Most Profitable Charter Aircraft
 

If you were going to start a charter company from scratch, what would be the top 2-3 airplanes you would want to use? I currently manage a King Air C90 that I could lease at a very reasonable price. Is this usually a profitable charter plane? What are a few others you guys would recommend?

The most profitable aircraft is the one you're not financially responsible for. But it really depends on which market your serving. Citations still seem to be popular.

I can't remember the website, but there is one out there that lists the average operating cost per hour. To own an airplane and try to make money with it is insane. I recently lost my job to a situation like that. Usually the only reason an airplane is on a charter certificate is to offset cost, not make money. Unless you're flying boxes, and the airplane is extremely busy, Ala Ameriflight/Airnet, don't plan on making money, plan on spending money.

I keep seeing this statement... is that just because of fuel prices and economy? You would think somewhere you could make money with a plane. I mean, how do any of the charter companies do it? Like flexjet and netjets etc.

Flexjet and Netjets are fractionals...

so in order to use them, you have to BUY a fraction, THEN pay a monthly management fee, THEN pay a per-hour usage fee... That is how they make money! :)

There is no such thing as a "profitable" charter... you have to charge so much in order to make a profit that someone would just go to a 135 company that is just offsetting costs for some owner-- just like slyguy said.

But that 135 company is charging a hefty monthly mgmt fee, plus taking 15-20% of revenue made from charter, so the mgmt companies are making out like bandits while the pilots do all the work!

what2fly.com

You can make slim margins on an airplane on a 135 certificate on every flight. But when maint. comes up, or you need to send pilots to recurrent for their 6 month 8410's and insurance, or the airplane needs upgrades, or a radio craps out, or the nose wheel steering buys the farm, or you have a tire blow out, or the left main gear door develops a crack, or the cowl splits and the nose bowl needs to be replaced and re-painted, there goes not only your profits, but more than likely some money out of pocket too. My former employer was going to try and buy a Metro. He was going to get it for a song and dance, with a ton of spares. Even with financing half only of the cost on an airplane that was from the seventies, the monthly nut to crack would have left about $100/200 an hour in profit. On an airplane that might charter 35-40 hours on a REALLY good month, you do the math. Is the risk really worth the return? This was also paying the pilots hourly, not a salary. That is a good way to cycle through pilots like some cycle through underwear. If you want to keep a guy around, pay him a salary so when he's not flying, he still has piece of mind that his mortgage is still going to be paid.

Off the top of my head the DOC's on a C-90 is around $550/hr. Looking at a wet lease what do you think you can bill it out at?

$500/hr:D...............

Somebody who actually knows what they're doing will include all direct operating costs (fuel, maintenance parts/labor, & engine reserve) along with all fixed costs (crew salaries & benefits, hangar, insurance, etc) along with a margin percentage into their hourly charter rates.

Many newer charter aircraft are on engine programs like TAP/ESP/JSSI/MSP/etc. and some even on nclusive hourly maintenance programs like Cessna's ProTech or FalconCare where all scheduled & unscheduled maintenance is included in a single hourly rate. With programs like these, the unscheduled maintenance event isn't a "budget buster".

There's a reason why many owned charter aircraft are older, however; low acquisition price and the high operating costs can be passed right along to the customer.

I didn't feel like typing all that out, but yes you are right. But try and justify the bill for an engine program on a 20-30 year old airframe from someone like Standard Aero. It would drive the cost per hour to the point where it would be even or in the red. The company I was working at was very small, and I was included in all aspects of it, including airplane purchases. When there are only 5 employee's, and 3 of them are pilots, you get included in all of it. There are many different packages of engine programs, and most owners from my experience who own/can only afford older airplanes don't have the money for Standard Aero's Gold MSP (Maint. Service Plan I think). And, if the airplane is not flown for all the hours included in the MSP, you are still responsible for those hours in a lump sum. The cheap ones will usually only cover overhauls. If you have a failure, it's on you. If you had to pay for just a hot section inspection on say a Garret731, your looking at (IIRC) around $110k. Not cheap. It's not the regular maint. that will get most owners. It's the $45k I once saw when a contract pilot did an overweight landing in a Lear60. All tires had to be replaced, spar inspections had to be done, wing root fairings had to come off, interior had to come put for inspections, and the DOM had to be flow to SFO, roomed for two nights, a mobile NDT guy had to come out to do some inspections, some of his tools had to be flown in, etc., etc. It cost the owner that money. And, if you want to be competitive, passing the costs along to the customer is not an option, otherwise the airplane will just sit. Why would someone pay $2400 an hour for an airplane when they can get the same exact airplane for $2100 an hour who has a corporate owner who can afford the cost of the airplane?

My point is, it can get expensive in a hurry, and any sane person only puts an airplane on a charter certificate to offset costs, not make money. A Gulfstream will NEVER make money. A KingAir 200 might break if no major concerns pop up. Ever seen the cost of replacing boots on a KingAir? If the airplane has never been on a 135 certificate, the initial acquisition might be cheap, but you had better hope the logbooks are to the fed's liking. It could involve months of inspections and waiting for the notoriously slow government to get around to approving the airframe. And to operate a 135 certificate with an approved MEL to be able to dispatch with deferred items is a major PITA.


Taxes can also become quite burdensome as well. If the aircraft doesn't do a certain number of hours of out of state charter, you will be dinged with a huge tax bill at the end of the year. We had to actually take one of our airplanes and park it at HND to save the owner $45k in taxes. The whole time it was there, it was generating zero revenue, there were ramp fee's accumulating, it was outside instead of a hangar, and the clock was ticking away on numerous inspections that have to be done whether it's flown or not. There is no simple answer to the OP's question, other than plan on loosing money.

Go to executivejetmanagement.com and look up charter rates, then go to omnijet.com and look up DOC rates. Whichever has the largest margin and you know you can get for the lowest price is the winner.

Probably the best aircraft imho is a PA31. Sorry, not glamorous. Want a jet, Lear 35. Want a prop... MU2. Notice, old crappy, low price? Anything nicer and you're competing with people just trying to offset cost and not profit. King Air's charter rates and operating costs make them unprofitable in my mind for a start from scratch operation.

If, and this isn't meant to be funny, but if you want to know how much money there is to make in charter look at the going charter rates and realize that the DOC is either above that, at it or just slightly below it. Thus your margin between going rate and charter minus the random 5% off some broker will demand will get you nada to pay for everything else.

This is not a good road to go down. The money and security is in aircraft management with a side a charter but not charter.

If I were to do it again (Part 135 operations and 135 startup) I would select an airplane used heavily by Netjets or Flexjet or, sigh, Flightoptions. Beechjet comes to mind, so does the Citation V. They love having a direct swap aircraft to charter. Expect to give up 5%, maybe 10% off the going charter rate and doing one-way charters. Props are not good charter aircraft to make a buck off of.

Best bet, if you're really starting from scratch, is creating a fractional on a small piston twin and have a steady income and growing small. Maybe freight. Otherwise, you'll never pay your bills.

All of this is extraordinarily expensive and unprofitable mind you as this is an offset your costs industry, not profit industry.

I worked at two Part 135 operations. 1 was stand alone charter company and it went belly up with the wealth of the owner was drained significantly. I don't think it was ever profitable despite a really excellent well funded attempt. Going rates on King Air's was unfortunately barely covering DOC in our area and business was weak and sporadic. I've heard GIII going rates are below fuel cost in many instances.

The other was with a $24M jet. That was a charter management deal. What I already knew and then saw first hand is an owner may have $2.5M in bills for his $24M jet. Running it Part 135 for 500 hours will raise costs a mere $.5M, not bad. He'll make in good times $1.5 maybe $2.0M back if its flown a lot more. So instead of paying $2.5M for a plane he flies 100 hours, he pays $1-$1.5M out of pocket.

You're aiming to make a profit while competing against people who are operating at a loss and offering their planes to EJM and similiar companies thus getting all of the Netjets discounts you won't get. Kind of hard to be profitable eh?

Here's the deal, going rate was $4000. 15% of that was taken by the charter operator. We made $3,400 but got 15% fuel surcharge... back to $4000. Then we paid are ultra low DOC's, given the size of the plane and warranties, and fuel which was back at that time around $1800. So there is your margin, $2200.

So that means we need to fly 1,136 hours a year to break even. Not happening. Thats 3.4 hours per day when you discount mx. The daily min is 2 hours per day and after all of the deal making and stuff that's really all you get. Nowadays I think a lot of charter operators refuse to pay for a deadhead, thus you have one-way charters and you sit unpaid waiting for the opportunity to come back. It's highly unlikely you'd get 3.4 hours per day on any aircraft in any operation.

Thus, aircraft management or you are:

http://www.trainfortopdollar.com/tra...ney-in-tdk.jpg

Unless you fly boxes and get a good contract. Thats the only way anymore to own an airplane and make money with it.

BTW, as mshunter mentioned, Part 135 certification is a joke in that it takes 6 months to do 1 weeks work but never less than 6 months and none of it is done until the week before the pre determined 6 months is up. Get the picture? Meanwhile, you need to have your plane and operation ready to go while waiting on the certification. How much costs do you think you can afford?

I agree.

Except that the good contract will be undercut by someone else who has done it longer, owns their fuel farm, has other contracts, and frankly just does it better even if they're not better people and the planes are dangerous.

Oh, and you better hope the FAA never has an AD come out on the plane or a pilot gets ****ed and quits, then you're sunk.

Good margins will come from the skill of your management and sales teams, not the specific type of aircraft.

generalizing here maybe?

Nope. I have seen it first hand. With the purchase price of a Gulfstream, the maintenence bills, and paying for pilots (contract or otherwise), you can't make money on a Gulfstream. The metric of fliyng it 135 and adhearing to a duty day doesn't comeout on the plus side. Not to mention a Gulfstreams typical trip is to fly somewhere, sit for a few days and fly back. All that down time equals lost revenue. Ever seen the cost of a set of brake on a G4? I have a friend who specalizes in Gulfstream and Hawker spares. A set of brakes for a G# IIRC was recently sold for over $100k. Not new, but reconditioned. A set of main wheels was $54k. You can make money in lumps, but it goes right back into the airplane. Anything with the name Gulfstream attached to it is going to cost on parts. Heck, the hush kits for a G2 are almost as much as a G2 costs now. $1.5m for an airplane that can be had for $1.5m.

$400,000
1968 GULFSTREAM II Jet Aircraft For Sale At Controller.com


QTA recently started doing the hush kits again for $1.25M
Stage III hush kits revived: AINonline

I agree.

I flew a Legacy which was not expensive and very easy to maintain. That said, a main tire with assembly was around $10-$11K. About $75K for all six but at the time you only got them when you were AOG thanks to a strike or something. And we were cheap remember.

Maintenance was pre-paid and that was around $11K a month (on a contract inked in 2006) and it'd go up to $22K after I want to say 24 months. I can't remember off the top of my head when the switch was made but it was due to warranties running out. The engines would outlast the airframe really and never need to be replaced but because any issues with them was extremely costly we prepaid that too for around $10 or $11K as well. So you're looking at complete 100% tip-to-tail scheduled and unscheduled airframe and engine coverage for around $250K in maintenance based on a little less than 500 hours a year. It was roughly about $500/hr.

Mind you, that's unless you broke something. That is not covered.

As to a Gulfstream, let's say 450 for fun. Charters for $5,900. DOC is looking at around $3200 based on $680 in mx and $5.60 on fuel. That leaves you roughly with $2,700/hr to pay your bills. Figure you are a start up and are leasing your, let's say $27 million dollar, aircraft then you're looking at what, $270K in lease payments per month? $270k / $2,700 contribution and you've got to fly 100 hours a month just to pay your lease payment. Add probably 10-15 hours for pilots costs, plus a few more hours for insurance, facilities will need a few hours, training, mistakes, miscellaneous, etc. and let's be kind and say you need to fly 130 hours to cover costs and that's about 4 hours per day of flying if you flew every day and never put the plane down for maintenance, ever.

I just can't see how it could ever be done.

Now divide that airplane between two owners and manage it and possibly even add some charter in there then well, then you may have an opportunity.

If someone a) trusts you and b) you don't get undercut.

First you have to get a 135 certificate -- no easy task these days, unless you're going to run a single-pilot 135 (in which case it gets a little simpler). Then you have to have a very firm understanding with the owner about who will pay for what, maintenance wise. Then you need to get the airplane through an FAA conformity inspection, which, depending upon the inspector and FSDO involved can be a nightmare -- especially if the airplane's records are fouled up or incomplete, ADs not complied with or correctly recorded, unable to track components, etc., etc. Then you and any other crewbies you intend to use have to pass FAR 135.293-297-299 checks, initially, (for the 297 check) at six month intervals afterward, and (for the 293 and 299) checks at yearly intervals afterward. You need to get familiar enough with parts 119 and 135 so you don't wind up busting some regulation out of ignorance.

I won't go into more tedious detail, but there's a lot of it, and the FAA isn't impressed if details slip through the cracks.

From a business standpoint, it is very difficult to generate a steady cash flow sufficient to pay operating expenses with a little profit, with one airplane -- unless you have some contract that guarantees sufficient flying to crack the nut. And then, what if the airplane sticks its tongue out at you, and you have to charter out to serve your contract customer? It ain't easy, it takes a good-size capital reserve when you start, and you may wind up losing your . . . uhh . . . assets if fortune doesn't smile on you.

If you're going to do it, develop a comprehensive business plan, including contingency options, have it reviewed by someone who knows what they're doing, and then . . . good luck!

I hear there are a few Columbian companies that will charter an aircraft and provide a very nice profit margin... just don't let the feds catch you:eek:

There's an old saying: You want to make a small fortune in aviation? Then start with a big one!:p

As was said earlier....

Why would someone pay $2400 an hour for an airplane when they can get the same exact airplane for $2100 an hour who has a corporate owner who can afford the cost of the airplane?

There are thousands of airplanes owned by a guy that uses them one day per week. The other six days, he finds a management company who HAS a 135 ticket, leases it to them at DOC plus 10-20%. The management company charters it out at 80% of the break even point of a company owned aircraft. The owner cuts his costs (the 10-20%) offsets his fixed costs. The Management company makes money off the owner because they ARE part of the airplane's fixed costs.


I knew an guy (A&P, Comm ASEL/MEL) who EVENTUALLY made a little money starting his own 135 gig. He started out by buying a 310 (similar to this C310 for Sale: $52K) that was out of annual and had a couple issues. He did the annual himself, fixed the issues, pulled out the seats, and did hot-shot cargo. It took him about 18 months to get the 135 ticket and a few regular customers. About that time he was breaking even. A year or so later, he had several customers and was making some money. Keep in mind, his mx labor cost was zero (he did it in his off time), and he flew the plane himself.

BUT... now he can work on finding an owner who needs to offset the ownership costs, and offer to put the owner's plane on HIS 135 ticket. Or, when he finds the next run out 310, he can buy it, fix it up, and add it to his fleet.... but then he would need a second pilot (and the costs rise). Or, he could sell his first plane for a profit since it is 135 "certified".

The only aircraft that I have seen that have made a profit are the ones that are paid for. Otherwise, the bank always gets the profit you would have made in the form of interest. The bank will charge you 6 to 12 percent. In aviation, that is a pretty good profit margin.

I agree old paid for airplanes are the way to go we still use AC50's.