Another Way to Get From Point A to Point B:  Looking at Private Jet Travel

The increasing costs of commercial travel, combined with frequent delays, hectic airports, and security screening that many frequent travellers consider excessively burdensome, have led some of our clients to consider private jet travel.  Private jets offer many advantages.  They can operate out of smaller airports according to the traveler’s schedule.  Private jets have access to more than 5,000 airports in the U.S. and Europe alone.  And many providers can schedule private jet travel on just a few hours notice.  But it is not cheap.  The cost of private jet travel is dictated by the size plane a traveler requires to reach their destinations and the size of the traveling party.

There are several different options for private jet travel.  Two of the most popular are private jet membership and fractional private jet ownership.

Membership
Private Jet membership may be appropriate for travelers who fly fewer than 50 hours per year and with limited geographic scope.  The typical contract length is one year, so this could be the more attractive choice for someone who does not want to be committed for the long term.  Membership programs can generally accommodate travel within the U.S., Caribbean, and Europe, depending on the provider.  Typically, participants purchase contracts for 25 hours of flying time.  The pricing of the contracts are based on the type of aircraft; depending on the program, participants may be allowed to “trade” a certain number of their flying hours for a bigger or smaller type of aircraft.  The total cost of the contract includes all management fees and expenses associated with the specified number of travel hours and ranges from $100,000 for a small size plane to $300,000 or more for the largest aircraft.

Ownership
Fractional ownership is geared for the traveler who plans to fly more frequently because the smallest increment of ownership is a 1/16th share, which corresponds to 50 hours of annual flying time.  You can purchase up to a ½ share, which corresponds to 400 hours.  At the inception of the management contract, the fractional owner purchases an equity interest in a specific aircraft.  Fractional owners may also use different aircraft at an exchange rate.  Many fractional ownership companies have partnerships that enable them to coordinate private jet travel around the globe.  The average contract length is five years; at the end of the initial five-year period the fractional owner may be able to renew their current management agreement at the prevailing monthly and hourly rates if they want to retain their ownership for same aircraft.  Other programs require the fractional owner to sell back their interest at the end of the contract, and re-purchase a new interest.

On top of the initial equity outlay to purchase an interest ($1 million for the smallest size plane that seats six to $3 million for a larger size plane that seas twelve for the 1/8th equity or 100 hours of flying time), the fractional owner pays a monthly management fee to cover all of the fixed costs associated with the fractional jet ownership program, such as pilot salaries and training, and insurance.  Fractional owners also pay an “occupied hourly rate” that covers the direct operating costs, such as fuel and aircraft maintenance, for the hours a traveler is actually on board the plane.   These fixed and operating costs could easily top $300,000 for someone flying, say, 100 hours a year, on a small aircraft.

The offerings of private jet membership programs and fractional ownership companies differ greatly.  There are many factors to investigate before selecting an option that may be right for you.  If you’re interested, we have compiled information about several of the most popular providers.

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