33. Page 5-4
Private Jet Travel: Understanding the Options
An extremely important point in performing financial analyses of various business
aviation options, though, is that if any of these options involve ownership
(Ownership or Fractional), it is absolutely essential to include an “after-tax”
scenario to get an apples-to-apples comparison (or use a lease cost as a proxy
for ownership). Depreciation expense, and its tax treatment, can be such a
crucial driver of the true financial picture of these programs that failing to
consider it can grossly skew the results.
The final factor making it difficult to compare the all-in price of various business
aviation programs might be the most important – the travel patterns of the user.
If you Charter an aircraft from New York to Chicago, attend a mid-day meeting
and return that same night, your cost will essentially be the quoted hourly rate
times the number of flight hours (with perhaps some incidental charges for
specific catering requests, or arranging for a car). If you want to come back three
days later, though, you might wind up paying double this amount, because the
Charter company cannot afford to have an aircraft sit idle waiting for you instead
of earning revenue. So they might charge you for the “empty leg” back to New
York, then the additional return to Chicago to pick you up. Or would you be
better off paying for the “daily minimum” level of hours, even though you’re not
actually using them? Then what about the overnight charges? And if the aircraft
you charter is not based at a nearby airport, will you be charged for the
positioning flight? On both ends of the trip?
Block Charter programs are typically not quite as hard on inefficient users as On-
Demand Charter tends to be. Some offer a round-trip (i.e., efficient) hourly price
and a one-way (i.e., inefficient) hourly price. The inefficient price might be 30-40
percent higher than the efficient price. Not as bad as double, but still a factor that
must be considered against your true travel requirements. Other Block Charter
programs keep the hourly fee constant, but allow half of the hours to be used
one-way (the net result is not that different from the approach just described).
Others turn this around and offer an incentive (i.e., discount) for efficient use.
Fractional and Block-Frax programs, due to their anywhere-anytime approach
and network scale, come down on the opposite end of the spectrum from On-
Demand Charter: there is no charge for positioning or empty leg flights and no
penalty for inefficient use. While this means that the cost is spread around all the
program users, it is also reduced by network optimization practices.
All of these factors interact to make it extremely difficult to compare within or
across program types without conducting rigorous financial analyses in order to
derive a true, “all-in” apples-to-apples price per hour or mile. But by working
through each of the cost areas described above, digging into the details of the
program, and applying them to your projected “real world” trip requirements, you
can make a much more informed financial decision. In Appendix A, we provide
some representative pricing information for various business aviation offerings.
High penalty for
borne by all
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.