Having explored the concepts of charter, jet cards and fractional ownership as possible supplemental lift solutions, this month David Wyndham considers how to make a decision over adding supplemental lift to your flight department…
There’s far more to understanding supplemental lift in Business Aviation than knowing the options available. If there’s a real need to add extra flying capability to your flight department without buying an airplane outright, then you’re going to need to know how to decide between charter, a jet card, or fractional ownership.
And once you have selected the right option, you will need to choose the right aircraft to fulfil those additional mission needs. Following is some advice on developing your understanding to ensure your next supplemental lift solution is the right one for your operation.
How to Choose the Right Type of Supplemental Lift
Why Consider Aircraft Charter? Chartering a business aircraft can make financial sense when flying anywhere from a few hours to approximately 100 hours per year. It provides the greatest flexibility and no commitment, as you are only under ‘contract’ for the flight you booked.
Aircraft charter is flexible in the sense that you can choose different aircraft types based on your changing mission needs. However, if you’re looking at a number of empty-leg trips (i.e. ‘deadhead’ trips, with no passengers), a jet card with one-way travel may be worth considering.
Charter is booked either by contacting the operator direct, or via a charter broker.
Why Consider a Jet Card? Typically, a Jet Card might factor as a viable option if there is a need for 25 flight hours up to around 100 hours annually (provided the hours are to be used within a year). But be aware that the options don’t stop there…
There are card programs that offer different aircraft categories, newer models, and US-only operators versus global providers.
As suggested above, many jet card programs offer one-way travel options. Generally speaking, the card programs guarantee their cost-per-hour for 12 months and are all-inclusive of fuel and other fees, with the exception of international travel costs.
Why Consider Fractional Ownership? Fractional ownership comes with significant commitments compared to charter and jet cards. Fractional aircraft require a form of ownership or an operating lease, and the contracts are generally for five years.
Annual hour allotments are fixed and guaranteed. However, excess hours are limited and can come at a higher cost. To benefit from fractional ownership, your utilization needs to be predictable and stable. If they are not, you could end up with a quarter, an eighth, and a sixteenth share all under different contract start dates.
Rather than just being an hourly fee, fractional pricing has a monthly management fee and an occupied hourly fee with a fuel-cost adjustment. Fractional ownership typically makes financial sense for those with the need for between 50 and 300 hours flying a year. It’s important to note, however, that above 250 hours the cost of whole-aircraft ownership may actually be more economical.
There may be certain tax advantages to business aircraft ownership, but you should carefully evaluate all charter alternatives before deciding on the best way to expand your current aviation operation.
How to Choose the Right Aircraft for Supplemental Lift…
The current aircraft in your operation should be capable of performing the most important mission to justify owning that particular aircraft. Overall, it should meet 85–90% of your private air travel needs. If your current aircraft is not a good fit most of the time, then replacing it may be the right move.
Choosing the type of aircraft to have as a supplement is the same as choosing your primary aircraft. The travel needs will define the aircraft characteristics. So, you must first define the required and desired criteria and then evaluate the options.
Whatever option you choose should be financially optimized. For example, though a Long Range Jet is capable of flying a 150-mile trip, a smaller Turboprop is likely to be more cost effective.
How to Manage Growth Using Supplemental Lift
Growing into another aircraft requires careful consideration and planning. What may look like continued growth into a second aircraft may plateau at a lower level of usage than anticipated. Conversely, waiting too long to acquire another aircraft may cost you more in the long run. Either way, projecting future demand is difficult.
Therefore, adding another aircraft should be part of an aircraft needs analysis. This plan requires inputs from the main users regarding what they want and need from air travel. The financial planning needs to be considered along with the benefits of the subsequent aircraft.
Part of the process may indicate whether your current aircraft is capable of meeting your main requirement, and may suggest that you should consider a two-aircraft operation.
You need to look at the budget for not only the current operation but for the total cost of owning and operating the aircraft.
For example, if one aircraft is capable of meeting demand for 600 hours per year, then the second aircraft may not fulfil a requirement for 1,200 hours. The crossover point in these situations can often be much lower.
One of our clients operated a trans-oceanic business jet that was flying approximately 150 hours annually over short- to medium-length trips. My financial analysis revealed it was less costly to buy a used Mid-size Jet than operate the global jet for an additional 150 hours per year and accept the associated operating costs and higher market depreciation.
Supplemental lift can be a great add-on to your normal aircraft usage. It can add a few more hours in the short-term, provide access to a larger aircraft for a special trip, or bridge the gap to owning another aircraft.
Whether it’s traditional charter, jet card membership or fractional ownership, there is a solution to fit your needs and budget. In all cases, look at the total costs not only to acquire another aircraft, but also to operate it.