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Fractional or full ownership of jets?

Old 07-31-2008, 10:15 AM
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Hi all! I'm in the process of deciding whether I should buy a private jet or buy a flexjet card. I've been reading some private jet decision guides. Is Halogen Guide's decision guide trustworthy? I included the link below. Thanks!

Halogen Guides | Decision Guides
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Old 07-31-2008, 11:13 AM
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Originally Posted by jetsetter44 View Post
Hi all! I'm in the process of deciding whether I should buy a private jet or buy a flexjet card. I've been reading some private jet decision guides. Is Halogen Guide's decision guide trustworthy? I included the link below. Thanks!

Halogen Guides | Decision Guides

How many hours do you expect to fly per year? What type of missions will you fly? How many people on average will fly with you? These types of questions need to be answered before you consider the alternatives. You want a solution tailored to your situation and needs.

Keep in mind that when you buy a fractional share you are paying for a portion of the fractional operator's overhead. Sure, you get depreciation benefits, but you are paying a very high premium because the operator has a very expensive infrastructure to maintain. Fractional cards are even more expensive on an hourly basis from what I hear - you are essentially paying for their reputation. The Marquis Card, for example, is super expensive on an hourly basis relative to other charter operators but people want to buy something related to Netjets because of its reputation for safety, luxury, etc. I also believe most of those people don't do their homework and they are merely looking for a status symbol with a reputation for safety. That's my opinion (why buy something that is considerably more expensive than alternatives on an hourly basis?).

Personally, if I were wealthy and in your current position, I would charter airplanes from a reputable/experienced charter operator only when I needed them. Don't pay a lot up front when you are not sure when you will use the hours. Compare hourly rates between the Flexjet card and a competitive/reputable charter operator - you should not be paying as much for the charter operator per hour. Most big, reputable charter operators will also have a variety of airplanes available to fit your mission requirements. I would pay a la carte if I were you. If your use is for business use I assume you would be able to write-off those expenses.

Buying an airplane would entail management of an airplane and all of those associated expenses and stresses. I've read that you should consider full aircraft ownership if you fly something like 300-400 hours per year at a minimum. You would get serious depreciation benefits but you would either have to manage it yourself (costly and time consuming hiring people to fly/maintain the airplane) or hire a management company to handle those functions and possibly charter it out while you are not using it.

If you live on the West Coast and you are intent on buying a smaller jet airplane and you want charter revenue on the side, I would consider the following operator (JetSuite). It is a startup company with an interesting concept and it might be worth exploring if you want a smaller airplane. The founder is a former Jet Blue founder (I don't work for the company but I find it interesting).

That's my $0.02. There's a great article out there about the cost-side of the fractional business and it paints a grim picture because of all of the infrastructure investments required (operations, core fleet, training, etc.) to operate profitably - as a fractional owner or card buyer, you would help pay for that infrastructure. Sure, you are paying for the charter operator's infrastructure as well when you charter an airplane, but it can't be as expensive as the fractional's costs because of the size difference of the infrastructure. You are paying a big premium to fly with a fractional if you fly for a small number of hours per year. Good luck and let us know what you decide.

Last edited by Bill Lumberg; 07-31-2008 at 11:20 AM.
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Old 07-31-2008, 11:43 AM
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I would be weary of this guide at first glance. All they offer is their views on why you should buy a Jet card. If your serious you'll probably want to get in touch with an aircraft broker. One that you'll need to hire to represent your needs. They can help you decide whether full, partial or fractional ownership is right for you. They can also help you decide whether you should stick to charter.
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Old 08-04-2008, 04:18 AM
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We operate our legacy Citation (an early 80s model) just over 350 hours per year for the same cost as 200 hours (1/4 share) on a NetJets Ultra.

Those numbers are from October 2007 and do not include debt service on our current airplane OR the acquisition cost of the quarter share ($2.2M)...but as fuel has risen increasing the cost of operating our own airplane I'm sure NJA has increased its hourly fuel surcharge.

I'd say up to 100 hours per year chartering is the best way to go, between 100-200 hours a fractional share is the best option, and more than 200-225 hours per year operating your own aircraft is most cost effective. Of course, typical mission will play a major role in the aircraft you want and/or need...everybody wants to fly in a big airplane but many, many corporations and individuals have found themselves "airplane poor" after getting something far more capable than their needs dictate.

There are many, many pros/cons to both full and fractional ownership...be sure to carefully perform due diligence on both options before making a decision.
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Old 08-04-2008, 03:52 PM
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There is a HUGE difference between buying a fractional jet card and owning and operating your own aircraft. There usually is a logical progression for most people who enter the world of private aviation for the first time. Many will begin with on demand charter and quickly realize the benefits that travelling privately has to offer. Next many will buy a block charter card which is offered by many different charter brokers. With a block charter card you pay one way rates and no repositioning fees. Also you are guaranteed an aircraft with a specific callout time. You cannot be guaranteed an aircraft with on demand charter since aircraft are always subject to availability. Block charter cards are usually offered by brokers who usually do not own or operate any of the aircraft they schedule. Instead they use a network of charter operators. Many people who are block charter customers fly anywhere between 30-100 hours a year versus on demand customes who fly usually less than 30 hours per year. For some the block charter route will be the solution that best suites their interest.

Even though a fractional jet card is on average about 30% more expensive than a block charter card it is an option that many people pursue for several different reasons. One is the fleet consistency. With block charter you never know which aircraft will show up. You could fly on as many as 10-20 different aircraft types, depending on which cabin category you choose, ranging in age from brand new to 30 years old. In addition there is inconsistency between operators, specifically crew training and maintenance. With a fractional jet card you buy into a specific aircraft type and the aircraft are operated, maintained, and crewed all by the same company. In addition they will usually have the same paint and interiors. Just to add a quick note there has never been a fatal accident on a fractional aircraft. There is a much higher degree of consistency with a fractional jet card than with a block charter card. The common fractional jet card owner usually flys between 25-50 hours per year and mostly for personal use.

For most people flying between 50-250 hours per year, fractional is a good choice. You actually purchase a portion of the aircraft, depending on the number of hours per year you fly, and are titled on that aircraft. This allows you to depreciate the aircraft which is a significant advantage for those using the aircraft for business purposes. With fractional you are guaranteed an aircraft with as little as 6 hours callout. Most fractional programs also have a provision for multiple use of aircraft as well. All the leading fractional providers offer an expanded service area that usually includes the Carribbean, Mexico, and Canada with the option to waive ferry fees to bring the aircraft back to the U.S. Netjets and Flexjet also offer ferry fee waivers to Europe. There are typically four costs involved with fractional which differs greatly from the debit model of jet cards. First you have the purchase price, which on the low side is around $400k, which will start you off flying in a 1/16th share that gives you 50 flight hours per year, the minimum required interest. Larger aircraft and multiple shares will reach high into the 7 figure range. Second you have a monthly management fee which will usually be around the $6k to $7k per month range for a light jet such as an Encore or a Learjet 40. Third you have a base hourly rate for costs such as engine maintenance, base fuel costs, catering, landing fees and so forth. Fourth there is the fuel component adjustment which fluctuates depending on current fuel costs. As you can probably imagine it is pretty high right know. When you compare all in costs per hour, fractional will be less than a fractional jet card but more than a block charter card unless you take into consideration tax benefits of owning the aircraft in which case the after tax all in cost per hour may be lower.

Then there is buying the whole aircraft. Depending on the costs of the fractional aircraft and program you may justify owning and operating an aircraft, or having your aircraft managed. This financial justification usually falls somewhere between the 200-400 hour mark. With whole aircraft ownership the aircraft is at your beckon call, you can keep your personal belongings in the aircraft while you conduct your business, and you can have one consistent crew. There are a number of other issues and benefits with owning your own aircraft which are too numerous to mention in this already lengthy post.

I hope this sheds a little light on the world of private aviation. Owning an aircraft is one of the most expensive purchases one can make and can be a very costly if the wrong decision is made. If you have any questions I would be more than happy to lend my .02 cents but at the least I would encourage you to consult with a knowledgable professional about the different options available and which one would best suit your individual situation.
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