Setting out the material considerations in acquiring – and sharing – this exceptional asset
In my experience, those who own or charter private jets perceive the time spent flying differently and it’s something others should link to their success. Their ability to tour different offices and operations, often in the same day and the resulting productivity gains make a significant material difference to their business. The hours saved hopping around the globe efficiently are of far greater value than the reduced costs associated with commercial Business or First Class.
But there’s a stage beyond that, when owning the jet makes even more sense. It is all in the numbers, the familiar asset utilization versus amortization debate. Understand the thresholds at which charter gives way to owning and you’ll recognise the time to acquire what can seem a very expensive asset.
Take one of the most successful business aviation jets in Europe, the Dassault Falcon 2000. To charter one costs between €6,500 and €7,500 per hour. When factoring in positioning legs (for which you pay), seasonality, brokers and operators’ commissions, your 2h45 flight from London to Greece in summer costs you closer to €25,000 (because you actually pay for London-Greece-Rome). If you owned an aircraft, ramp utilization up to 500 hours and the cost of operation annually touches €3-3.5 million. That is €6,000-7,000 per hour, much cheaper than chartering.
Of course, consuming 500 hours alone would be a challenge, but for owners that’s the opportunity. What we see is a typical owner taking 150 hours for personal use. The rest, perhaps 300 hours is then consumed through third-party charter. With the Falcon 2000 this attracts €1.5 million in fixed costs (crews, planned maintenance, etc.) with a variable cost per flight in the range of €4,000 per hour for the owner and the third-party paying a blended higher rate at €7,500.
The charter activity generates close to €1.05 million contribution to fixed costs. The variable costs of the owner’s hours at €4,000, plus the amortization of the remaining fixed costs at €450,000 would result in an effective hourly cost of €7,000: much cheaper than the charter as your plane will require less empty flights… or you get others to pay for it.
Why, you might ask, would someone wish to own a plane if the costs simply level out? Once again, productivity is the answer. Charter, regardless of the way it is structured, will only offer limited flexibility. Own and you fly when you want.
There is the option of block charter or shared ownership. However, suppliers will transfer to their clients the real costs of the increased flexibility. There are also contractual limitations to accommodate such as peak periods. Then there is the reality on the ground. When booking a charter flight, 90 percent of the time the charter client will pay for the aircraft’s positioning before and/or after their use. This can translate to two hours per occupied hour flown. In specific circumstances, doubling the hours in this way can even offset the amortization of some second-hand business jets, making ownership truly cheaper than rental. The bias in favour of ownership is then made even stronger. The merits, however, still warrant careful evaluation and specialist advice.
In our experience at KENDRISfly, owners know the market is volatile. They understand it’s complex and that not all aircraft or operators are able to deliver the same level of savings. But, they have been given the insight to choose from the most efficient jets and those that best meet their needs. They may also consult technical and commercial subject-matter specialists and progress to tax, law and ownership structure experts through the acquisition process.
So, for those planning travel now and coming from the charter side or those in the market for a different kind of jet, an assessment of the benefits of ownership in all its aspects could be very well-timed.
See the PDF of the article from "The Gateway" / Harrods Aviation from Q4/2022 here: