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Benjamin Franklin is quoted as saying, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.” Aldo Gucci of the Gucci fashion brand and Sir Henry Royce of Rolls Royce are credited with similar sentiments. Yet when it comes to buying private aviation solutions I find many buyers focus on price, which certainly makes sense when you consider the outlay for most jet cards is between $150,000 and $500,000 or for single trip charters can easily cost well over $25,000.
For buyers of jet cards, the main exercise is often to compare not only the hourly rates between the multitude of providers (there are over 50 companies selling jet cards) but against the cost to charter a private jet on-demand, or trip-by-trip. It’s something easier said than done.
When comparing jet cards to private jet charter brokers (online or offline), you need to factor in that many jet card programs include FBO fees, deicing, catering, Wifi, the costs of flying the jet to pick you up or back to base after dropping you off (ferry flights), pilot positioning expenses and so forth into their hourly rates. For each ad hoc charter flight, these costs will vary, but as incurred, you will pay for them.
In the case of jet cards, most providers also have a guarantee to get you another aircraft if at the last minute there is a mechanical, the pilot gets sick or the crew that was supposed to fly you runs out of duty time because of delays on previous flights. If you charter on-demand (jet cards are simply another form of charter, usually prepaid and often with fixed hourly pricing), you are basically on your own and need to get a new quote. You may find while a broker saved you money on your last two trips, you gave it all back plus some getting a last-minute replacement aircraft or paying for deicing on multiple legs.
Of course, some of it is dependent on where you fly. If you are flying from and to airports in markets where lots of private jets are based, you are less likely to have to pay ferry fees. If you are doing lots of same-day roundtrips where the operator can use the same aircraft and flight crew you might again save money with a one-off charter although some jet cards offer roundtrip discounts, and again, you have the issues of last-minute replacements, charges for Wifi (some programs include it) that can range into the thousands of dollars, airport fees, FBO charges, deicing, catering and so forth.
Depending on your outlook on safety (Some people hold the view that private aviation overall is very safe, so they’ll take any aircraft legally available for charter. They just want the best price.) you typically call three or four brokers or go online and request quotes. Once you get the quotes back – not all of those instant online quotes are guaranteed – you then have to look at who is the operator for each flight, what is each operating company’s rules for cancellations, bringing aboard pets, luggage restrictions and so forth. Having spent time with people who shop this way, if you do care about the details, you will typically spend at least an hour if not more planning and negotiating for each trip, plus you will need to arrange payment.
If you have a trusted broker and your broker knows what type of aircraft you find acceptable, what type of ratings you want from the operators, including hours of pilot experience in so forth, and you will just accept your broker’s quotes, it’s, of course, more streamlined.
Jet cards, by the same token, take due diligence before buying in. I’ve identified over 65 variables between programs but once you buy in, you know what are the standards for sourcing the aircraft, how many hours the pilots need to have overall and in that aircraft type, what’s included and what’s not. It means with a jet card, you can book your flights with one call or even via email or in some cases online booking tools. In other words, it’s fast. There’s no need for lots of back and forth.
However, in comparing jet cards, it’s also not straightforward in that programs typically have surcharges for peak days and some offer discounts for qualifying roundtrips, booking early or longer flights. The amount of the surcharges and discounts varies as does the number of peak days. There are also different service areas where your fixed rate applies. Some are regional, most cover the Continental U.S. or EU countries for European jet card programs, and some such as NetJets and VistaJet even cover intercontinental flights. When you go outside your service area, you generally pay surcharges or get a custom quote, so it’s important to make sure your provider has the type of aircraft that fit your planned flights and the primary service area covers most of your flying.
Making a direct comparison of hourly rates between card programs is tricky as some U.S. programs include the 7.5% Federal Excise Tax you’ll have to pay for domestic flight while others quote a rate where you have to add in the FET. Programs typically have both segment and daily minimums. It means if you have a 70-minute flight and your minimum is 90 minutes, you’ll get charged 90 minutes even though your flight took less time, a short leg in industry lingo. What it means is one program might look like it charges lower hourly rates, but if it has a 90-or 120-minute minimum, and most of your flights are shorter in time, a jet card with a 60-minute minimum and higher rate could actually be cheaper.
To give you an example, for the same type of aircraft company A offers a $5,000 hourly rate with a 90-minute minimum. Company B has a $6,000 hourly rate with a 60-minute minimum. If you make a 60-minute flight, your cost with company B will actually be $1,500 less ($6,000 versus $7,500) even though its published hourly rate is higher.
There are other factors that make comparing jet card prices head to head challenging and vary by provider, such as fuel surcharges, Consumer Price Index (CPI) escalators, high density airport charges, membership fees that need to be amortized over the number of hours you’ll use as well as varying taxi time charges and whether or not they are part of segment minimums.
When you consider all of the above, finding the right program for your needs means more than just looking at hourly rates. If you do a lot of cold weather flying, choosing a program that includes deicing can save you money in the end even if the hourly rate is a bit more.
Jet card companies also vary in how they calculate the hours you will be using. Some jet cards use an estimated time formula, which means regardless of if your flight takes more or less time than the estimate, that’s what you’ll be charged. Others charge based on actual flight time, which might mean having a longer route to get around weather will cost you more, but having stronger than expected tailwinds will save you a few bucks.
I believe getting to know the jet card company you will be dealing with is critical not mentioning the fact you will likely be wiring them six figures. Another reason brokers say you should charter trip by trip. If you do go the jet card route, you should find out who owns the company, who’s the CEO and if there are escrow account options. Jet card providers range from Fortune 500 companies like NetJets (owned by Warren Buffett’s Berkshire Hathaway), Delta Private Jets (Delta Air Lines) and Jet Aviation (General Dynamics which also owns private jet manufacturer Gulfstream Aerospace) to major privately held players such as Sentient, Flexjet, PrivateFly, SkyJet (all part of Kenn Ricci’s Directional Aviation), VistaJet, XOJET (part of Vista Global controlled by Forbes’ billionaire #1071 Thomas Flohr), JetSuite (partially owned by JetBlue and Qatar Airways), Private Jet Services Group (which specializes in sports teams and corporate shuttles), Nicholas Air and Wheels Up to small brokers with a handful of employees. In some cases, you’re dealing with the owner. In others, you are dealing mainly with sales reps and flight services teams.
Once you’ve narrowed your choices down to two or three companies and you have final proposals in hand, I always recommend asking your salesperson to schedule a brief call with the CEO, COO or one of the owners. Just like regular planes, private jets have mechanicals too and things do go wrong. I always think it’s smart to have the email of a senior level person in your smartphone.
Just like choosing a financial advisor, doctor or interior designer, in addition to safety standards, how the aircraft are sourced, lead-time for booking, cancellation policies and so forth, buying a jet card is like any other relationship. There is an element of chemistry to it, so make sure you take the time to do the due diligence and see to it that the various policies fit your flying needs.
Take the time to speak to several people in the company, including the folks that will be handling your reservations. Lastly, many people use jet cards and charter strategically, taking advantage of guaranteed availability and locked in prices when from their jet card memberships when it makes sense, while at the same time perhaps using a broker for trips where there are significant savings to be had, particularly if you can negotiate service recovery.
Most of all, remember when flying privately, there are no right or wrong choices. It’s about what you’re comfortable with. Taking the time to research the companies that best fit your needs, and then taking the time to speak with each of them in-depth will help guide you to the best choice for you.
December 31, 2018 at 06:35PM
Forbes – Entrepreneurs