- 23 Apr 2018
- Jet Charter
If you are expecting to need between five and 100 hours of private flying beyond your own aircraft in the next 12 months, a jet card may make sense as an alternative to on-demand charter or buying fractional ownership of an aircraft.
Jet cards sit in the middle of aircraft ownership bringing the key benefits of having a fractional share such as service recovery and consistency without the long-term commitment.
Being able to book flights with one call versus the time consuming on-demand charter process of gathering quotes, checking into the safety records of the operators, and then worrying about getting stranded if your plane has a mechanical issue or the pilot calls in sick. Yes, that happens.
Many aircraft owners, who need supplemental lift on an ongoing basis, either for family or company executives, find jet cards a good way to go.
From the business side, if you buy a jet card with Guaranteed Availability and Fixed One-Way Pricing you can pretty accurately budget what your flying is going to cost, something that will make your CFO happy. If you are flying your family, you know in advance the standards of aircraft being sourced, including the minimum experience required for the pilots that will be flying them.
Before brokers start writing in, let me say that if you can find a really good broker who you trust with mark-ups and sourcing of planes and pilots, on-demand charter can work well, especially if your broker agrees to cover any price differences if the contracted operator can’t deliver.
And there are other factors. With on-demand charter you will generally pay extra for catering, deicing, all airport related fees and charges related to getting the plane to you or to its next mission after you are dropped off. Jet cards bundle much of this all into a price where you know in advance what you are getting, so they cut down on those surprise charges.
Before you start requesting information from jet card companies – there are over 250 jet card programs out there from more than 40 providers, I wanted to share some of the basic lingo from the world of jet cards and what the terms mean, including how they mean different things to different providers.
Hourly Rate is the way most jet card companies price the flight time, although there are exceptions. Airstream Jets use a mileage-based approach and Executive AirShare combines days and hours. If your hourly rate is $5,000, for each 60 minutes of flight time, you will pay $5,000, which seems straightforward. Keep in mind, however, most programs don’t charge by the minute, but in 12-minute increments. In terms of figuring out your hourly rate, some programs charge actual flight time while others base it on the estimated flight time quoted when you book. Make sure when you are buying you understand how you will be billed.
To make guaranteed availability meaningful, it should come with a Fixed One-Way Rate. Each provider specifies how many days or hours in advance you need to book to ensure they can have an aircraft for you. Typically, the time needed before your flight, sometimes referred to “Call Out” is six to 24 hours, so if you have lots of last minute trips, this could be a key factor for you. And during Peak Days you may find it as long as seven days in advance and some programs won’t guarantee availability during peak days. Can your jet card provider get you a plane inside the specified lead-time for Guaranteed Availability? Generally yes, and many times at your contracted rate. I was in Sentient Jet’s offices last year when a member needed a flight inside his contracted lead-time for Guaranteed Availability, and its member services was able to find an aircraft it provided at his contracted rate. However, in some cases you may have to pay a market rate as if you were chartering on-demand.
Fixed One-Way Pricing
One expense that is often associated with charter comes because the jet that will take you on your journey may have not dropped its last passengers off at the airport you are starting. That means there is an expense in getting the plane to you. The charge – which you will typically have to pay with on-demand charter – is called a ferry fee. Depending on where you are flying, you may have to also pay for the crew to get to you if they are coming separately from your charter aircraft. You sometimes see these segments being sold as empty legs.
One benefit of a jet card that provides one-way pricing is you don’t pay for any flying except while you are in the plane – no ferry fees. If you live in a small market or are flying to a small airport, jet card pricing is likely to work well for you.
The example is you are flying from Lawrence, Kansas to Buffalo, New York, to be able to call 10 hours in advance and have somebody else (your jet card company) get you a plane on such short notice will probably save you some ferry fees. If you are flying New York to Palm Beach chances are the aircraft you fly was already in the local area, so there is less likely to be ferry fees.
You will find jet card users sometimes will charter on-demand for certain trips if they can beat their contracted jet card rates, although it takes extra time and then you have to scrutinize the aircraft and operators being provided.
While jet cards used to be mainly about Fixed One-Way Pricing, about a third of today’s cards analyzed by Private Jet Card Comparisons use Dynamic Pricing, which is market pricing. You get the best price available for an aircraft that meets the program standards, so it’s a bit like on-demand charter but knowing somebody else has vetted the aircraft and operator. The key differences would be the guarantees of service recovery and various inclusions ranging from catering and deicing to knowing the standards of aircraft your program will provide.
While you might think of Peak Days as being the day before or weekend after Thanksgiving or Christmas, jet card companies have a different perspective. The range of Peak Days varies from under 10 to over 100, according to Private Jet Card Comparisons, a buyer’s guide to jet card programs. Peak Days matter because many programs have surcharges, some as high as 40%, which means your $6,000 per hour rate is $8,400 on Peak Days. Lead-time to make reservations or cancel can also be much longer, in some cases more than a week, and some programs don’t guarantee availability on these dates. Another variance on Peak Days is the ability to upgrade or downgrade the size of your aircraft – something some programs restrict during these busy periods. Avoiding Peak Days is one reason you should try to map out your exact flying dates particularly those that you know can’t be moved.
Federal Excise Tax
You will end up paying the 7.5% Federal Excise Tax (FET) if you are flying in the U.S., so make sure to understand if it is included in the Hourly Rate you were quoted. Some jet cards quote hourly pricing with FET, others don’t, but you find that the $100,000 jet card is billed at $107,500.
Fuel Surcharges and Membership Fees
It’s what you think, and some programs have them, others don’t so make sure that you add them in to your hourly rate when comparing jet card price.
Taxi Time is charged (or not charged) in addition to your flight time. When it’s charged, it’s charged by segment. That means if you choose a plane that requires a fuel stop, you will likely end up paying additional taxi time, which is nearly universally charged at 12 minutes per segment, although a few don’t charge any taxi time or only charge six minutes. If your Hourly Rate is $8,000, Taxi Time charged at 12 minutes will ding you at $1,600 for every segment you fly. If you do a lot of short flights, it can add up so you may want to look at providers that don’t charge it, JetSuite being a prominent player that eschews the charge.
Segment and Daily Minimums
As an aircraft owner you know first hand expensive maintenance is driven not only by flight hours, but cycles, landings and takeoffs. Bigger jets, bigger expenses. This means when it comes to segment and daily minimums, generally, the bigger the aircraft the longer the segment or daily use requirement. What it means is if you take a 90-minute flight on a large jet with a two-hour minimum you would be charged for 120 minutes of flight time For most programs the minimum for a Light Jet is 60 minutes where when you go to Midsize and Super Midsize jet, you will often find 90 minutes. One strength of the NetJets’ jet card programs is 60-minute minimums even on Super Midsize and Large Jets, something that could be important if you have nine or 10 people going on short flights.
Primary Service Area
The Primary Service Area (PSA) refers to the geographic area where terms covering Guaranteed Availability, Fixed One-Way Rates and so forth apply. Most jet card programs have a PSA that covers the U.S. Continent, although some XOJET Light Jet and Midsize Jet programs are regional. When you fly outside your PSA, it can mean a different Hourly Rate – sometimes a surcharge or dynamic pricing - and possibly Ferry Fees. In terms of PSA coverage outside the U.S., some programs include the entire Caribbean, all of Mexico and Canada while others specify airports or range, for example, within 250 miles of the U.S. coastline. Knowing where you are going to fly is important. One program that includes Puerto Rico might not include Barbados.
A number of providers have programs that offer a European PSA, although the definition of what’s in Europe varies, and NetJets (on specific cards) and VistaJet both offer trans-Atlantic flights without ferry fees, although only VistaJet offers a truly global jet card program with fixed one-way rates and no ferry fees.
If you go down the jet card route, be prepared to do homework in the same way as if you were buying an aircraft or fractional share. Take the time to figure out your must travel dates so you can avoid Peak Days when possible and understand the Segment and Daily Minimums plus the Primary Service Areas of the programs you are considering. While there are many good programs, the rules and policies of each means that a program that works well for your friend, may not be a fit for you. Of course, the ease of booking – one phone call or even tapping on your keyboard, and then knowing everything else is being taken care of saves time and in many instances money, compared to alternatives.
Read more from Doug Gollan on PrivateJetCardComparisons.com
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