Make Sure To Read The Fine Print When Comparing Jet Cards by Forbes – Entrepreneurs

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While jet cards continue to grow in popularity because they are easy to use, there are lots of variables that impact which jet card programs best fit your flying needs. I’ve identified over 65 variables, some of which are easy to compare. For example, you can compare the companies. Are they privately held? If so, how many employees do they have? How long have they been around? How many employees do they have? If they are publicly traded or part of a publicly traded company, what do their financials look like? Who is the senior management, and what is their aviation experience? Do they offer an escrow account to protect your deposit?

While jet cards make flying privately easy, comparing prices is difficult.Doug Gollan

You can also compare the basic programs. How many hours do you have to buy? Some start at five or 10 hours, while 25 hours is more typical. What’s the minimum deposit? They go as low as $25,000, although $100,000 or more is standard. What type of aircraft do they offer? Do those aircraft meet your needs? Can you change the size or aircraft types to suit your mission or are you locked into a specific type? Is there a fee to change the aircraft type or category, an interchange fee? How does the provider source the aircraft and what are their standards for sourcing those planes? How much experience do the pilots have to have? How far in advance do you need to make reservations? What about on peak days? What are the policies covering cancellations? Is Wifi guaranteed? On light jets, will the toilet be fully enclosed? Some don’t have any. Others just have a curtain or emergency potty. There are also different rules covering taking your pets or sending unaccompanied minors. Other variances that can be compared with some ease is how much insurance coverage is provided? What’s the policy on getting you a replacement aircraft if there is a mechanical, a delay upstream or one of the pilots gets sick? Another key variable of jet card programs is the primary service area, the geographic footprint where the general terms of your membership apply. While most companies offer programs that cover the Continental U.S., some are regional, and others cover varying areas of the Caribbean, Mexico, and Canada, and there are even some that have fixed rates for flying worldwide or within Europe.

So speaking of rates, it brings me to what might be the most difficult part of comparing jet card offerings. Figuring out how much your flights will actually cost. While there is a program that sells using a mileage-based formula and another that uses days, for everyone else it’s all about hourly rates.

Jet card providers vary from large publicly trade companies such as Berkshire Hathaways’ NetJets, General Dynamics’ Jet Aviation and Delta Air Lines’ Delta Private Jets to large privately held companies including VistaJet and XOJET of Vista Global, Wheels Up, Directional Aviation’s Flexjet, Sentient Jet, Skyjet and PrivateFly to boutique brokers with under 10 employees.Doug Gollan

One might think comparing hourly rates would be easy. After all, one company offers a light jet for $4,500 per hour and another advertises a light jet at $5,000 per hour, notwithstanding how the aircraft are sourced, just looking at hourly rates without comparing the details can cost you a lot of money.

If you are wondering why hourly rates can often be misleading when trying to figure out how much a flight will actually cost, here’s why. First of all, if you are flying within the United States or to and from destinations within 220 miles of the U.S. coast you will need to pay a 7.5% Federal Excise Tax (FET), yet only about one-third of programs include FET in the rates they advertise. What it means is if that $4,500 hourly rate did not include the tax and the $5,000 rate did, the difference would be only $162.50 instead of $500.

FET, however, is only one element that makes comparing what you will actually pay difficult. Some providers charge taxi time for each segment, typically 12 minutes, while others don’t charge any taxi time. Then some include taxi time in their daily and segment minimums, while for other providers it’s additional. Since 12 minutes represents 20% of an hour, if you are talking about an hourly rate of $8,000, you are talking about potentially a $1,600 difference.

As an example, let’s assume there are two programs with the $8,000 rate. If you are doing flights under 48 minutes, a program that includes the 12 minutes of taxi time in its minimums and has a 60 minutes minimum will charge you $8,000. A program that has the same 60-minute minimum but charges taxi time added to the minimums would cost you $9,600 for the same flight.

The daily minimums are also important to consider. Quite a few programs have 120 minute daily minimums even on small aircraft, which means even if you just fly a one hour flight, you end up paying for two hours of travel time. At the same time, a program with a low hourly rate but higher minimums might, in fact, be more cost-effective for your longer flights.

Another way just looking at hourly rates can be misleading is some jet card programs have fuel surcharges which can range to more than $1,000 per hour for larger aircraft. So again, that $4,500 hourly rate we discussed earlier, if it did include FET, but came with a fuel surcharge, could be more than the $5,000 hourly rate that doesn’t have fuel surcharges.

Peak day surcharges are another area where there is a wide variance – not only in the number of peak days – but also the extra cost. While a number of programs that have peak days don’t have a surcharge – just longer lead times for reservations and cancellations – surcharges run as high as 40%, although they are more typically 5-to-20%. I generally suggest looking for programs where you can avoid peak days as the provider often reserves the right to move your departure time by +/- 3 hours. However, to the point of this article, since peak days vary, you need to make sure when looking at rates, you take this into account. If you compare two programs, one that has an $8,000 hourly rate but no peak day surcharge may seem more expensive, until you find the other program at $7,000 per hour has a 20% surcharge. For a three hour flight, you would actually pay $1,200 more if you just looked at the hourly rates.

If you do a lot of winter weather flying, you also need to consider some programs include deicing while others don’t. While deicing varies by airport and aircraft type, it can range anywhere from $1,000 to over $10,000 per incidence. If you are flying from Chicago to Aspen every other weekend during the winter, it can really add up, so is something to think about.

Yet one more factor that can make simply comparing hourly rates misleading is membership fees. While only a handful of providers have them, if you divide a $15,000 membership charge across 25 hours of annual flying, you really need to add an extra $600 to the hourly rate if you want a true apple to apple comparison.

There are also various discounts for booking early, making qualifying roundtrips and longer flights which can dramatically impact your price, and make a program that is seemingly more expensive actually cheaper when it comes to what you will pay. In putting together the 2019 edition of Private Jet Card Comparisons where I serve as editor, I built out a tool that provides nine different trip scenarios with formulas that take into account the different variables for over 150 national guaranteed availability, fixed-rate programs.

While price is only one factor to consider as mentioned at the beginning of this piece, it is, without doubt, important when you are spending hundreds of thousands of dollars. Being able to compare what you actually pay for flights between the programs for me was quite interesting and really highlights that based on your specific needs, there are lots of options. It’s just not always easy to find the right one without doing some homework. That said, in talking to jet card users on a daily basis, I expect card programs will continue to grow in popularity. In fact, there at least eight new providers that have launched jet card programs in the past 12 months, and I’m aware of at least three more in the development stage.


January 8, 2019 at 04:12PM
https://www.forbes.com/sites/douggollan/2019/01/08/make-sure-to-read-the-fine-print-when-comparing-jet-cards/
Forbes – Entrepreneurs
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