Is a company private jet good business?
There’s a post on Forbes this week about the continued value of owning a company plane – either fully or through one of the myriad of fractional ownership schemes.
As the article points out, business aviation got a black eye back in 2008 when the big three from the US auto manufacturing industry flew their company-owned private jets to Washington to request taxpayer bailout money.
The fallout was a watershed moment – the CEOs of the companies were slammed by politicians and the media for recklessly wasting money on jets (although all three argued they were required to travel in private jets for safety reasons).
Four years on, major corporations are still offloading jets in large numbers as they feel the financial squeeze (only last month RIM publically announced it will sell one of its two corporate jets as part of an effort to save $1 billion in annual costs).
The Forbes piece rightly argues that business aviation is still a wonderful tool, but where it falls short is pointing to fractional ownership as the only alternative to full aircraft ownership.
Many fractional operators have also been forced to cut back with the economy, add fuel surcharges and even cancel aircraft orders, while their existing fleets continue to age.
However, the general market is benefitting from the reverse scenario, with aircraft owners attracting business to their new aircraft through competitive pricing.
Chartering an aircraft can generally offer far greater flexibility to private jet users. The ability to match each individual trip with the correct aircraft type and price can yield significant cost savings.
With a specialist charter company like Chapman Freeborn there is no membership fee, no acquisition fee, no management fee, and no minimum number of flying hours. Clients aren’t locked into a long term contract and have the flexibility to select the aircraft and services that meet their requirements at any given time.
As is the case with fully-owned aircraft, companies can sometimes find themselves trying to offload fractional shares when business takes a sudden downturn – sometimes incurring penalties if they do so (a typical fractional contact can last up to five years).
There are specialists in this reselling field such as Fractrade and Fractional Jet Europe who help to reduce or eliminate early termination costs on jet cards and fractional contracts, or improve the buy-back value of unwanted shares.
The ownership vs. fractional vs. charter debate is one that will rumble on and on – but it’s worth exploring all the options fully before putting pen to paper on a long term contract.
You can read the Forbes post here