Commercial Airlines vs. Private Aviation
New choices put faster, friendlier ways to fly within reach
Remember when flying for business or pleasure was actually something you looked forward to? When you could arrive within minutes of departure, stroll right up to your gate, sit in a comfortable seat with ample leg room, enjoy a free cocktail (or two, depending on your destination), eat a hot meal, and collect your bags quickly when the flight was over?
Okay. Perhaps the “golden era” of airline travel wasn’t as perfect as this nostalgia-tinted recollection might suggest. Plus, it does ignore some of the recent positive developments such as online ticketing, and in-flight movies and Wi-Fi – not to mention no smoking! Still, who wouldn’t prefer to avoid the inconveniences, hassles, and frequent delays of commercial airline travel today and return to a more civilized way to fly?
That’s precisely the pitch that private aviation companies are making as they promote the ease, convenience, and luxury of using smaller, more comfortable private planes instead of commercial airlines to reach your work or recreation destination. They’re also increasingly putting the cost of private flights within reach.
Today’s private aviation alternatives
If you’ve ever dreamt of owning your own plane someday or simply chartering a flight whenever you need one, now may be the right time to explore your options. Greater competition among private aviation companies; lighter, more fuel efficient and low maintenance turbo-prop designs; and new use and ownership models, are all combining to make “going private” in the sky more affordable than ever.
As Kenny Dichter, CEO and founder of Wheels Up suggests, “The increasing ‘democratization’ of private aviation is finally making it more affordable to a wider group of people.”
The choices for private flying today fall into five categories or models, which sometimes overlap as the private aviation providers expand their offerings. Private aviation users also may tap into more than one of these categories as they seek the right solutions for different situations. “The model that’s right for you will depend on how frequently you fly, how soon you’ll be leaving, where you’re going, how many people (or pets) may be joining you, and of course, your budget,” says Doug Gollan, founder and editor of Private Jet Card Comparisons. For both full and partial ownership options, he suggests getting an experienced aviation attorney to help you with the contracts.
1. Full ownership
Traditionally, owning your own plane was only practical for people flying 400 or more hours a year. However, new Federal tax laws and a depressed market for used aircraft have caused wealthy individuals who fly only 150+ hours to take another look.
According to Gollan, “You can buy a used large-cabin Gulfstream 450 which originally sold for over $35 million for less than $5 million today. You can then hire a professional management company to handle crewing, maintenance, and compliance with government regulations. You can also work out a program with them to offer your plane for charter when you aren’t using it to offset some of your costs.”
There may be a tax benefit to owning (or fractionally owning) your own equipment, says Nick Copley, analyst and president of SherpaReport.com, a site that tracks trends and costs of private planes, boats, and luxury vacation destinations. "If you use the plane for business, you can currently depreciate 100% of the cost in year one. Most CFOs love this tax benefit," he says.
At the same time, Copley cautions anyone considering the outright purchase of a plane to be mindful of the ongoing costs. "While used aircraft can be more economical to buy, they still cost a lot to operate and maintain," he explains. “Annual costs for a mid-size jet can be well over $1 million year, and you’ll pay even more than this for a large jet."
If ownership is an option that interests you, Gollan suggests beginning your research by looking at Business Jet Traveler’s comprehensive Business Aircraft Data Directory to compare aircraft by range, seating, and price. You can also check out the practical “Step-by-Step Guide to Buying an Aircraft” on Copley’s Sherpa.com site.
2. Fractional ownership and leases
Fractional ownership and lease programs are akin to purchasing a timeshare. When you buy into one of these programs, you typically purchase a 1/16th share, which gives you 50 hours of flying time per year, for 3-5 years. (For a $5 million plane, that’s roughly $300,000.) You then pay a monthly management fee and per hour charges for your flights. If you buy your share instead of leasing it, you also receive the value of your share on the used aircraft market when your contract is up.
Today, there are only two national fractional programs: NetJets, owned by Warren Buffet’s Berkshire Hathaway, and Flexjet, part of the Directional Aviation group, which also includes Sentient Jet (jet cards) and Skyjet (on-demand charters). There are also a number of regional and local providers who may have programs specifically designed for your home market.
3. On-demand charters
Chartering a plane on demand is still one of the most economical methods of flying privately, and it’s probably best for people who fly fewer than 25 hours a year. There are no deposits, upfront costs, or membership fees, and a plane can be reserved whenever you need it, with only a few hours of advance notice required.
"When you charter a plane, you have the sole use of it and you pay by the hour, with base prices starting as low as $2,000 for a turboprop," explains Copley. If you do this, “just make sure you get a fully inclusive quote," he says, because your flight could actually cost upwards of $5,000 after all the extra charges are applied.
Those charges include landing fees, ramp fees (for parking), fuel surcharges, segment fees (a per passenger tax), and Federal Excise Tax. And that’s just the start. There also may be extra fees for food service, “ferrying” (to get the plane to your departure location), Wi-Fi, and de-icing, which can cost in the thousands of dollars per incident.
There's a more complete list of all the extras that might be included in your charter flight invoice (in addition to the hourly fee) on Copley’s website.
The base cost also will vary based on the type and size of the aircraft, the distance flown, peak flying times, and several other factors.
When you charter a plane, you will be dealing either directly with the operator or with a broker who will secure the appropriate aircraft from an operator based on your needs. While many companies now offer mobile apps for easy booking, Gollan suggests using an experienced and reputable broker if you are new to private aviation. That way, he or she can screen the company properly and evaluate the pilot’s experience and the aircraft’s safety records.
4. Jet card programs
The number of jet card program providers has more than doubled over the last decade, in part because they provide benefits similar to full and fractional ownership, but with a lower cost of entry and an option for annual renewal.
Today there are more than 40 companies offering 250 separate jet card programs in the U.S. These programs allow you to purchase from 10 hours to 100 hours of flight time in advance. Your payment is deposited upfront (usually in an escrow account) which means you may be sending the provider as much as $500,000, depending on your anticipated flying time. Then, just as you might use a debit or stored value card, the money in your account is applied toward the fees for your flights over the year.
A core benefit of jet card programs is their fixed hourly rate, so you know in advance how much you will be paying. In addition, most jet card programs allow travel in the Continental U.S. and parts of the Caribbean, Mexico and Canada. (VistaJet offers a worldwide program and NetJets offers travel to Europe.) They also have peak days which are more expensive and require longer lead times for reservations and cancellations.
But that’s where the similarities end, according to Gollan. “Jet card programs vary in multiple ways, including airplane size and sourcing standards, pilot qualifications, service areas, travel policies for unaccompanied minors and pets, peak period surcharges, de-icing fees, daily minimums, and availability of Wi-Fi.”
5. Membership model
An off-shoot of the jet card concept, the “membership” model was introduced by Dichter when he launched Wheels Up, after selling his Marquis Jet Card business to NetJets. By assembling a fleet of new, lighter weight turbo-prop aircraft that are more fuel efficient, easier to maintain, and built to fly shorter distances, his aim was to lower the cost of private aviation, using a membership model that “feels more like Netflix than NetJets,” he says.
With this approach, you purchase a one-time membership for $17,500 and then pay annual dues of $8,500 for an unlimited number of flights, which you pay for separately, depending on the plane that’s selected. According to Dichter, “In the past, you either had to buy a full plane or a part of a plane to gain access to the experience we’re giving our members. Now, for $17,500 [the initial membership fee] plus the annual fee, you’re able to access a high-quality plane with the highest standard of safety in the industry.”
Assessing your options and costs gets complicated
Comparing the cost of the different charter/rental/jet card models can be difficult, because there are so many variables, including:
- the number of hours you can fly
- the cost per hour
- the types of aircraft available
- the taxes and specific fees that may be added to your bill by each company, such as Federal Excise Tax, per passenger taxes and fees, passenger facility charges, layover or “ferry” fees, and fuel surcharges
That’s why Gollan developed his Private Jet Card Comparisons site with spreadsheets available on a subscription basis to help people compare the 250 jet card programs according to more than 60 separate characteristics. His effort created what Barron’s Penta magazine calls “a modern-day online Kelley Blue Book for private jet cards.”
As a rule of thumb, Dichter suggests that private aviation is most cost effective for shorter flights of 2-3 hours. (The average flight time for private planes throughout the U.S. is about two hours, he says.) “Once you get into longer flights and overseas destinations, using a commercial airline is typically the best value,” he says.
Benefits beyond the bottom line
While cost may be your main concern when deciding whether to opt for a private plane experience, it’s not the only factor to take into account. Other benefits of private aviation include time savings, convenience, flexibility, and privacy.
- Saving time
“Private aviation can be a tremendous timesaver/time creator,” says Dichter. “For example, going door-to-door from New York City to Boston on a commercial flight might take six or seven hours based on ground transportation to and from the airport, TSA screening, and waiting to board. However, if you’re using a private option like Wheels Up, it could cut your travel time in half: to three hours versus six.”
When you travel on a private plane, he says, you can drive right up to it, avoid the TSA line, have all of your luggage (including A/V equipment, golf clubs, fishing tackle, or skis) put directly on board by the pilot or co-pilot, and then settle into a comfortable seat for a quick, efficient, stress-free flight, directly to your destination, with only a handful of other flyers on the plane with you.
- Convenience and access
Many of the private aviation alternatives allow you to reserve a flight (sometimes using a mobile phone app) on short notice, typically 24 hours in advance, but some with as few as 6 hours’ notice. Smaller planes also mean you’ll have access to many of the 5,000 local airports across the U.S. vs. the 500 airports available for larger commercial flights. That can be a tremendous time saver if your vacation or business destination is not close to a major city.
With a private plane, you can schedule your flight at a time that’s most convenient for you. If you’re running late, the pilot will wait until you arrive.
If you book the plane for people in your company or your family, you can communicate freely and confidentially without disturbing other passengers. That can help make the time you spend flying more productive as well.
- Less stress
With a private plane, you have more control over timing of your flight, and your take-off and landing will be less subject to delays or cancellations for non-weather reasons. There are also no TSA lines, although the pilot will still make a quick check of all passengers against the “no fly” list. Plus, you skip the wait for your baggage, which arrives with you!
Why not give it a try?
If you are new to private flying, don't do many trips each year, and just want to try it out, Copley’s Sherpa Report recommends starting with a single charter or a small deposit jet card.
Dichter also likes the idea of testing the private option to see if it might work for you, your family, or your business. But do so with caution, he says, because once you’ve flown this way, it’s easy to get “hooked” like he did. “As Warren Buffet once put it to me: ‘Once you’ve flown privately, going back to commercial airlines is like going back to holding hands after you’re married.’” Now you really know what you’re missing!
Disclosure: Boston Private has an annual membership agreement with Wheels Up for 2018.
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