with the aircraft owner (as well as communicating with the other aviation specialists involved). Here is a look at three critical elements to a smooth conformity process— experience, organization, and communication.
Not all air carrier certificates are equal, so before you select a management company, it’s important that an aircraft owner ask a few questions. Consider that an air carrier certificate is a security pass to a building with twenty floors. The pass is customizable to allow or authorize access to a particular set of floors. The security pass may authorize access to the lobby and first three floors, but not to the remaining fifteen floors. In the same way, the FAA issues an Air Carrier Certificate with certain “authorizations” that are increasing in their complexity and freedoms. Here are a few examples of such authorizations:
- Area of Operation
- The operator may be limited to conducting charters in the domestic United States, Canada, and Mexico vs. worldwide authority. Even flying to Hawaii requires special authorizations.
- Size of Aircraft as defined by number of seats
- Nine or fewer seats is one category vs. ten or more seats.
These are only two examples of authorizations. There are many more to consider when choosing to charter a jet. The management company selected should already have the proper authorizations and experience to charter the type of plane under ownership. If the jet operator does not have the prior experience with that aircraft type, the aircraft may be restricted on the particular charters. There is also a possibility that an aircraft owner introducing a new aircraft type to a management company will become a test case for the organization; which will most likely result in delays and unnecessary complications.
Experienced aircraft management companies understand that efficiency and streamlining operations is built upon exceptional organization. Due to the sheer number of tasks and wide-ranging topics addressed during conformity, it is impossible for one person to have the necessary experience and time to accomplish all tasks in an expedited manner. Therefore, a team of specialists must be employed. This team is led by the aircraft manager who acts as a central point of contact to keep the conformity process on schedule, while specialized software is utilized to digitally manage, categorize, and organize the varied tasks required to conform the aircraft to Part 135.
The aviation team surrounding an aircraft owner and set in place throughout private jet ownership. An aircraft manager acts as the focal point for the aircraft owner.
An experienced and organized team with state-of-the-art tools is great but without effective and timely communication, the conformity process can be difficult. Here again, the aircraft manager plays an essential role as the single point of contact for the aircraft owner. The aircraft manager acts as a leader and liaison to inform a private jet owner of key milestones and discussing options without burdening them with the intricate details and idiosyncrasies of the conformity process.
In addition to the communication that exists between an aircraft owner and an aircraft manager, the aircraft manager advocates for the aircraft owner during meetings with the rest of the management company team. Communication with the conformity team should be occurring multiple times a day to ensure everything is on schedule. “At Clay Lacy, our conformity team meets twice a week. During these meetings, we discuss what tasks have been completed, are being completed, and must be completed to reach current and future goals,” says Joe Barber, Director of Aircraft Management at Clay Lacy Aviation. “We keep the owner informed of what is being accomplished, so they have peace-of-mind that their aircraft will be conformed on schedule.”
This article was originally published by Clay Lacy Aviation on their Insights Blog.
- Area of Operation
What to Consider When Chartering Your Jet see more
NAFA member, David Wyndham, Co-Owner and President of Conklin & de Decker, discusses potential issues and concerns for operators to consider before choosing to hire a management company to charter your business jet when you're not using it.
Putting an aircraft on a charter operator's certificate may incur expenses for the initial inspections that are required to demonstrate its compliance with FAA standards for commercial service. Both the aircraft and crew must conform to the charter operator's approved operating limitations.
The aircraft must also be enrolled on the charter operator's approved maintenance program, which could require more frequent inspections, while commercial operations may necessitate the installation of additional safety equipment and the crews must train to the approved operating standards fo the charter operator.
The above costs, which are typically borne by the aircraft owner, can range from several thousand to tends of thousands of dollars.
Given the added costs of approving your aircraft for on-demand commercial service, there must be sufficient charter revenue to make the arrangement work financially. The more you fly for your own purposes, however, the less time the charter operator has available to monetize your aircraft. This can be a delicate balance to find, since scheduling charter flights will impact the aircraft's ability for company travel.
Moreover, peak demand for charter may overlap with your own intended travel schedule, especially in the summer and around the holidays. So, you will either forgo the charter revenue or be forced to adjust your own itinerary to accommodate.
Some charter operators may claim that they can charter your aircraft for 700 hours per year - but that won't be possible unless you fly infrequently and avoid peak travel periods. If you fly more than 100-150 hours annually, you may not be able to generate enough charter revenues to make the extra work worthwhile.
To read the complete article, click here.
This article was originally published in AvBuyer, Vol. 23, Issue 2, 2019, p. 62.
When Can Charter Offset Jet Operating Costs? see more
NAFA member, David Wyndham, Vice President with Conklin & de Decker, discusses ways to help reduce your costs of business jet ownership.
Are you looking to reduce your total costs of business jet ownership? A management company can charter your aircraft during the idle periods between personal trips. David Wyndham discusses…
Choosing the right firm to manage your jet will be crucial. Firstly, it must have authorization under FAA Part 135 (or its international equivalent outside the US). Secondly, be prepared that the relationship between owner and management company can be complicated given the myriad of regulatory restrictions governing operational control of any aircraft used for commercial service.
Following are the general terms that exist between the aircraft owner and commercial operator:
- The aircraft owner pays all the operating costs (e.g., fuel, maintenance, other aircraft operating expenses, etc.)
- The crew may be billed either as salaries or as an hourly fee
- The aircraft owner gets a variable percentage of the charter revenue
Fact: Your idle asset can generate income that will offset the cost of owning and operating the aircraft.
Myth: Chartering your aircraft means you will “fly for free.”
Some Rules of Thumb
The aircraft owner typically receives 85% of the base charter rate, while the certificate holder keeps the remaining 15%. As outlined above, the aircraft owner typically will pay all the aircraft-specific expenses such as fuel and maintenance. The excess of charter revenue over those expenses is what helps offset the fixed costs, resulting in a net decrease in total cost to the owner.
Other negotiated terms may involve the accrual for maintenance, guaranteed hourly maintenance plans, and fuel cost offsets. Recently, I saw an agreement where the aircraft owner received a set revenue per hour regardless of what the charter operator charged. Another agreement had the charter operator paying the fuel costs with a reduced percentage of the revenues to the owner.
So, what’s in it for the charter operator? Why would they even want to deal with individual owners instead of operating their own fleet?
The Scale Problem of Charter
Charter companies have a scale problem. Market charter rates are not sufficient to cover all the costs of operating an aircraft unless they fly a lot of hours. When you factor in the fixed costs and cost of capital or leasing, charter rates simply don’t pay enough.
The utilization necessary to make a profit by owning the aircraft and chartering it are well beyond what the on-demand charter aircraft typically flies. Scheduled airlines may fly 2,500 hours per year per aircraft and, in many years, still lose money.
I ran the break-even revenues for a global business jet for one owner and, accounting for the cost of capital and taxes, calculated that they would need about 3,000 charter hours per year. For most charter operators, owning a turbine aircraft is not affordable.
Here’s another example to consider. An aircraft that charters for $3,200 per hour can cost about $1,700 per hour for the variable expenses alone. After the charter operator takes its 15%, the owner is left with roughly $2,720 per hour before variable expenses. Factor those in and the owner receives $1,020 per hour in excess of the variable costs.
There are fixed costs and, even with discounts available to the owner, those costs might run to $500k per year.
Assuming the used jet is valued at $3m, the lease payments are $300k per year. Even if you purchased the aircraft, there is a cost of capital as you cannot invest this money elsewhere. Adding the lease expense plus the fixed expenses, you are now at $800k per year.
At an income over operating expense of $1,020 per hour, our owner needs 784 hours of charter revenue to break even before tax considerations. Very few charter operators can generate that much revenue flying in a year.
Who Could Benefit?
For the owner who flies infrequently or has a predictable schedule the revenues from charter can certainly help reduce the cost of flying. The charter operator generates profitable revenues and the owner offsets their costs.
With the proper relationship, both the owner and operator can come out ahead and the charter client gets lower rates and a greater selection of aircraft.
Risk Management Benefit
One less obvious advantage of a charter relationship relates to risk management. As the owner of an aircraft, you will have liabilities related to the safe operation of the aircraft. That’s why you have insurance, right?
If you charter your aircraft, however, the operational risk is shared with the charter operator, even when you are onboard. They assume responsibility for the safe conduct of the flight.
Next month, we’ll address more of the potential issues and concerns associated with chartering your aircraft.
More information from www.conklindd.com
This article was originally published in AvBuyer on January 23, 2019.
Clay Lacy Aviation Joins National Aircraft Finance Association see more
FOR IMMEDIATE RELEASE
FORT LAUDERDALE, Fla. – Feb. 4, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that Clay Lacy Aviation has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Clay Lacy to our association,” said Ford von Weise, President of NAFA.
Founded in 1968 by an aviation legend and industry pioneer,Clay Lacy Aviation is considered one of the world’s most experienced operator of private jets. For the past 50 years the company has managed, maintained and globally operated jet aircraft from every major manufacturer- serving business and world leaders, Fortune 500 companies, government agencies, professional athletes, sports franchises, celebrities and dignitaries.
“NAFA brings together talented leaders from across the business aviation industry and we are delighted to support and participate in their efforts,”said Scott Cutshall, VP Brand Development with Clay Lacy.
Clay Lacy Aviation is a trusted partner for aircraft management, charter, maintenance, avionics, interiors and FBO services. The company has aircraft operations and regional offices across the U.S., including a full-service FBO at Van Nuys Airport in Los Angeles, and aircraft maintenance centers in Los Angeles, San Diego, and Oxford, Connecticut. They are also the authorized dealer for the Quest Kodiak 100 Series II in the Northeastern U.S.
Waterbury-Oxford Airport, Oxford, CT
The company prides itself on having the resources of a large organization, with the agility, responsiveness and personal attention of a small, private flight department. Their highly knowledgeable team of aviation professionals manages every facet of their clients’aircraft- whether one aircraft or a fleet, a light jet or an airliner- anticipating needs, reducing costs and protecting assets.
Much like NAFA, Clay Lacy Aviation is dedicated to the continuous improvement of safety, service and value throughout the industry.Clay Lacy and NAFA foster highly trained, knowledgeable and passionate aviation professionals worldwide with their expanding networks of experienced and trusted businesses.
For more information about Clay Lacy Aviation, visit claylacy.com.
Van Nuys Airport, Los Angeles, CA
The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.
Blue Ridge Jet Management Joins National Aircraft Finance Association see more
FOR IMMEDIATE RELEASE
FORT LAUDERDALE, Fla. - Jan. 16, 2019 - National Aircraft Finance Association (NAFA) is pleased to announce that Blue Ridge Jet Management has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Blue Ridge to our association,” said Ford von Weise, President of NAFA.
Blue Ridge Jet Management is a multi-faceted private aviation company offering services designed to evolve with the needs of their customers, including aircraft management, charter brokerage, aircraft sales and acquisitions, business aviation consulting and flight crew services. Their team encompasses over 100 years of aviation experience and supports their clients’ private aviation needs throughout the various phases of growth and development.
Many of their clients start with charter, transition through jet cards or a fractional share program and ultimately end up owning an aircraft. The goal at Blue Ridge Jet Management is to foster the client relationship by finding the right solution for every need, now and in the future.
“Blue Ridge Jet Management shares the commitment of the National Aircraft Finance Association to our mutual clients who require the expertise of a team of professional partners to receive the best guidance, advice and counsel regarding the complex process of aircraft acquisitions, financing, operations and management. It is an honor to be associated with NAFA and its Members,” stated Greg Kinsella, Co-founder of Blue Ridge.
Much like NAFA, Blue Ridge Jet Management promotes the highest standards of customer service in private aviation. Blue Ridge and NAFA contribute greatly to the aviation industry as committed partners with their clients.
For more information about Blue Ridge Jet Management, visit www.blueridgejet.com.
The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero
Time for a New Aircraft - or Not? see more
NAFA member, Lee Rohde, Founder, President and CEO of Essex Aviation, writes about what to consider when your aircraft needs change.
Perhaps your travel mission recently has changed, and you’ll be flying to new destinations. Or you’re interested in having more cabin space, amenities, and upgrades. Maybe the lease on your current aircraft is coming up for renewal and you want to be sure you’re using the most appropriate aircraft. Or your aircraft is fully depreciated and there are tax considerations to your continued ownership.
Is buying a new aircraft your only – or the best – option for you? Today’s business aviation market offers current aircraft owners a broad range of options to meet those evolving needs. Here are three different avenues to consider:
ONE: Upgrade or Refurbish Your Existing Aircraft
The first option is to refurbish the interior and exterior of your current aircraft while also considering upgrades to meet your new mission or regulatory requirements (see “Time Flies …Will Your Aircraft? BAA January/February 2018). This option offers the obvious benefits of not having to go through the search, inspection, and purchase process inherent in buying a new aircraft. It also reduces the unknowns, since you are familiar with and know the history of the aircraft you currently own. The downside is that you will have to take your aircraft out of service while the refurbishment and/or upgrades are completed. You’ll have to weigh the costs of the refurbishment and/or upgrades coupled with the costs to use alternative lift while the work is being completed.
Depending on your mission requirements, typical upgrades to consider would include but are not limited to:
- Avionics upgrades
- FANS/ADS-B Compliance
- Enhanced Vision Systems
- Cabin Management Systems
- In-Flight Connectivity and Entertainment Systems
- Galley Layout and Equipment
Interior and exterior aircraft refurbishment can involve all or some of the following:
- Exterior Paint
- Floor plan Modifications
- Seating Design and Upholstery
- Cabinetry Veneer
- Headliner and Sidewall Covering
- Improved Lighting
Upgrading and/or refurbishing your existing aircraft is usually recommended if you plan to keep your aircraft for at least four or five more years. If you’re thinking of selling sooner than that, work with your aviation advisor to consider which upgrades will help with the aircraft’s resale value and marketability, and which probably would not provide a substantial return.
TWO: Supplement Your Existing Aircraft
Another option is to keep your current aircraft and supplement it with an additional asset — such as charter, fractional ownership, or a membership or card program. This option can be an ideal combination if you enjoy your current aircraft but have encountered additional travel requirements that it is not best suited to support.
For example, perhaps you currently own a large cabin aircraft and need to make regular short trips throughout the Northeast, to Long Island, or to one of the several island destinations during the summer months. That may be much more aircraft than is needed and not cost effective given the short distances to be flown. In many cases, using a fractional share, charter, or membership/card program for these trips can be more efficient, and frees up your aircraft for other travel. Some options for supplemental, alternative lift are:
When you charter an aircraft, you are essentially renting the aircraft for a certain mission and period of time. Charter is best for quick trips since you’ll keep the plane with you for the duration of the trip, and the aircraft is exclusively available to you. If you are traveling for a two-week vacation and plan only to use the plane to get you there and back, retaining the chartered aircraft can be expensive compared to other options. One of the benefits of chartering is schedule flexibility, which normally allows you to change your travel plans as needed.
With fractional ownership, you are either purchasing or leasing a share and percentage of allotted flight time in a specific aircraft type. Typically, fractional programs require a minimum of 50 hours per year to participate. Fractional ownership does not offer as much flexibility in terms of scheduling change as does charter. Fractional shares can be beneficial if you plan to stay at your destination for a longer period of time, since you pay only for the occupied flight time you use, albeit at a higher per hour cost than for occupied round trip charter.
Membership/Card Programs are ideal if you don’t need to fly frequently during the year, and if you appreciate flexibility in the aircraft available for each trip. On these programs, you typically will be required to use a minimum of 25 hours per year. When evaluating these programs, it is critical to understand how each provider sources its aircraft and the safety ratings of the operators they use, as well as the terms and conditions of the funds being put on the account.
THREE: Replace Your Existing Aircraft
You also may choose to replace your existing aircraft altogether. For example, if your destinations have changed and you need an aircraft capable of landing on shorter runways, you need a larger aircraft to travel internationally, you want to stop less frequently to refuel on longer flights, or you just need more room for more passengers.
As you think about replacement, you will need to consider several questions, including but not limited to:
- How will you be using the aircraft? For business or personal use, or a combination of both?
- How many trips do you take annually? What is the average duration?
- Do you travel to airports with runway restrictions or that are limited to certain size/performance aircraft?
- For how many passengers do you need seating?
- Is international travel anticipated? If so, where and how often?
- Do you want a cabin with stand-up headroom?
- How many and what type of sleeping locations do you desire?
- Do you carry a lot of baggage or other equipment when you travel?
You also will have to decide whether you want to buy a new or pre-owned aircraft. Purchasing a new aircraft will allow you to fully customize it, but will require a longer time for final delivery. Or you could acquire a “white tail,” which is an aircraft that has already been built and completed, but whose original purchaser failed to take delivery. While you don’t have the same ability to customize, you’ll benefit from a much quicker final delivery and entry into service. A pre-owned aircraft also offers you the option, if desired, to refurbish or upgrade the aircraft to meet your needs.
If your mission requirements have changed or you anticipate a near term change, consider all the options. An unbiased aviation consultant or advisor, not affiliated with a specific operator or third-party provider, can help you evaluate your options and offer recommendations based on your current and future travel needs.
The original article was published in Business Aviation Advisor on March 1, 2018.
Your Asset on the Line - Customizing Your Charter Management Contract see more
When seeking to generate extra revenue to help offset the overhead costs of owning and operating your aircraft, you’ll likely hire a properly licensed aircraft charter management company (a “certificated air carrier” in FAA-speak) with the authority to make it available to the public for charter flights.
Normally, you would set up a “dry” lease (a.k.a. “charter management contract”) to that charter operator. While the FAA will impose some restrictions on what such a contract can require, it is your aircraft, so you may seek to impose some guidelines that most charter operators won’t necessarily initially offer to help protect your valuable asset.
Any good charter management contract will have standard clauses dealing with the term and termination rights of the parties, the services the charter operator will provide (crew, maintenance, record keeping, etc.), the basic obligations of the airplane owner to pay for the maintenance of operations of the aircraft (in exchange for receiving most, if not all, of the generated charter revenue), insurance requirements and related indemnification and risk-of-loss issues, key legal provisions such as statements addressing the FAA’s rules on “operational control” of the aircraft, and common “boilerplate” provisions dealing with notice requirements, confidentiality, and so forth.
- What else might you consider asking for that does not typically appear in the first draft of a charter management contract? Examples of such provisions include:
Limitations on who can charter the aircraft, such as:
- “Hard partiers” (e.g. rock bands)
- Young children
- Customers who refuse to submit to credit checks.
- Limitations on substances you might not want on your aircraft:
- Red wine (See “Something to Hide” BAA Nov/Dec 2016)
- Marijuana, even if legal under your state law
- Smoking of any kind.
- Beyond what is typically covered under aircraft insurance provisions, areas where you may not want your aircraft to be operated, such as:
- Any region on the U.S. State Department’s Travel Advisory list, or even outside your country at all
- Into a weather-challenged zone, such as a hurricane area, forest fires, or after a recent blizzard
- To a country that imposes tariffs that you might end up having to pay after the fact.
- Specific items you may not want on board, such as:
- Animals, whether caged pets or exotic species
- Other materials you might find objectionable.
- Additional safety items or restrictions, such as:
- Requiring the pilots to be trained by a particular training company
- Imposing crew duty requirements more stringent than the FAA’s
- Requiring every flight to have a corporate flight attendant (See “The Corporate Flight Attendant: Safety and Service,” BAA April 2014).
- Any timing limitations on use of your aircraft, such as:
- The requirement to provide at least 48 hours’ notice before a charter so that you can make sure it won’t conflict with your planned use
- No weekday charter (if you use your airplane primarily for business during the week), or conversely
- No holiday weekend charter (if your use is primarily personal).
All of these suggestions are subject to some very important restrictions. The Department of Transportation’s anti-discrimination rules make it very clear that you cannot seek to limit the use of the aircraft based on race or gender, for example. And the FAA has significant rules regarding placing so many restrictions or guidelines on the charter management company that you have, in effect, failed to give them the operational control of the aircraft they are required to maintain.
But it is your aircraft, so discuss with the charter management company just how it will – or will not – use your aircraft.
This article originally appeared in Business Aviation Advisor September/October 2018.
- What else might you consider asking for that does not typically appear in the first draft of a charter management contract? Examples of such provisions include: