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PRIVATE JET TRAVEL

October 2008

Other than for the richest executives in Canadian business, private air travel was once beyond reach for chief executives who were not amongst the ranks of the highest paid. Today, however, the world of corporate aviation is changing fast, and becoming much more affordable.

Private Jet Travel

Use of private jets is increasing every year. The General Aviation Manufacturers Association (GAMA) states private planes flew 27 million hours in 2006 carrying 166 million passengers. Nearly two-thirds of all hours flown are for business purposes and, in the U.S. alone, there are more than 4,000 paved general aviation airports open to the public, compared to less than 500 airports for scheduled airlines.

Because private jets can take off and land on shorter runways, there are many more airports close to where you need to go. As a result, companies that make these jets (Bombardier, Gulfstream, Embraer, to name a few) are enjoying an influx of business orders with new models and different sizes to appeal to the corporate market.

You still have to do your homework and fully understand your travel needs and resources. A large capital outlay – as well as maintenance and hanger fees, staffing, etc. – could mean the cost outweighs the benefits of ownership if you fly less than 300 hours a year.

Private Jet TravelFULL OWNERSHIP

You get the greatest flexibility by owning your own plane, but you also take on substantial costs and are limited by the number of planes you own. If it’s maintenance time, your plane may not be readily available. If your plane is not in use, you may consider making it available for charters to help reduce costs during down times.

AIR CHARTER SERVICES

Charter air is an option at the other end as it requires no expense except the cost of flights as the charter company is responsible for maintenance, staffing, training, and storage. With thousands of charter companies, there is a great variance in service, quality, pricing, and availability. Air charters don’t require you to put up large amounts of money upfront and there are no monthly fees. Sometimes the charter may act as a broker, and not supply their own planes, which may cause you quality and safety concerns. Get your questions ready and get the answers before engaging any charter air supplier.

If you fly between 20 to 300 hours a year on private airplanes, it’s time to check out fractional ownership or jet cards.

FRACTIONAL OWNERSHIP

In 1986, NetJets, a Berkshire Hathaway company, introduced the first fractional ownership program where its customers could buy an interest (fraction) in a specific private jet.

Private Jet TravelToday, the usual term is a five-year period and, depending on the size of your share, this gives you access to 25 to 400 hours each year. Usually, you buy a five-year term ‘share’ of it at a pro-rated price. The fractional provider looks after staff, training, support, catering, maintenance, etc., while customers pay a monthly management fee and an hourly rate based on the time they fly. Typically these charges do not include the time the plane takes in coming to get you or returning to its base. You can renew your term at the end of the fifth year or sell your share back for fair market value, less handling, before the end of the term.

If another customer has ‘your’ plane when you need it, the provider supplies another from their fleet, on less than 12 hours notice. If you need a larger or smaller plane than you purchased shares in, the provider supplies one and deducts more or less time.

If your travel budget is about $80,000 a year, you should consider fractional ownership.

JET CARDS

A recent invention that has introduced the most new users to corporate aviation is the Jet Card. Users don’t own a plane or shares in a plane. Instead, like a pre-paid telephone calling card, they just pre-pay for a block of flying hours, from 25 hours up. It works like a debit card as flying time is simply deducted from the card balance. You have no further obligation after using up your hours. Virtually all fractional jet travel providers offer a jet card program.

The benefits of fractional ownership and jet cards are pretty much the same:

  • the opportunity for short notice flights
  • access to larger or smaller planes depending on the need
  • the use of planes which are managed and maintained by professional aviation companies

While occasional fliers are buying jet cards, so are companies that already own their own planes to get access to short notice flights if their aircraft are in for maintenance. Generally, if you currently do more than 10 hours of private flights, jet cards could be a good alternative.

GETTING STARTED

In order to know which option is best for you, you must be clear on your expectations and needs for private aviation. It might be best to initially try a 25-hour jet card and see how well it works.

If you have difficulty justifying the expense of private aviation, you may not be too far off from the cost of full-fare, first-class commercial seats for a party of six business associates and clients. The convenience and the flexibility of private aviation and the possibility of cost savings are certainly worth investigating.

On top of that are the benefits of avoiding all the negatives of air travel – airport congestion, lost bags, flight delays – and enjoying the benefits – time saved by being able to land at many more airports than the major commercial hubs and greater schedule flexibility and flying times. Indeed, saving time and gaining more inflight productivity are perhaps the two greatest benefits of private flight for the busy corporate executive as it allows you and your companions to focus on business issues en route.

Plus, we shouldn’t overlook the prestige factor. Providing private flights with your clients as a captive audience makes a strong statement about corporate success.

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