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When Adding Lift: You've Got Choices, But Choose Wisely
When an increasing number of a flight department's trip requests are declined because demands on the aircraft are maxed, it's probably time to consider additional lift. Today, that presents a choice of acquiring another aircraft, a fractional or shared ownership plan, charter, or prepaid jet cards. But any decision to add capacity depends upon a factual evaluation of the flight department's operations.
First, Do Your Homework
"Before you consider more lift, you have to look at the number of trips, the destinations and whether any trips can be combined or postponed," said Deborah Bew, president of Aircraft Acquisitions, Inc., a Durham, NC-based consulting firm specializing in fixed-wing business aircraft acquisitions and sales. "Then, you have to determine if the available options compromise company policies, such as those involving security; or in the case of a chartered flight, if the aircraft's crew matches your company's flight department safety standards."
NBAA's Mike Nichols, vice president, operations, education & economics, advised that the flight department's mission profile, and the company's financial situation, will have a bearing on the options selected, as will the estimated additional flight hours needed.
"If an extra one to 50 hours are required, charter may be a viable choice; with fractional or shared ownership a better option at 51 to 200 hours," Nichols said. "At 200 hours, a case could be made for full aircraft ownership. However, with both fractional shares and whole ownership, there's the added tax advantage of asset depreciation."
Jet cards, another option Nichols sited for supplemental lift, are what he termed "prepaid block charter arrangements" that usually feature a substantial discount off standard charter rates.
Kevin Vaughan, president of Sentient Jet Cards, recommends that flight departments select a jet card plan that holds its operators to vigorous safety standards. "Also, look at the financial terms, flexibility and cost per hour in order to make an informed decision," said Vaughan, who added that flexibility is another major consideration. "For example, at Sentient, the amount you put on your jet card never expires. Since it's not jet-specific, you can choose the aircraft to fit your mission, or use multiple airplanes on the same day."
According to Denise Wilson, president of Desert Jet, an aircraft management and charter firm near Palm Springs, CA, on demand charter may have some edge if numerous roundtrips are required. "But, if you do a lot of one-way flying, that's where jet cards and fractional plans make more sense," she said.
More specifically, Wilson advised that fractional plans are recommended for flight departments that need to transport multiple people on simultaneous trips for as much as 100-200 flight hours per year. "Under those conditions, fractional ownership is a smarter alternative when you compare the cost of fractional programs, versus the hourly costs of charter."
Fred Reid, president of Dallas-headquartered Flexjet – one of the leading fractional ownership plans, reported that within the context of additional lift requirements, fractional plans can be justified when any projected hours do not justify acquiring another aircraft. "Because fractional plans operate a relatively young, closed fleet available only to their members, it is usually more reliable than retail charter, because availability is guaranteed within a specific contractually mandated call out time, and at a predictable price."
Reid pointed out that the nominal entry point for fractional plan membership is 50 hours per year. With fractionals, the industry standard is 50 hours per share, with each share equal to a one-sixteenth ownership in the aircraft.
The availability factor with fractionals is a definite consideration, since arranging for retail charter on short notice can sometimes be challenging. As Tom Philips, a long-time corporate jet pilot based in Missoula, MT, explained, finding the right airplane often requires extensive research. "You could call several people, only to find that the airplane you want to use is down for maintenance or that the pilots are timed out."
Is Charter for Your Operation?
Philips recommended that flight departments looking at charter get to know an operator and build a relationship with that service company. "Use each occasion you use the provider to build familiarity with him. This is especially true when it comes to jets."
When the case can be made for acquiring an additional aircraft, it's important to research all available options, according to Dan Snyder, director of operations for Missoula, MT-based air tanker operator, Neptune Aviation. Two years ago, Neptune's flight department added a Beech King Air B100 twin turboprop to supplement its Learjet 35 (traded in this year for a Falcon 50 EX).
Neptune's flight department supports not only its air tanker operations, but serves the owner's business needs, and the company's charter operations. Snyder reported that the decision to acquire the King Air was made as the Learjet's scheduling conflicts increased.
"The King Air's purchase was weighed against chartering, but given the missions we fly in support of the air tankers, we would have had to arrange for an aircraft to be on standby at all times during the fire season," Snyder remarked. "That's what made owning our own aircraft cheaper, even after we factored in acquisition, maintenance, insurance, and crew costs. And, when it's not needed, we can make it available for charter and capture that additional revenue stream."
Snyder advised that operators considering purchasing an airplane look carefully at the history of the aircraft to make sure it will perform as advertised. "Then, make sure it will match your primary mission and any secondary missions you can think of – and fly those missions effectively."