Is By The Day The New Way You Will Be Buying Private Jet Flights by Forbes – Entrepreneurs

Serebral360° found a great read by Forbes – Entrepreneurs article, “Is By The Day The New Way You Will Be Buying Private Jet Flights.”

Add another layer to your #Business literacy. We at Serebral360° would love to know if the Forbes – Entrepreneurs article was helpful, leave a comment, like and share. Let’s dive in and discuss the information and put it to use to grow your business. #BusinessStrategy #ContentMarketing #WebDevelopment #BrandStrategy
Info@serebral360.com 762.333.1807 www.serebral360.com
Grap a copy of our NEW Business Stratgety Books #FFSS VOL1 and #FFSS VOL2

The traditional currency of both fractional ownership and jet cards has been charging for travel time by the flight hour, with the exception of Airshare, a Kansas-based operator of small private jets which uses a by-the-day formula. Now one of the industry’s major players – Flexjet – has jumped in. Does this mean we’ll be seeing more of this interesting approach?

Flexjet is now selling shares in its Gulfstream G650 fleet by the day. Instead of 200 hours for a quarter share, you get 75 days.

Doug Gollan

The subsidiary of Kenn Ricci’s Directional Aviation group recently launched the day based approach to selling shares specifically for its fleet of Gulfstream G650s. Like Airshare, there is also an hourly charge, however, the core metric has become days.

In Flexjet World Access, a quarter share translates to 75 days instead of the traditional 200 hours. It’s an interesting approach for many reasons.

Firstly, when it comes to on-demand charter, most inventory of large cabin, ultra long-haul private jets is managed, not owned by the charter operators. While the aircraft owners may have their heavy metal on Part 135 certificates and available for charter, they are often picky about who is flying on them and where.

Under Flexjet’s World Access you can keep the jet with you for an entire trip, including days you are not flying, making the offer closer to the full aircraft ownership experience.

Doug Gollan

In addition to worries about damage to furniture, tables and paneling in cabins often costing millions of dollars to outfit, owners usually don’t want shorter flights. That’s because expensive maintenance is often driven not by flight hours, but cycles – landings and takeoffs. Various checks and parts replacements are specified at reaching a specific number of cycles.

What it means, is if you were planning to fly from New York to Washington D.C., then Zurich before returning home, there’s a good chance you might have to charter separate aircraft for the New York to Washington D.C. leg.

With jet cards, many programs have a two-hour segment or daily minimums for the large-cabin jets so if you want to pay around $25,000 to $30,000 for a 40-minute flight you can, but it’s hardly a good deal.

For jet card and fractional share customers, there’s also the hassle of knowing all your luggage has to be unloaded and transferred to your hotel at each stop since operators are trying to keep their fleets moving.  If you are going to be somewhere far away for more than a day or two, it’s likely you will have another aircraft waiting when you are ready for your next flight.

The Flexjet approach, says Clay Wilcox, who recently rejoined Ricci after a decade between Marquis Jet and NetJets, is to as best possible mock the experience of owning your own G650, meaning you have the same aircraft for your entire trip, same pilots, and can leave what you want on it when you are making stops.

While there isn’t a specific number of days you can keep the plane parked on the tarmac in Geneva or Papeete, Wilcox says the goal is to leave it with you, so if you are going from New York to Sydney for some meetings, but want to spend a week in French Polynesia, the idea is that you would keep the plane with you, it would stay with you for your couple days of meetings in Australia, then fly you back to New York.

Like your typical fractional share, you have to lay out the money to acquire a quarter of the G650, or if you choose to lease, have it factored into those payments. Currently, the list price for the type is about $67 million.

You then pay a monthly management fee, which Wilcox says is the same as it would have been under the old hourly model. Hourly rates are closer to direct operating costs, so under $5,000, he says. However, unlike traditional fractional ownership, rates are not one-way. If the jet has to be ferried someplace else, that’s on you, so in other words, if you are heading to Europe for the summer, chances are you will have to pay repositioning fees, which brings up the next point.

The program is only being sold in New York and London, so perhaps after being dropped off in Nice to hop on your yacht, you would only be paying to reposition the aircraft to the U.K. instead of back to the U.S.

In terms of use, Flexjet is reconfiguring the fleet to fly with crew rest areas so you can carry up to four captains, meaning you can use its full range, around 14 hours nonstop. It also means being able to do a long haul and short hop on the same day, although if your itinerary requires repositioning flight crew, you pay for that.

Still, a one-week trip to Asia which could easily soak up 40 hours, or 20% of your hourly allocation under the traditional model would use less than 10% of your annual days.

Even a single day roundtrip from New York for a meeting in Los Angeles which would take 5.5% of hours based on the 200 hours in the quarter share model would take just 1.3% of your annual days.

Scott Cutshall, vice president-marketing for Clay Lacey Aviation, which is a leading charter operator managing large-cabin jets, says, “I agree the program is innovative and further blurs the line between charter, fractional and ownership.”

In terms, whether the concept would work for his fleet, he notes, “I have heard of a similar arrangement, charter-by-the-day, being discussed in the aircraft charter world. In the traditional charter/management arrangement the owner revenue is a function of the hourly charter rate, therefore, moving to a new model of charter-by-the-day, would require a restructuring of the owner revenue return. Considering the variables involved, this would just take some time to determine if there are aircraft owners interested in such an arrangement and what their expectations would be under such an arrangement.”

Jonah Adler, CMO at Jet Edge, which manages 39 large cabin private jets, puts it this way. “In charter, we look at by the day more than we do hourly in terms of availability. When our owners use their aircraft, it’s not about how many hours they fly, it’s all about how many days they fly. Open days mean open availability for charter. Once a plane is being used for part of the day, the day is shot in terms of being able to get additional utility out of the aircraft.”

However, he notes, “All that being said, we think this makes a lot of sense when it comes to a fractional program.”

James Butler, CEO of Shaircraft Solutions, a consultant who works with buyers of fractional shares, says, “Players in the fractional marketplace constantly are seeking new and better ways to identify and profitably satisfy specific niche customers. This Flexjet concept is another effort in this regard.”

He doesn’t see it expanding. “It seems unlikely that this model will be effective with lesser aircraft that most often are utilized domestically by private fliers, for whom the benefits of maintaining the use of an aircraft over a number of days seem unlikely to outweigh the costs associated with doing so.”

NetJets, which is the dominant player in fractional ownership, and operates 33 Bombardier Global Express ultra-long-range jets, declined to comment on if they thought the model might be something they would pursue.

VistaJet, which is taking delivery of its first Global 7500 this year and already flies the 5000 and 6000 didn’t respond a request for comment, while XOJET which operates an owned fleet of super-midsize Challenger 300s and Citations Xs declined to comment.

Kevin Wargo is CEO of Dumont Aviation Group with an owned and managed fleet of over 30 private jets, including more than a dozen Dassault Falcon 2000s. He told me, “We are not considering a daily program at this time.”

I asked Andy Tretiak, chief marketing officer of Airshare if he viewed Flexjet’s move as an endorsement of its formula?

He replied, “Absolutely. The days-based model we offer has been the best-kept secret in private aviation since our company was founded…Our customers have long recognized the value of purchasing days versus hours, so it’s not a surprise our competition would now begin experimenting with similar programs.”

With Airshare doing it with Embraer Phenom 300 and 100 light jets, and now Flexjet applying the day based formula to ultra long-haul private jets, I wondered if he saw opportunities in other cabin categories.

Tretiak says, “It’s very difficult to manage both days-based and hourly programs within the same operational structure. With lighter jets, our scheduling approach allows us to be really nimble when repositioning aircraft to cover flights, resulting in lower hourly costs for our customers. Offering limited shares in a specific aircraft type makes positioning a real challenge. There are certainly opportunities to execute the days-based model in larger cabin sizes, but it’s highly beneficial to be committed to this type of program across the entire fleet. When we make the move to larger aircraft, we believe we are well positioned for this expansion due to the infrastructural investment we’ve made specific to a days-based program.”

I came up with several scenarios where one could get close to 400 hours per year of flights using the model of 75 days for a quarter share, so in terms of competing against NetJets, for Flexjet, perhaps the move reminds of the classic Avis ad campaign flaunting its second-place status with the slogan, “We try harder.” Whether or not anyone else will be joining the by-the-day approach seems unsure at this point.

June 10, 2019 at 12:31PM
https://www.forbes.com/sites/douggollan/2019/06/10/is-by-the-day-the-new-way-you-will-be-buying-private-jet-flights/
Forbes – Entrepreneurs
http://www.forbes.com/entrepreneurs/
http://bit.ly/2CMy7Yu