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fractional ownership

  • NAFA Administrator posted an article
    Jet Card vs Fractional Ownership vs Charter: Which Is Best For You? see more

    NAFA member, Clay Lacy Aviation, discusses your options when it comes to jet cards, fractional ownership and charter.

    Jet cards, fractional ownership or private jet charter… which option is best for you? That’s the question we ask ourselves for each charter proposal we develop for our clients. Why? Because we want you to travel with confidence that you are flying with the program that makes the most sense for your budget and trip.

    In short, Clay Lacy Aviation charter might not always be the best travel solution for you – and we will make sure you know.

     

    Jet Card, Fractional Ownership or Charter

    Outside of owning your own aircraft, the best methods of experiencing private aviation are through jet card programs, fractional ownership or charter.

    Jet Card Programs allow you to purchase the future use of an aircraft. Costs are set at a fixed hourly rate, usually at market pricing, but can fluctuate based on your travel needs. Jet cards work well if you know exactly how many hours you plan to fly each year and if that amount is between 25 and 50 hours. Card programs do not include taxes and trip related expenses adding an additional cost to the pre-purchased flight hours.

    With Fractional Ownership, you purchase a portion of an aircraft or aircraft type to fly a specific number of hours a year. It’s often compared to a timeshare in real estate. Aviation companies specializing in fractional ownership sell these aircraft shares to jets they already own, which ensures an aircraft is nearly always available when you need it.

    In addition to the purchase price of the fractional share, you can expect to also pay a monthly management fee and an hourly fee to cover trip expenses, fuel taxes, and other variable fees. Many fractional and jet card programs have peak period prices, around holidays, that are higher than normal, and some have blackout days unless you purchase into a higher tier of membership.

    Charter differs from fractional ownership and jet cards in aircraft choice, pricing and availability. When you charter an aircraft with a company like Clay Lacy Aviation or through a charter broker – an individual who matches prospective travelers to available aircraft – you have a larger selection of models to choose from. Hourly charter prices are traditionally lower than jet cards, and significantly less than fractional ownership. And when you charter, you are only paying when you fly. There are no deposits, acquisition costs or membership fees.

     

    Trip Planning with Clay Lacy Aviation

    With Clay Lacy Aviation, you can rely on our straightforward approach to getting you the right aircraft solution for your flight. Like we said earlier, that does not necessarily mean us.

    When we do make the most sense for your needs, know that private jet charter with Clay Lacy Aviation offers these added benefits:

    • A large selection of aircraft which means you might fly a Phenom 300 for a regional business trip and the ultra-long range Gulfstream G650 to reach your international vacation destination. Additionally, if the aircraft you schedule suddenly becomes unavailable, we provide a replacement at no cost.
    • Pricing is flexible, and, while not always the least expensive of the three options, nearly always falls 20-45% below jet card pricing for round trip flights.
    • Taxes, fuel and fees are built into our charter quotes, so you know the exact amount you will pay before you ever take off.

    Plus, we promise not to take shortcuts with our aircraft – not just for our owners but also for your health and safety. Our philosophy is that an aircraft should fly no more than 400 hours a year, which benefits its health – and yours.

    We do not claim to be the best solution for every trip, but we can guarantee when you come to us, we will find the right solution for you.

    This article was originally published by Clay Lacy Aviation on March 16, 2021.

  • NAFA Administrator posted an article
    Aircraft Share Options Explained: Fractional Jet Ownership vs. Charter vs. Jet Card see more

    NAFA member, H. Lee Rohde, III, President and CEO of Essex Aviation, discusses discusses private jet share options.  

    Flying private has long been a popular alternative to flying commercial due to the luxury, privacy, and convenience it affords — but now, in these uncertain times, flying private also provides a much-needed sense of security and peace of mind. As a result, a growing number of individuals are starting to explore private jet share options, particularly fractional ownership, charter programs, and jet card programs, each of which offer the same amenities as outright acquisition with less of a commitment.

    In this blog post, we’ll compare fractional jet ownership vs. charter program vs. jet card program to help you find the private jet share option that best meets your unique travel needs.

    Table of Contents

    • What is a Private Jet Share?
    • What is Fractional Jet Ownership?
    • When Does Fractional Jet Ownership Make Sense?
    • What is Private Jet Chartering?
    • When Does Private Jet Chartering Make Sense?
    • What Are Membership & Jet Card Programs?
    • When Do Membership & Jet Card Programs Make Sense?
    • At a Glance: Fractional Jet Ownership vs. Charter vs. Jet Card Programs
    • Fly Safer with Essex Aviation

    What is a Private Jet Share?

    As implied by its name, a private jet share refers to any private aviation program in which you own or lease a share of an aircraft rather than own it outright. There are multiple private jet share options to choose from, including fractional aircraft ownership, private jet membership or card programs and private jet chartering. How a private jet share is structured depends entirely on the program, aircraft model, and number of hours utilized.

    What is Fractional Jet Ownership?

    Those interested in fractional ownership purchase a share of a specific aircraft type and agree to an annual amount of allotted flight hours. Most fractional ownership programs require a minimum size share of 50 hours of flight time per year, though this can vary depending on the provider. The maximum share size is 800 hours of flight time per year, which is roughly equivalent to ownership of an entire aircraft.

    Fractional ownership shares are acquired from the company that operates the aircraft and that has a designed shared ownership program and services agreement in which all share owners participate. This company also employs pilots, cabin crew and flight operations coordinators, administers maintenance and covers airport and hangar fees and insurance, which can be attractive to individuals who want the benefits of aircraft ownership without the responsibility. Some fractional ownership programs even provide the option to upgrade or downgrade the size of the aircraft depending on your trip requirements.

    When Does Fractional Jet Ownership Make Sense?

    Although the total cost, including the share acquisition or lease, is more expensive than other alternatives, fractional ownership doesn’t require you to pay a “deadhead cost” — that is, any costs incurred from positioning the aircraft at your departure point. Additionally, it’s possible to sell fractional shares back to the program provider, though these shares tend to depreciate more due to their high level of annual utilization, resulting in lower residual values.

    Fractional ownership is a popular option among those who frequently travel for business-related reasons because it offers tax benefits. Frequent fliers also appreciate the consistency and continuity that fractional ownership offers. Most groups that operate fractional programs, such as NetJetsFlexJet and AirShare are highly reputable and have well-documented, standardized procedures for everything from how they vet operators to how they sanitize aircraft between one flight and the next.

    Fractional aircraft ownership is ideal for individuals who want the experience of flying with an organization with a dedicated fleet of aircraft, pilots, and crew, and who require the flexibility to avoid duty times and other restrictions.

    What is Private Jet Chartering?

    Private jet chartering is an on-demand service that enables you to compare pricing and amenities for various aircraft types and book the one that best meets your travel needs in much the same way as you’d book a seat on a commercial flight. Those interested in chartering have the option of working with either a charter operator or a charter broker, though it’s best practice to work with a private aviation consultant before considering either option.

    When Does Private Jet Chartering Make Sense?

    Of the three types of private jet share presented in article — fractional jet ownership vs. charter vs. jet card — private jet chartering requires the least commitment, both in terms of time and expense.

    In fact, chartering is the most popular private aviation option due to the fact that it doesn’t require a significant capital cost upfront or fixed costs associated with maintenance and staff salaries — all you have to pay for is the utilization of the aircraft on a trip-by-trip basis. This makes chartering ideal for anyone who wants the private aviation experience without any of the responsibility. It’s important to note, though, that what you save on chartering, you’ll make up for in terms of non-guaranteed availability in a specific aircraft type: It can sometimes be challenging to find an aircraft that meets both your specific needs and your schedule, so you may be forced to choose between one and the other.

    What Are Membership & Jet Card Programs?

    Membership and jet card programs, though often referred to interchangeably, are structurally unique. With a membership program, you agree to a fixed cost per hour at the start of the contract and are billed after each flight. You’re also typically subjected to either monthly management or annual membership fees.

    There are two types of jet card programs: a dedicated service with a predetermined number of hours on a specific aircraft type or size category, and a debit card service that enables you to fund an established travel account and select the aircraft category on a trip-by-trip basis with agreed-to hourly rates. Depending on the program, the provider will either quote you for a certain number of hours during booking and bill actual time upon completion of the trip or deduct the final total cost of the trip from your balance after it is completed.

    When Do Membership & Jet Card Programs Make Sense?

    Much like chartering, membership and jet card programs are best suited for individuals who want a short-term commitment and require a much lower investment than fractional ownership. Jet card programs, in particular, are appealing because they come at a fixed rate. There’s no need to negotiate the price for each flight — just add money to your jet card account and go. In some cases, you can even cancel your membership and get a refund for unused hours if you’re dissatisfied with your service, which makes jet card programs one of the most accessible points of entry to the private aviation market.

    Another compelling reason to consider a membership or jet card program is because most major private aviation companies offer them, making them a reliable option. When evaluating either membership or jet card programs, be sure to work with an experienced private aviation consultant who can steer you toward a reputable company and help you understand the relationship between the program provider and the aircraft you intend to utilize.

    If you’re interested in joining a membership or jet card program, keep in mind that they often come with a longer advance notice requirement to schedule an aircraft. This is less of an issue if you’re the type of traveler who books their trips well in advance but can be challenging if you frequently make last-minute travel arrangements, especially during peak periods such as holidays.

    At a Glance: Fractional Jet Ownership vs. Charter vs. Jet Card Programs

    Fly Safer with Essex Aviation

    If you’re in need of private aviation assistance, Essex Aviation Group is here for you. From private jet charter consulting to new aircraft acquisition to aircraft completion management, we offer a wide variety of services tailored to support the travel needs of each and every customer. Contact us today to let us know how we can help you find the private jet share option that’s right for you.

    This article was originally published by Essex Aviation.  

     September 14, 2020
  • Tracey Cheek posted an article
    Lien On Me - The benefits of aircraft co-ownership. see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance, writes about the benefits of aircraft co-ownership. 

    You could make good use of a light jet for your business, but you’re not likely to fly it more than 100 hours per year. And the capital cost of a brand new aircraft, plus the fixed operating costs, are a bit more than you want to spend, even considering the benefits of warranties and less downtime with a new versus a used aircraft. Instead of looking at a used and/or less capable aircraft, you decide you want a partner.

    Co-ownership of an aircraft can be beneficial for you and your partner. (See: “Giving Half a Whole Lot of Thought,” BAA Sept/Oct 2017). A carefully structured partnership can provide many benefits not otherwise available to you by using charter or owning a fractional share, including access, tax advantages, and a dedicated crew, while dividing the cost of ownership in two.

    Good news! Another like-minded business owner – either someone you know, or one who has been identified for you by an aviation professional – would like to partner with you on the purchase and operation of an aircraft.

    You’re ready for the purchase, but either you or your intended partner prefers to deploy the cash elsewhere, in your primary business or other investments. So one partner requires a loan while the other does not – your first potential conflict. How will you proceed?

    The path of least resistance is for the partners to agree to seek financing together, then to arrange some preferential treatment for the less-willing partner, such as a lower allocation of fixed overhead expenses. After all, he or she is agreeing to an unwanted loan.

    When one partner is adamant about not taking a loan, you can look for a lender who is willing to work with you, and has procedures in place to help facilitate your purchase.

    Here’s how it might work. The non-financing partner signs an acknowledgement with the lender (i.e. a subordination agreement or an extra signature on the security agreement). This gives both partners a formal relationship with the lender. Typically, the documentation will have an acknowledgment that the non-financing partner either will assume any deficiency from the borrowing partner or turn over the aircraft to the lender. The agreement also will ask the non-borrowing partner to acknowledge that the bank has first priority should a problem arise.

    For example, an airplane costs $9 million, so each partner must contribute $4.5 million. The non-borrowing partner pays cash, and the other partner makes a down payment of $900,000 and takes a loan for $3.6 million.

    Four years later, the airplane has depreciated to $6.75 million, and there remains a $3.1 million balance on the loan. The equity in the plane is $3.65 million. At that point, the borrowing partner has an unexpected life event (e.g. divorce, or major lawsuit), and cannot continue to make the loan payments.

    He/she also is in arrears with the partner on hangar rent and other maintenance-related expenses and so decides to surrender his/her equity to the partner. The non-borrowing partner then “cures” any default with back payments and inherits all the equity. At that point he/she either may find a new partner or sell the aircraft for $6.75 million, after originally having invested $4.5 million. If sold, the partner recovers all of his/her original investment, plus $2.25 million to cover any back owed expenses. This scenario also would apply with more than one partner, with each non-borrowing partner agreeing to the same terms as above.

    Shared ownership can be an excellent option when your proposed annual flight requirements aren't large enough to justify owning a dedicated aircraft. But when one of the partners prefers to finance his/her share, make certain that the lender selected can structure a deal that protects both borrower and cash buyer alike.

    This article was originally published on July 3, 2018 in Business Aviation Advisor

     September 20, 2018
  • NAFA Administrator posted an article
    Aircraft Fractional Programs: A Solution During a Pandemic? see more

    NAFA member, Amanda Applegate, Partner at Aerlex Law Group, discusses aircraft fractional programs.

    Due to COVID-19 there has been a significant increase in the number of individuals who previously were comfortable flying commercially that are now exploring the idea of traveling on private aircraft. Over the past decade, the group of individuals who could afford to fly privately has increased but the number of people who fly privately has not increased at the same rate. The reasons that some individuals elected not to fly privately before are now outweighed by the health and safety concerns caused by COVID-19. Many people currently considering private aviation are looking for temporary solutions, believing that science will lead us through the pandemic eventually. Recently I have been asked if fractional ownership is a good solution.

    By way of background, there are many ways to travel privately. Ad hoc charter requires no commitment and each flight is scheduled separately through a charter broker or a charter operator. A great option for those who only want to travel privately until health concerns go away and who think they will go back to flying commercially sooner rather than later. Next in the private travel hierarchy is block charter/membership programs where a single provider is used for a certain number of hours or days, often paid in advance. This is a good option for an individual who wants consistency, wants one person to call for private flight solutions and/or who is willing to make a small commitment in return for reduces rates or other benefits not available under the ad hoc option. Next comes fractional ownership or fractional leases where a single provider is selected and a minimum commitment is required, usually at least a couple of years. Finally, the option that requires the most commitment is whole aircraft ownership, which entails owning and operating an aircraft.

    The fractional market has changed significantly over the past 20 years. The number of national fractional providers has decreased while the number regional providers have increased. Additionally, in 2020 we have seen many of the long-standing fractional providers offer new programs, products and aircraft types. As a result of the changing market, there is not a single best program for all individuals. 

    When exploring the various fractional providers and their various offerings, it is important to understand how the fractional share will be used. If you can generally predict the number of hours needed per year and the flights which will be flown, it will help determine the best program offering. Further, it is important to understand how long of a commitment you are willing to make to the ownership (or leasing) of a fractional share. The shorter the commitment period, the less it makes sense to own a fractional interest, and instead a lease (if available) of a fractional share may be more advantageous. As with any capital investment, the longer you plan to own something the more the capital investment makes sense. For example, if you really like a particular aircraft model and know with certainty that you want to use that type of aircraft for 5-10 years, then fractional ownership would be a far better solution than if you think your mission and thus aircraft type will change in the next couple of years. Furthermore if the aircraft will be used for personal use and there is no tax advantage to owning, then a lease may be a better option.

    Things to think about when making a decision on fractional providers:

    1. Number of hours needed per year
    2. Expected flight patterns (some of the newer enhancements make longer flights more affordable)
    3. Purchase and lease option available?
    4. Guaranteed aircraft – Is the aircraft you are purchasing or leasing guaranteed (or can a lesser aircraft be provided) and what are the peak travel day restrictions
    5. Other program restrictions or enhancements

    With the right flight data, an estimate of the number of flight hours needed per year and the knowledge of commitment level, it is easy to determine the all-in cost per hour of the various programs. However, the analysis does not stop there. As with all service products, it is not solely a determination to be made purely on price. Intangible factors should also be considered such as appearance of aircraft, on-time performance, cultural fit between customer and prospective providers, and customer service.

    When considering entering into a fractional program for the first time it is extremely important to take your time to make the right determination and try not to rush through the process in order to accommodate an upcoming flight. Take your time, get to know each provider and their offerings and select the program that best suits your individual flying needs, commitment level and who will provide the service level you expect. Fractional programs may be a good solution for first time private aviation flyers looking to avoid commercial airlines, but the particular program and product should be closely considered.

    This article was originally published by Aerlex in BusinessAir Magazine, October 2020, Volume 30, No. 10.

  • NAFA Administrator posted an article
    AINsight: Best Five Options To Fly Privately see more

    NAFA member, David G. Mayer, Partner with Shackelford, Bowen, McKinley & Norton, LLP, shares the best options to fly privately. 

    As commercial airlines attempt to fill seats amid the Covid-19 pandemic, some families, businesses, and individuals have made a flight to safety by traveling again or for the first time on private aircraft.

    These travelers set their schedules and itineraries for on-demand business or personal flights. They can travel to about 5,300 public-use airports in the U.S., roughly 10 times the number of airports available to commercial aircraft. International airport access expands the flexibility to travel globally. Travelers greatly value saving travel time, the healthy and safe environment, productivity, and convenience of private aircraft while enjoying a comfortable, interconnected, and protected flight experience.

    Although the reasons to fly privately may be obvious, especially in the age of Covid-19, deciding on the right providers and approaches to flying are more complex. Three modes of aircraft travel involve no capital investment: chartering, jet or fraction cards, and membership programs. Each of these options holds strong attributes for new and some repeat flyers. Two other options require capital outlays for frequent flyers: purchasing a whole aircraft or a fractional share of an aircraft.

    Before All Else

    Before making choices from the five types of private aircraft travel described below, each person should complete the following diligence and processes to select the best possible flight experience:

    • Aircraft supports the mission. Identify the right aircraft for your “mission”—industry lingo that refers to identifying the details of a trip. In general, a mission profile covers logistics, operating hours, amenities, connectivity, catering, luggage/storage capacity, number of passengers, and travel distance. One size aircraft might not fit all travel needs, especially for owners or lessees that have access to only one aircraft.

    • Stellar manager, operator, and pilot safety records. Insist that the commercial operator, aircraft manager, and pilots have stellar safety records. The commercial operator should supply a top-flight team, including experienced pilots approved by the operator’s insurer. Managers, operators, and pilots should be free of enforcement actions by, or violation notices from, the FAA. Ask them.

    • Aircraft in good condition. Confirm whether the aircraft complies with its manufacturer’s maintenance and regulatory requirements. The aircraft should also present a well-maintained physical appearance.

    • Robust Covid-19 protocols. Verify that the aircraft manager, commercial operator, and FBO have designed and implemented a robust Covid-19 safety protocol for ground personnel, passengers, and crew, including health screening, social distancing, and personal protective equipment.

    • Adequate insurance coverage. Require that the aircraft manager or commercial operator provide written evidence of comprehensive liability insurance to protect you despite the tightening insurance markets.

    • Aviation experts. Use business aviation experts, including various brokers, technical consultants, and aviation lawyers, to assist in evaluating, documenting, and closing the best option or options for you.

    Chartering Aircraft

    charter is simply an ad hoc transportation service by private aircraft by the seat or whole aircraft. Charter makes the most sense for occasional and new flyers including those seeking a healthy and safe aircraft travel environment during the pandemic. Although more complicated, a charter is like taking a taxi. In legal terms, charter operators engage in air commerce by carrying persons or property for compensation or hire. You can hire a charter service in most cities with a private or public-use airport.

    Perhaps the simplest question about a charter and other options is what kind of aircraft does the traveler need to satisfy his or her top travel priorities? And how much will she or he spend to travel on a private aircraft? Charter rates can easily climb from approximately $1,200 to $12,000 per hour or more, depending on the aircraft selected from light jet or turboprop to an ultra-long-range jet.

    Though charter rates are not inexpensive, charters are somewhat more affordable because charter rates have dropped since 2019. Also, Congress approved, among other tax benefits, an excise tax holiday in the CARES Act, which suspends the 7.5 percent flight excise tax on amounts paid to charter operators from March 28, 2020, to Dec. 31, 2020.

    Cost transparency is sometimes challenging in the charter world. Travelers should ask for receipts detailing charges on their accounts, watch for overlapping charges, and tie the charges to final invoices. It is advisable to compare operator fleet sizes and business models.

    One persistent legal and safety concern arises from illegal charter operations. Broadly speaking, illegal charters occur when the aircraft operator or pilot conducts charter operations without proper certification or fails to comply with strict safety requirements in applicable regulations. Illegal charters have ensnared frequent and occasional charter travelers.

    Customers should look for red flags such as an operator asking customers to sign short-term leases or timesharing agreements. As a result of these regulatory violations, the FAA has, in coordination with the business aviation industry, stepped up its enforcement actions against operators and warned pilots to shun illegal charter operations.

    Membership Programs

    Fee-paying members typically have access to private aircraft for a set number of hours that may range from 25 to 100 hours per year. Program terms, aircraft fleets, and quality vary widely as does pricing for membership and flights. Before joining, travelers should compare programs of operators that have developed creative ways to travel at a predictable cost.

    Jet and Fraction Cards

    Jet and fraction cards cost more than most other aircraft travel options and work like a pre-paid credit card that a traveler uses to pay for 25 to 100 or more flight hours. The cards enable travelers to dip a toe into private aviation. Card amounts vary, starting as low as $25,000 and perhaps lower in this changing segment. These cards and other options can provide supplemental lift to enhance travel flexibility.

    Whole Aircraft Ownership or Leasing

    Buying or leasing a “whole” aircraft often makes sense once a traveler anticipates using at least 200 flight hours per year and wants to control the use, customization, operational control, repair facilities, crewing, base location, and availability of the aircraft. However, many of my clients acquire aircraft knowing they will need fewer hours but also expecting to charter the aircraft to others to offset fixed costs.

    At the outset of deciding whether to buy a whole aircraft, businesses should determine whether bonus depreciation and other tax benefits may be available and structured to reduce their after-tax cost of ownership and operations. Financing is widely available for whole aircraft at historically low rates. It is important to use aviation experts here as purchase, sale, financing, or leasing transactions are often complex.

    Fractional Share Ownership

    Simpler than owning or leasing a whole aircraft, an owner or lessee of an aircraft fractional share typically commits to a five-year program. A fraction typically corresponds to a certain number of annual flight hours, often ranging from 25 to 300 hours, though some programs instead use number of travel days instead of flight hours. Fractional programs charge monthly management and per-hour flight fees, differ in quality, and provide highly personalized service. Bonus depreciation and/or other federal tax benefits might be available like whole aircraft. A few banks will lease or finance a fractional share.

    Conclusion

    To mitigate Covid-19 infection risk, some families, businesses, and individuals have abandoned commercial aircraft travel for on-demand travel in private aircraft. The five best options for such private aircraft flights consist of charter services, membership programs, and jet or fraction cards, along with purchasing or leasing whole or fractional shares of these aircraft.

    Covid-19 has boosted demand to fly by private aircraft, especially charter services. Perhaps this demand foretells a new era of sustainable growth in private aircraft travel as people realize that these flights not only save time but might also save lives.

    Disclaimer: This blog is not intended to convey, and does not convey, legal or other advice. Each person should consult his or her advisors to make decisions about flying privately, as well as any legal or economic implications, risks, or terms in connection with any such decision.

    This article was originally published by AINonline on July 17, 2020.

  • Tracey Cheek posted an article
    Supplemental Lift for Your Business Jet: What's Best for You? (Pt 1) see more

    NAFA member David Wyndham, Vice President with Conklin & de Decker, discusses whether Charter, Jet Card or Fractional Ownership is better option for your supplemental lift. 

    Are there some business travel needs your aircraft can’t fulfill? David Wyndham explores the option of supplemental lift. What is supplemental lift, and how can you use it as an appropriate add-on in your current aircraft operations?

    Supplemental lift may be a logical alternative to your current aircraft. As the term implies, supplemental lift is an add-on to your current operation – it is not a replacement for your current aircraft. What it does is to achieve a means of expanding your operation without adding another aircraft, extra crew, and support.

    It may be that you have a specific need for short-term lift if an aircraft in your operation is undergoing a major maintenance event. Or you may need extra flight hours beyond what your current aircraft can support.

    Alternatively, there may be several unique missions on the horizon for which your current aircraft is unsuitable. Perhaps you simply wish to bridge the gap before acquiring another aircraft as your flight operation grows.

    Thankfully, there is a range of supplemental lift options available that offer a modest number of additional flight hours without the costs associated with actually owning an extra aircraft.

    Within this article, we will consider the following questions:

    • What are aircraft charter, jet cards and fractional ownership?
    • When does supplemental lift make sense?

    What are Aircraft Charter, Jet Cards & Fractional Ownership?

    Aircraft charter enables you to rent an aircraft for a trip. With charter, you pay the entire time the aircraft is flying (including any unoccupied i.e. ‘deadhead’ legs without you aboard). Therefore, charter costs are minimized with round-trip travel. Aircraft charter tends to work particularly well if one or more well-qualified providers operate the aircraft type you need close to your location.

    Jet cards are a form of pre-purchased charter. Some jet card programs are aligned with a major fractional ownership company (such as NetJets). Other providers offer a broker arrangement where they sell you the time and find the qualified operator for you. Most jet card providers offer both one-way and round-trip pricing.

    Fractional ownership enables you to purchase or lease a share of an aircraft in proportion to the additional flying that you plan to do. This may be a good way to bridge the gap between insufficient current aircraft availability and developing sufficient need to justify buying an additional aircraft outright. Operators who purchase a fractional share can choose to sell it back to the provider at the end of the contract.

    When Does Supplemental Lift Make Sense?

    As highlighted through the different options, supplemental lift can be a short- or long-term solution. The hours can vary with your needs. To illustrate, and also highlight how and when supplemental lift makes sense, following are some real-life examples.

    Extended Downtime: One operator I work with has an aircraft that’s almost 12 years old. They fly regularly and the aircraft is fast approaching a major maintenance check and engine overhauls. The avionics suite is outdated and the principal wants to add in-flight cabin connectivity. Additionally, the paint and interior are in need of a refresh.

    Having conducted a financial analysis, the operator concluded that the aircraft value prior to the work being done is lower than they would sell it for. Moreover, the cost of a newer replacement aircraft is more than they wish to spend. The plan, therefore, is for them to complete the overhauls and upgrades at the same time, with an expected downtime of at least four months.

    This means a temporary solution is required that effectively replaces their aircraft for the time it will take to complete the maintenance and upgrades.

    An estimated 120 flight hours will be needed over those four months, and the operator has chosen aircraft charter as the right option to fulfil this demand.

    Fortunately, they’re located in a city with several large charter operators nearby and were able to negotiate a block of hours with a local provider with a top safety rating.

    Expanding Mission Need: A different corporate client recently expanded operations to a distant city and their current aircraft cannot make that trip non-stop. The client estimates flying one trip per month for approximately eight flight hours, representing a 20% increase in their flying activity. To upsize to a larger aircraft would increase the operating budget by almost 90%.

    The cost to buy the larger business jet is nearly three times what their current jet is worth. Over the course of a year, the client would need less than 100 hours flying a longer-range jet and their demand analysis indicates this utilization is likely to remain steady and long-term.

    In addition, avoiding a fuel stop on 20% of the trips wouldn’t be worth the added investment in a new, larger jet. But what if the client were to supplement their operations with added lift?

    The client was able to find a fractional ownership solution to meet their needs at a fraction of the cost of replacing their current aircraft. When they near the end of their current contract, they will reassess their need and budget, revisiting the question of acquiring a larger business jet.

    Growing Operation: One last example is of a flight operation growing at 15% per year. Corporate projections indicate that this rate of growth will continue and there are new departments asking for use of the aircraft.

    In their analysis, the client’s aviation department estimates that they can meet the additional demand for the next 18–24 months by hiring a new pilot and combining a few trips each month. Acquiring another aircraft may take between six and nine months.

    The company hired a consultant who performed an aircraft needs analysis. The report confirmed the aviation department’s internal findings and recommended that a second aircraft be purchased within the year. The report also recommended adding supplemental lift within the next six months to maintain the department’s ability to meet trip requests without any disruption.

    Accordingly, they purchased a jet card offering them the additional projected flight hours. The card program includes price guarantees for 12 months with the initial purchase.

    Simultaneous Travel Needs: One more consideration might be the scenario where you occasionally need simultaneous aircraft. If you anticipate multiple overlapping requests for the aircraft, a supplemental option, such as a charter, jet card or fractional ownership might make sense.

    Next month we will continue our discussion with consideration of how to choose the right aircraft, and then manage the supplemental lift as you grow into another aircraft.

    This article was originally published on AvBuyer on June 21, 2019.

  • Tracey Cheek posted an article
    Understanding Popular Private Jet Share Options see more

    NAFA member, H. Lee Rohde, III, President and CEO of Essex Aviation, discusses Private Jet Share options.

    Private jet shares are a popular alternative for frequent fliers who want to enjoy the benefits of private aircraft ownership without the longer-term commitment or larger financial investment typical of purchasing a whole aircraft. In this blog, we’ll take a look at some popular private jet share options, as well as pros and cons for each.

    What is a Private Jet Share?

    As implied by its name, a private jet share refers to any private aviation program in which you own or lease a share of an aircraft rather than own it outright. There are multiple private jet share options to choose from, including fractional aircraft ownership, private jet membership or card programs and private jet chartering.

    How Are Private Jet Shares Structured?

    The private jet share structure depends entirely on which program, aircraft model and hours of utilization you require.

    Fractional Ownership
    Those interested in fractional ownership purchase a private jet share of a specific aircraft type and agree to an annual amount of allotted flight hours. Most fractional ownership programs require a minimum share size of 50 hours of flight time per year; the maximum share size is 800 hours of flight time per year, which is equivalent to ownership of the entire aircraft.

    Fractional ownership shares are acquired from the company that operates the aircraft and has a designed shared ownership program and services agreement that all share owners participate in. This company is also responsible for employing pilots and flight attendants, administering maintenance, airport and hangar fees and insurance, which can be attractive to individuals who want to avoid managing the details of full aircraft ownership. Some fractional ownership programs also provide the option to upgrade or downgrade the aircraft size depending on your trip requirements.

    Compared to other private jet share models, fractional ownership doesn’t require you to pay for the hours flown to position the aircraft to your departure point — also known as a deadhead cost. However, though you’ll save on certain costs and repositioning fees, the private jet share model comes with significant upfront acquisition and monthly operational costs. Fractional ownership can be the most expensive private jet share model because it closely replicates outright ownership and involves acquiring a portion of an aircraft. Additionally, although it’s possible to sell fractional shares back to the program provider, these shares tend to depreciate more due to their high level of annual utilization, resulting in lower residual values.

    Membership and Jet Card Programs
    Membership and jet card programs, though often lumped in the same category, are structurally unique. With a membership program, you agree to a fixed cost per hour at the start of the contract and are billed after each flight. You’re also often subjected to either monthly management or annual membership fees. There are two types of jet card programs: a dedicated service with a predetermined number of hours on a specific aircraft type or size category, and a debit card service that enables you to fund an established travel account and select the aircraft category on a trip-by-trip basis with agreed-to hourly rates. For the debit card program, the cost of the trip is calculated after the completion of your trip and deducted from your card program balance.

    Unlike fractional ownership, which operates under FAA Part 91K regulations, membership and jet card programs are purchased through a variety of companies that may or may not have a direct ownership and operate under Part 135 regulations. When evaluating various programs, make sure you understand the relationship between the program provider and the aircraft you intend to utilize. Membership and jet card programs are often better suited for individuals interested in a short-term commitment and require a much lower investment than fractional ownership. Membership and jet card programs can be appealing because they come at a fixed rate, so there’s no need to negotiate the price for each flight.

    One of the drawbacks to membership and jet card programs is that there’s often a longer advance notice requirement to schedule an aircraft. This is less of an issue if you’re the kind of traveler who books their trips well in advance but can be challenging if you often make last-minute travel arrangements, especially during peak periods such as holidays. Membership and jet card programs can also come with additional fees, such as repositioning fees, and the total cost of your trip might include taxi time as well as flight time.

    Private Jet Chartering
    Private jet chartering is an on-demand service that enables you to compare pricing and amenities for various aircraft types and book the one that best meets your travel needs in much the same way as you’d book a seat on a commercial flight. Those interested in chartering a private jet have the option of working with a charter operator or a charter broker, though it’s best practice to work with a private aviation consultant before considering either option. Like membership and jet card programs, this option can be well-suited for those looking for a short-term commitment.

    Chartering is the most popular private aviation option due to the fact that it doesn’t require a significant capital cost upfront or fixed costs that contribute to maintenance and staff salaries — all you have to pay for is the utilization of the aircraft on a trip-by-trip basis. What you save on cost with chartering, however, you may need to trade for non-guaranteed availability and some due-diligence of the provider. It can sometimes be challenging to find an aircraft that meets both your specific needs and your schedule, so you might be forced to choose between one or the other.

    Private Jet Share Models: A Breakdown

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    This article was originally published by Essex Aviation Group on their blog.  

  • Tracey Cheek posted an article
    Supplemental Lift - What's Best For You? see more

    NAFA member David Wyndham, Vice President with Conklin & de Decker, shares what supplemental lift is and how it can benefit you.

    Are there some business travel needs your aircraft can’t fulfill? David Wyndham explores the option of supplemental lift. What is supplemental lift, and how can you use it as an appropriate add-on in your current aircraft operations?

    Supplemental lift may be a logical alternative to your current aircraft. As the term implies, supplemental lift is an add-on to your current operation – it is not a replacement for your current aircraft. What it does is to achieve a means of expanding your operation without adding another aircraft, extra crew, and support.

    It may be that you have a specific need for short-term lift if an aircraft in your operation is undergoing a major maintenance event. Or you may need extra flight hours beyond what your current aircraft can support.

    Alternatively, there may be several unique missions on the horizon for which your current aircraft is unsuitable. Perhaps you simply wish to bridge the gap before acquiring another aircraft as your flight operation grows. Thankfully, there is a range of supplemental lift options available that offer a modest number of additional flight hours without the costs associated with actually owning an extra aircraft.

    Within this article, we will consider the following questions:

    • What are aircraft charter, jet cards and fractional ownership?
    • When does supplemental lift make sense?

    What are Aircraft Charter, Jet Cards and Fractional Ownership?

    Aircraft charter enables you to rent an aircraft for a trip. With charter, you pay the entire time the aircraft is flying (including any unoccupied i.e. ‘deadhead’ legs without you aboard). Therefore, charter costs are minimized with round-trip travel. Aircraft charter tends to work particularly well if one or more well-qualified providers operate the aircraft type you need close to your location.

    Jet cards are a form of pre-purchased charter. Some jet card programs are aligned with a major fractional ownership company (such as NetJets).

    Other providers offer a broker arrangement where they sell you the time and find the qualified operator for you. Most jet card providers offer both one-way and round-trip pricing.

    Fractional ownership enables you to purchase or lease a share of an aircraft in proportion to the additional flying that you plan to do. This may be a good way to bridge the gap between insufficient current aircraft availability and developing sufficient need to justify buying an additional aircraft outright. Operators who purchase a fractional share can choose to sell it back to the provider at the end of the contract.

    When Does Supplemental Lift Make Sense?

    As highlighted through the different options, supplemental lift can be a short- or long-term solution. The hours can vary with your needs. To illustrate, and also highlight how and when supplemental lift makes sense, following are some real-life examples.

    Extended Downtime: One operator I work with has an aircraft that’s almost 12 years old. They fly regularly and the aircraft is fast approaching a major maintenance check and engine overhauls. The avionics suite is outdated and the principal wants to add in-flight cabin connectivity. Additionally, the paint and interior are in need of a refresh.

    Having conducted a financial analysis, the operator concluded that the aircraft value prior to the work being done is lower than they would sell it for. Moreover, the cost of a newer replacement aircraft is more than they wish to spend. The plan, therefore, is for them to complete the overhauls and upgrades at the same time, with an expected downtime of at least four months. This means a temporary solution is required that effectively replaces their aircraft for the time it will take to complete the maintenance and upgrades.

    An estimated 120 flight hours will be needed over those four months, and the operator has chosen aircraft charter as the right option to fulfill this demand.

    Fortunately, they’re located in a city with several large charter operators nearby and were able to negotiate a block of hours with a local provider with a top safety rating.

    Expanding Mission Need: A different corporate client recently expanded operations to a distant city and their current aircraft cannot make that trip non-stop. The client estimates flying one trip per month for approximately eight flight hours, representing a 20% increase in their flying activity. To upsize to a larger aircraft would increase the operating budget by almost 90%.

    The cost to buy the larger business jet is nearly three times what their current jet is worth. Over the course of a year, the client would need less than 100 hours flying a longer-range jet and their demand analysis indicates this utilization is likely to remain steady and long-term. In addition, avoiding a fuel stop on 20% of the trips wouldn’t be worth the added investment in a new, larger jet.

    But what if the client were to supplement their operations with added lift?

    The client was able to find a fractional ownership solution to meet their needs at a fraction of the cost of replacing their current aircraft. When they near the end of their current contract, they will reassess their need and budget, revisiting the question of acquiring a larger business jet.

    Growing Operation: One last example is of a flight operation growing at 15% per year. Corporate projections indicate that this rate of growth will continue and there are new departments asking for use of the aircraft.

    In their analysis, the client’s aviation department estimates that they can meet the additional demand for the next 18–24 months by hiring a new pilot and combining a few trips each month. Acquiring another aircraft may take between six and nine months.

    The company hired a consultant who performed an aircraft needs analysis. The report confirmed the aviation department’s internal findings and recommended that a second aircraft be purchased within the year. The report also recommended adding supplemental lift within the next six months to maintain the department’s ability to meet trip requests without any disruption.

    Accordingly, they purchased a jet card offering them the additional projected flight hours. The card program includes price guarantees for 12 months with the initial purchase.

    Simultaneous Travel Needs: One more consideration might be the scenario where you occasionally need simultaneous aircraft. If you anticipate multiple overlapping requests for the aircraft, a supplemental option, such as a charter, jet card or fractional ownership might make sense.

    Next month we will continue our discussion with consideration of how to choose the right aircraft, and then manage the supplemental lift as you grow into another aircraft.

    This article was originally published in AvBuyer Magazine, Volume 23, Issue 6, 2019, p. 76

  • Tracey Cheek posted an article
    Private Aviation Case Study: Transitioning from a Business to Personal Fractional Share see more

    NAFA member, H. Lee Rohde, III, President and CEO of Essex Aviation, shares a private aviation case study.

    The Client

    As a privately held, family-run company with a substantial global footprint, the client had realized some time ago that relying on commercial airlines was an impractical way to conduct business.

    For more than 15 years, the family-run business enjoyed the benefits of fractional aircraft shares for their business travel requirements. They started with a small executive aircraft, which made business travel so efficient that they found themselves increasing their fractional shares. With four family members utilizing the aircraft, 75% of their fractional ownership travel hours went towards business while the remaining 25% was spent on personal use.

    The Challenge

    In 2017, the family sold their business to a group of investment companies. While they no longer needed to travel for business, the family decided they would like to continue flying privately for their personal needs. As part of the acquisition of the business, the buyers also purchased the fractional share the company owned as part of the transaction.

    Although the family had a decade-long relationship with their fractional provider for business use, transitioning to personal fractional share required a different strategy to meet their future travel requirements.

    The Solution

    The family’s attorney recommended they consult with Essex Aviation to evaluate their options. As a qualified aviation consulting firm, Essex performed a full analysis of the transition, which included:

    • Identifying the type of aircraft that would satisfy their aviation needs.
    • Determining any potential conflicts in scheduling.
    • Helping the family understand the financial benefits of each option.

    The family worked with Essex to review the options available from their then current fractional provider and also received proposals from other providers. Essex worked with the family to review and identify their best options and, for a variety of reasons selected, to go with a new provider.

    The family started with a 75-hour fractional share which they leased and later transitioned into a 150-hour share per year to accommodate their increased personal travel requirements.

    The Conclusion

    Essex was able to use their expertise and industry knowledge to perform an initial evaluation and holistic review of all the available options for the family. They also assisted the client with navigating through all of the necessary negotiations and final contract process.

    Essex continues to provide thorough aviation consulting services to assist the family whenever they need to add more hours to their contract, explore new options or negotiate the most practical solution.

    To download the full case study, click here.

    This case study was originally published on Essex Aviation's blog.

  • Tracey Cheek posted an article
    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
    • Carpet
    • 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:

    Charter

    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.

    Fractional Ownership

    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

    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. 

  • Tracey Cheek posted an article
    It's common for people to misunderstand the differences between co-ownership vs fractional ownership see more

    NAFA member, Adam Meredith with AOPA Aviation Finance shares the differences between co-ownership and fractional ownership. 

    CO-OWNERSHIP

    Co-ownership is frequently what people mean when asking about fractional ownership.  If you are looking to purchase an aircraft with multiple partners, this is more commonly regarded as a partnership loan. The good news here is that there’s a lot more financing options. Lenders are comfortable financing partnerships with up to four members using standard loan structures amortized up to 20 years. Beyond four members, lenders will typically only find comfort if the partnership is operating as a flying club. We have plenty of flying club options as well, however, those typically require a larger down payment and a shorter amortization.

    FRACTIONAL OWNERSHIP 

    Fractional ownership, where there’s a fractional management provider like NetJets or Planesense and the company flies and maintains your “share” of the aircraft, have very limited financing options. The reason for this is that lenders are rarely able to fully secure their collateral interest in these loans. Also, making things challenging is they must assess both your personal financial situation as well as the financial health of the fractional operator. 

    For the strongest fractional providers there are some options, however, financing is limited and you can expect terms of no more than five years. As an aside, if you anticipate flying more than 25 hours annually, fractional ownership can be a very cost-effective way to gain access to larger aircraft…just don’t expect to be able to fly the plane!

    This article was originally published by AOPA Aviation Finance Company on September 6, 2018.

     

     September 11, 2018