30. Page 5-1
Private Jet Travel: Understanding the Options
A lucky few might be able to consider business aviation options without
considering price. We wish we were in this group, but we are not. Nor, we
suspect, are most of you.
Indeed, the recent business aviation offerings have been designed to a large
extent with price in mind. The success of Fractional programs has been largely
driven by the simple notion of reducing the acquisition cost by selling shares in
the aircraft. Block-Frax breaks Fractional down into even smaller shares. And
Block Charter uses a different mechanism to achieve very similar objectives:
reducing the aggregate cost to the user by selling discrete portions of usage well
below those associated with Whole Aircraft Ownership. (Of course, the programs
also offer increased benefits – i.e., value -- to the users through guarantees, tie-
ins, upgrades/downgrades and many other aspects previously discussed.) Used
aircraft programs bring some of these price points down even further. And a new
generation of “micro” jets currently in development could do the same for
Ownership, and all the other offerings, simply by virtue of a much lower price
point (though their capabilities will be lower than those of larger jets as well).
As the aggregate price of business aviation usage drops through these
developments, it invites participation by larger segments of the market (smaller
companies, less well-heeled individuals). Thus, the last 15 years of the business
aviation market have been characterized by ever-increasing access to business
aviation aircraft in ever-decreasing chunks.
The burst of new offerings, though, has also spurred competition among similar
programs. They are often chasing the same customers. This has led to
increased price competition.
As a result, savvy customers would like to compare their all-in cost per flight hour
(or even more precisely, per mile, which captures differences in aircraft speed),
rather than just the aggregate cost. Unfortunately, it is far from easy to make this
comparison, even within a program category, much less across programs. At
that level, it is not even as simple as apples-to-oranges; it is apples-to-oranges-
Why is this so? Because some of the programs tend to be complex. Because
some of the costs are uncertain and some are opaque. Because taxation
plays a major role. And because the costs can vary greatly by the usage
patterns of the customer. We will address each of these factors, and the degree
to which they impact analyzing the financial aspects of each program type.
costs of business
Independent Source: Deloitte Private Wealth, Private aircraft: Flying private makes sense for those with the right information (page 20)
*This website has no affiliation with Deloitte.