Often clients reveal that buying a whole aircraft is not the answer- at least not for the time being. Either mission fulfillment is not realistic from a budget standpoint (e.g.- all trips involve a limited number of long-range international travel best satisfied by a large- expensive aircraft)- or the company must dispatch multiple flights daily in completely different directions with different passengers. These are just two of the many reasons buying an aircraft may not be the most logical solution to meet the needs of a company.
As we have mentioned in previous articles- the industry provides several alternatives to whole aircraft ownership. The least restrictive and most flexible may be charter.
For the Charter solution a company may interview several regional providers or national providers with regional fleets to meet the firm’s demand for business travel. The company can decide on relatively short notice the type of aircraft that best serves the specific trip. For instance- maybe a turboprop aircraft provides the best profile for a short set of intra-state trips whereas a large-body aircraft satisfies the company’s need of International trips. Charter is a non-equity-based proposition providing flexibility to the customer; it is a great start for many.
Another solution for some is Fractional ownership- allowing a company to buy less than 100 percent ownership of an aircraft. In this solution the company owning a fractional share may have the option to dispatch several aircraft in any given day- based on the share-size purchased. There are many differences between Fractional ownership and Charter- but this month we are only going to focus on the similarities. Both options involve less financial commitment than a whole purchase.
REMEMBER YOUR MISSION PROFILE
Back to the question- when is Charter either not enough for the company- or not the only solution for the travel needs? You must revisit the Mission Profile work accomplished when initially considering Business Aviation for an answer. Remember- once completed and an interim solution was developed- the results of the work were not thrown away. Rather- they were put in a drawer with the pledge to review the Mission Profile at least annually based on a clear change in company needs.
Your Mission Profile showed you the annual use of a business aircraft based on city pairs contemplated and the frequency of those trips. If the net result was less than 200 to 250 hours of annual use- buying was not the initial answer. Now- possibly one year or so later the company may have increased either the estimation of trip frequency or the number of the city pairs to be served- thus crossing the threshold for whole-ownership based on annual use.
Maybe now is the perfect time to move out of charter and into whole aircraft ownership. Remember- not just annual use is developed in the Mission Profile work. Equally important is establishing the category of aircraft to meet the mission. Is a turboprop needed because now the short regional trip frequency has increased? Or is the long-range aircraft required more because the International trips have increased? It could be that a mid-size aircraft could blend both old and new needs nicely into one solution package.
Having defined the actual need after some period of charter utilization- and reverting back to the original plan and plugging in actual utilization rather than the projected use- a new picture may emerge. This picture shows the Board that whole aircraft ownership’s time has come. Given there is now a real benefits/ cost metric of Business Aviation based on the period of charter use- a comparative analysis can be derived to show the variance between the charter or interim solution and the proposed new solution.
This comparison is invaluable as Board Members begin to recognize a shift in priority in lift solutions. As I have mentioned- there are several lines that need to cross to develop the needs and value proposition of whole ownership. If those lines and the corresponding corporate financial vectors are aligned- it is time to begin a new and exciting phase of Business Aviation.
Remember- now that you have successfully sourced as well as used charter as a solution- the need for a clean break is not the way to view this transition. Charter may still serve the Board and the company by providing multiple dispatch capability and backup- thereby assuring 100% availability of Business Aviation.
Do you have any questions or opinions on the above topic? Get it answered/published in World Aircraft Sales Magazine. Email feedback to: Jack@avbuyer.com