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By The Numbers
Let’s assume that you have done your analysis and determined that whole aircraft ownership is the best solution for your travel needs. There are still more choices (with consequences) to consider - and there are essentially two ways to have your wholly owned aircraft- explains David Wyndham.


When you own a business aircraft- you can use the in-house flight department or go with a management company. Utilizing an in-house flight department means that you hire pilots- possibly a mechanic and maybe an administrative/scheduling person. These folks can work out of an office at the hangar. The main advantages are:

• Maintaining the highest level of control. These people are your employees and you have complete discretion over who you hire and what their work schedule is.

• You should get the highest level of service. The people you hire will be the ones best able to meet your service requirements.

• You get the best level of security and privacy. These folks are your employees and they know you and your schedule. Any private discussions that you have on the aircraft- or any sensitive business or personal papers on the aircraft will remain secure.

The above does come at a price however - namely salaries- benefits and your full support (time). A well-qualified Captain in a light jet may command a salary of $88-000 per year in a major metropolitan area; an experienced mechanic $82-000. Whether you fly 300 hours or 500 hours- you incur 100% of the salaries and associated employment burdens. (The professionals will also require aircraft re-currency training twice a year as a best practice).

Some general annual fixed costs associated with a light jet in a traditional flight department are displayed in the table below. As you will see- before your first hour is flown you should be prepared for these costs - and to manage and support these staff.

THE MANAGEMENT COMPANY OPTION
If setting up and staffing/managing a flight department is not to your liking- there are a number of management companies that offer turn-key service. These can provide all of the above support. The advantages they offer are:

• They are knowledgeable and may be better able to manage the crews.v • Depending on your flight schedule you may be able to forego a dedicated crew. Pilots could be shared with other owners- reducing the salary burden.

A well-run management company can secure volume discounts for fuel- insurance and hangar space- while the maintenance team can be shared with other owners. Savings in these areas are somewhat offset by the fact that you are paying a management fee- but you may still come out ahead on total cost. You’ll definitely come out ahead on reducing the burden of managing the operation yourself.

MANAGED WITH CHARTER
Within the managed aircraft scenario- you can make your aircraft available for charter by third parties when you are not using it. There are certain legal and tax ramifications to this- so always contact qualified aviation tax and legal experts first.

The big benefit of 'managed with charter' is the offsetting revenues provided through chartering your aircraft out. If you only fly 120 days per year- there are an additional 245 days to charter the aircraft out. A generic charter agreement is that you will pay for all of the aircraft operating expenses- and the charter management operator will advertise- book and manage the charter trip. They will collect the revenues and retain about 15%- with 85% passed along to you.

When considering chartering aircraft out- remember:

• Your aircraft will be used by others. Don’t leave your 'stuff' on the aircraft unless it can be locked up.
• Wear and tear will be increase with use.
• To conform to FAA Part 135 regulations for maintenance and operation of charter aircraft- you will see increased maintenance costs and a potential requirement to install additional mandatory equipment.
• The aircraft needs to be available for use by the charter customer. If your travel schedule is predictable and not likely to change at the last minute- the charter operator will have an easier time booking your aircraft.

Please note that you will never make money chartering your aircraft in this manner. In addition to the fixed expenses- the debt service/cost of money in a turbine aircraft is high. The on-demand nature of the air charter market makes utilization low. If the airlines can't make consistent profits flying 2-500 hours a year per airplane- you cannot make a profit with 300- 500 or even 600 revenue hours.

What charter will do is offset your operating costs. A typical light jet has a variable operating cost of about $1-800 per hour. Imagine that your aircraft generated approximately $2-400 per hour charter revenue: you would have $600 per charter hour to offset all those fixed expenses.

Working with a management company requires contracts- clear communications- and a clear understanding of what your desires are for the aircraft. You need monthly financial reports and detailed breakdowns on all the costs (and revenues from charter). Management companies can reduce the 'hassle factor' in owning an aircraft- but only if the relationship is a solid one.

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