Comparison study of buying an airplane, fractional share, jet cardrivate jet charter

32. Page 5-3

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5. Pricing





Private Jet Travel: Understanding the Options  


October 2003



it is.  The Monthly Management Fee is essentially fixed, though it might have a 
CPI-based escalation.  The Occupied Hourly Rate is also essentially fixed, 
though subject to inflation and fuel escalation.  The main area of financial 
uncertainty in a Fractional program relates to the resale value of the share.  The 
program commits to pay you fair market value (less the remarking fee) but how 
much will that be at termination? 

Block Charter, Block-Frax and Charter programs offer an even higher level of 
financial certainty.  After all fees have been disclosed and agreed to, charter has 
almost no uncertainty.  Within a contract term, you can predict most of your Block 
Charter and Block-Frax costs quite accurately (but there are fuel escalators, and 
see our comment on the potential for rate escalation where the programs debit 
on a dollar, rather than hour, basis).  


Some, though by no means all, of the programs quite naturally do not go out of 
their way to point out some of the smaller costs that users can incur.  These are 
sometimes called “hidden charges”, though they are typically spelled out in the 
contract.  Nonetheless, they can add up, and comparing a quoted price from 
such a program can give a false picture, without diving in deeply, especially if 
comparing it to a true “all-in” price from another program.  Overnight charges and 
daily minimum fees in some programs have to be analyzed.  Similarly, some 
charge a take-off/landing fee that might exceed the true ground time, depending 
on airports used.    


The financial aspects of the programs can be heavily driven by tax 
considerations, especially, though not exclusively, if you take title to the asset. 
How much depreciation will you take?  Over what time frame?  Accelerated or 
straight-line?  What about recapture at the time of sale?  Or capital gains tax?  
Will you engage in a like-kind exchange?  Will you have to pay any state sales 
and use taxes?  What about Federal transportation Excise Taxes on 
“commercial” operations?  What will your tax bracket be at the time of resale?  
Will your holding company create “passive” losses, and if so do you have 
sufficient passive gains to offset them?  Which of your trips are for legitimate 
business purposes allowing income tax deductions?  These questions just begin 
to scratch the surface of the types of taxation issues that can come up.  

Whole Aircraft Ownership and Fractional programs can involve business 
deduction, depreciation, capital gains, like-kind exchange, states sales and use, 
and potentially “passive” loss taxation issues.  

Block Charter, Block-Frax and Charter programs would ordinarily involve only 
Federal transportation Excise Tax, business deduction and potentially “passive” 
loss issues. 


Block Charter, 
Block-Frax, and 
Charter are 
mostly certain, 
with exceptions 




Beware of hidden 






Tax issues can be 


"Chartering a plane, either directly from a charter company or through a charter broker, is often the most cost effective way to fly private."

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.