A closer look at fractional aviation

As a frequent traveller one wants the best possible experience from start to finish and if your holiday or business trip begins with travelling in your very own private jet then one is off to the best of starts.

Flying privately is simply the best way to take to the skies- combining the ultimate in customer service, convenience, flexibility, time-saving and security.  The benefits do not just stop at the obvious- flying privately gives you greater scope for making the most of your flying time through either entertaining clients or simply by allowing you the room and facilities for you to break out the laptop and allow your working day to continue almost uninterrupted. 

But let us not forget a point that is a rarely discussed- it feels good to fly privately, although we may all look to manage our conspicuous consumption and our associated carbon footprint, there is undoubtedly a sizeable cache and prestige associated with having your own plane.

To the layman, flying private is the preserve of the super-rich and/or famous but you can fly private without necessarily owning your ‘own’ plane.  As an approximate guide- if your flying hours are less than 400 per year then outright purchase is probably not for you, but there are a number of fractional schemes that could service your needs and provide you with 100% of the experience at a fraction of the cost.

So onto the fractional options- Fractional Ownership Programmes.  You purchase a share of a plane with the actual price you pay based on the pro-rated cost of full purchase.  As a fractional owner you have guaranteed access to your plane with as little as a few hours notice and pay a monthly fee that covers maintenance and upkeep alongside an ‘occupied hours’ fee which is only charged when you are onboard.

A fractional ownership programme is generally calculated as a 5-year deal, at the end of this period you sell your share back to the operator of the scheme for a reasonable market value less a remarketing and administration fee.  So one needs to be aware of how the market value is calculated as this will ultimately affect your bottom line as the overall cost of ownership is going to be very much-dependent on the residual value.

It is impossible to speak of fractional aviation without referencing NetJets.  Richard Santulli, Chairman and CEO of NetJets Inc., developed the fractional ownership model in the US in 1986. NetJets Fractional shares start at 1/16th interest, the equivalent of 50 hours annual flying time- the prices for which range from $400 000 for a 1/16th share in a seven seater Hawker 400XP to just over $10 million for half a share in a Gulfstream 550.

On to Fractional Card and Membership Programmes- these programmes suit those looking for a smaller financial commitment, offering an hour/plane model whereby you ‘pay-as-you-go’ by block-purchasing hours on a particular plane or a debit scheme whereby you prepay a sum which can be applied against different planes in the operators fleet.  In the latter your Oyster-style card is debited on a per-flight basis dependent on the plane type, journey length, peak/off-peak travel and other relevant variables.

Although offering a lower buy-in you can experience the fractional owners level of service but the trade-off is that occupied hours will generally be more expensive per hour than that of a true fractional scheme.

NetJets Europe introduced their Private Jet Card in 2002- the popularity of the card is evidenced by its renewal rate, with 90% of cardholders renewing or graduating to fractional ownership.

Mark Booth, NetJets Europe’s Chairman and CEO, said “Simplicity is the key to the success of the Private Jet Card, making it perfect for many businessmen and women who want to experience the benefits of flying privately with the highest levels of safety and operational excellence.”

Prices for the Private Jet Card start from €131,000 for 25 hours flying time on a light jet (Citation Bravo/Hawker 400XP).  The 25 hour card provides the most accessible way for customers to explore the benefits of business aviation.  Unsurprisingly, almost 20 per cent of cardholders upgrade to owner status by purchasing a fraction of a NetJets aircraft.

VistaJet is one of the fastest growing private jet company and was recently awarded the prestigious ARG/US Platinum rating in recognition of the Company's high standards.  With VistaJet the Customer has the option to commit to 100, 200, 300 or 400 hours annually without taking on any asset risk. The Customer pays no monthly management fee and only a low occupied hourly fee.  Several flexible options ranging from 100 hours guaranteed availability and a 30 month term to 400 hours and 5-year programs. 

We spoke with Alex Berry, Executive Vice President, Programme Sales about his service- “VistaJet aim to make our Clients lives easier and more productive by focusing heavily on service. These facts, coupled with the passenger time-saving benefits are currently the key areas driving the growth in the private aviation market. Working within the mid-top end tier of service providers our Clients demand the best service possible.” 

“Europe, the Middle East and Russia are all big markets for us now and we’re probably the biggest operator flying to and from Moscow with over 1,000 movements per annum.”

The impact of the credit crunch on private aviation seems to be contrary to the wider market place, in fact- in the last month a new offering in the form of Jet Republic has launched and across the industry it seems that fleets are expanding.  Jonathan Breeze, chief executive of Jet Republic, explained his thoughts behind this: "Despite the current economic climate, the private jet market is enjoying strong growth.

We also believe there is significant room for improvement in the level of service provided by the private jet aviation sector, means there is a very strong and real opportunity for us to take a significant share of this market."

Alex Berry (VistaJet) expanded on this theme “I’m not surprised there have been some casualties within the commercial airline category recently and some new entrants into the private sector. Private aviation is going to continue to grow.  In North America there’s approximately 11,000 private aircraft available whereas in Europe there’s still only between 2,000 and 2,500. The credit crunch is starting to have an effect on the market in that an 18 month waiting list for new private aircraft is still pretty much the same, but the premiums requested to “jump the queue” for immediate deliveries have dropped considerably over the last 12 months.”  

 

Posted:
17/02/09
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