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Business Jet Ownership Options
Time is a precious- limited commodity- observes David Wyndham. The use of private air travel is a very effective way to spend your limited time. Fortunately you have many options other than whole ownership to enjoy Business Aviation’s benefits - although there are costs associated with those options- as listed below.

Charter is the first step that you can take into business aircraft utilization. You only pay for the time used- and there are no long-term commitments. Charter is a good alternative if you need only a limited amount of flying per year (less than 50 hours P/A). In addition for limited flying annually- Charter provides a good solution for:

Vastly different travel requirements: Charter offers a choice between many different aircraft types- so you can match the aircraft to the mission. Charter can provide you with a small- relatively low-cost alternative for the short trip (think of a light jet flying from New York to Portland- Maine)- and a bigger aircraft for the long-range trip (New York to Portland- Oregon).

Return Trips: With charter- you will generally pay for every hour the aircraft is flying- whether you are on board or not. Other charges can include catering- landing fees and taxes. Ground time- overnight fees- and minimum daily billings can make one-way trips costly - so unless you can bag a special one-way offer- charter may not be the best option for one-way trips.

Separating ‘Personal’ from ‘Business’ Use: The IRS looks at business use and personal use of a company aircraft very differently. If you are using the aircraft for both business and personal trips- charter may be an easy way of separating the two types of flight. Similarly- if the trip is of mixed use- the all-inclusive cost of the charter is a known value to use when computing the deductible cost.

If you are flying more than 50 hours per year- there may be more cost-effective ways than Charter to secure use of a business aircraft. For example- jet cards are good for use when your travel ranges between 25 and 100 hours per year. Jet cards are essentially block charter programs. You pay an upfront fee that guarantees you a set number of hours for use of an aircraft. Most jet cards start at 25-hour blocks.

These cards can be for a specific aircraft type (e.g.- Citation X)- or for a specific category (e.g.- Mid-size). Depending on the program provider and promotion offered- there are both one-way cards (pay only for occupied legs) and round-trip cards (pay all hours the aircraft flies). If your travel is mostly same-day return- the round-trip prices are the better deal. (Some jet cards will also offer concierge services - including limousine bookings- hotels- theatre tickets- etc).

Once you near the end of your 25-hour block- you can purchase an additional card. The cards do expire- but only in the sense that the rates expire. With charter and jet cards- you have no ownership- no responsibilities (legal/operational)- and no long-term debt.

For those who consistently fly 75–250 hours annually- Fractional Ownership is the best option - particularly for those who fly a lot of one-way trips- and do not want the full management duties of whole aircraft ownership. Fractional ownership offers guaranteed aircraft availability when booked in advance. Fractional aircraft ownership is a concept under which an aircraft management company facilitates the sale of shares of an aircraft to a number of co-owners- who in turn employ the management company to operate the aircraft on their behalf under a dry-lease exchange agreement.

With a fractional program- you generally fly on the same type of aircraft. Those aircraft are outfitted almost identically to each other- and the crews are trained to the same standards. Hours are billed by block time- plus there is the acquisition cost and monthly management fee to consider. With rising fuel costs- typically there will be a fuel surcharge.

Ownership contracts run typically for five years. Shares are normally sold in 50-hour/year increments (or one-sixteenth shares). Total share costs are proportional to the share size - 50-hours annually will cost half of what 100-hours annually will cost. Some fractional programs also offer concierge-level services. If your business can use a tax deduction- the share’s acquisition cost can be 100% deductible if the aircraft is used for business alone.

It is a fact that the more flying you do- the lower the average cost per hour becomes. Whole aircraft ownership makes financial sense when your annual usage exceeds approximately 250 to 300 hours. While whole aircraft ownership offers the most control (and with sufficient annual flying- the potential for the lowest average total cost) it also stands to reason that with whole aircraft ownership comes all of the responsibilities of staff- maintenance- hangarage- etc.

How much- and what type of flying you do will help frame the ‘Jet Use Options’ discussion in your own Boardroom. We conclude with a quick recap of the key areas of responsibility for each:

* Charter - the commitment is for the individual flight.
* Jets cards - the commitment is for the block of hours.
* Fractional Ownership - the commitment is for the block of hours and a calendar period.
* Whole Ownership - the commitment is for the aircraft (in the air and on the ground) and the staff who operate it.

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