Calibrating the Time Machine

Between charter, fractional, and full ownership, the options for flying private offer more practical perks when the equation is: Time = Money

Calibrating the Time Machine
October 1, 2015

While the general public may view business aircraft as over-the-top symbols of opulence and excess, real-world statistics prove that opinion to be just plain wrong and misinformed. In fact, a new generation of pragmatists (both companies and individuals) are using these aircraft as a vital tool to expand their business, take better care of their employees, be more productive, and better serve their customers.  They are able to accomplish all of this because a business aircraft is quite frankly a time-machine.

A NEXA study conducted of the S&P 500 shows that companies that use business aircraft experience average revenue growth 434% higher than companies that don’t use them.  Non-financial measures tell a similar tale, with 90% of Business Week’s Best Customer Service companies, 98% of the Best Brands, and 95% of the Most Innovative Companies all using business aircraft.  And it’s not just large companies that benefit.  59% of companies using business aircraft have fewer than 500 employees and 7-in-10 have less than 1,000 employees.

It’s proof that business aircraft deliver a measurable competitive advantage. Another equally important contributor is the quality of life dynamic, which is becoming more and more important in today’s highly competitive workplace. A client recently left Santa Monica for a morning meeting in St. Louis, a late Lunch in Juno, and dinner in Sacramento, arriving home to see his kids before bed.  A schedule just not possible without a business aircraft.

The new private jet traveler is savvy and diversified. Like an investment portfolio manager, he is using various options to create a portfolio of aviation solutions, each designed to the requirement of particular flight missions.

There are three primary modes to access business aircraft; Charter (rental), Fractional (part owner), and Full Ownership. Each mode has a threshold that is most efficient and as you would expect, with increased cost, comes greater control, flexibility, and customization.

Solutions in Private Aviation

CHARTER

FRACTIONAL

OWNERSHIP

Capital expenditure

$0

$6mm

$50mm

Fixed cost/yr.

$0

$750,000*

$1.5mm

Variable cost/hr.

$3,000-8,500

$5,000-7,500

$1,500-$4,500

Residual value

$0

$3mm

$35mm

*Assuming G550 or Global 6000 with 1/16th ownership at approximately 50 hour
Source: Aircraft Evaluation: Clay Lacy Aviation Sales and Acquisitions, 2015


I have seen many clients ride the wave. It starts with clients (net worth approx. $15mm or more) who will progress from charter to fractional (net worth $50mm or more) and ultimately develop into aircraft ownership (net worth $150mm and up). There is a formula that will target the best service at a given time, and the savvy user is diversified among these options.

How would one create a portfolio? Contact a professional management company or consultant. Have them provide an overview to your management team about each service and which is best suited to each mission. Set clear and defined rules that consider (a) the number of passengers, (b) distance, (c) trip duration, and (d) preferences. For example, you would utilize your own airplane to London for a series of meetings. However, that factory tour visiting five plants in two days may be most effective using a charter, while if you reside in a smaller market with few charter options, fractional would provide a good value.

Private aviation is a tool to recapture time and take control of your schedule. But, let’s not forget how very cool it is to fly eight miles above the earth, moving as fast as the world turns, while enjoying the peace and privacy it affords. The competition is below, wondering why they weren’t the first to the table, and you’re comfortable knowing you’ve chosen the most efficient method of flying from your aviation portfolio.

2-15Q4 Desirables Air Interior

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