SHOULD YOU MOVE FROM FRACTIONAL OR CHARTER TO WHOLE-AIRCRAFT OWNERSHIP?

SHOULD YOU MOVE FROM FRACTIONAL OR CHARTER TO WHOLE-AIRCRAFT OWNERSHIP?

H. Lee Rohde III

Founder, Essex Aviation Group, Inc.

At Aviation Management Systems, clients often ask us to determine whether their increased use of business or private aircraft has reached a point where they should consider transitioning from a fractional or charter program to whole ownership. Other clients who have reduced their aircraft use ask us whether they would benefit from switching the other way around, from whole ownership to a fractional or charter program. The answers are driven by quantitative factors such as capital and operational costs and by qualitative factors such as the requirements, desires, and expectations of the primary travelers.

Cost Analysis 

Each cost analysis looks at capital costs and projected operational costs. In assessing capital costs—the financing or leasing outlays—you begin with a review of the market for the various aircraft models being considered. Depending upon the purchaser’s requirements, you usually can reduce the candidate aircraft to a small group. You then can discuss the range of purchase prices with lenders to establish the acquisition and financing costs for a purchase or lease structure. 

Operational costs can be relatively predictable, especially if the aircraft is enrolled in hourly engine, airframe, and avionics maintenance programs. Aircraft not enrolled in such programs require a higher level of analysis to project the operating costs. You need to consider the age of the aircraft and review its maintenance status in order to accurately project the future operating costs. 

Finally, you need to estimate the cost of necessary upgrades to the aircraft’s equipment and the cost of refurbishing its interior and exterior. 

A rule of thumb says that travelers who fly more than 200 hours per year should consider whole-aircraft ownership. Beyond 200 hours, an aircraft’s hourly operating costs will decrease as the annual use increases—until additional crew are required, at which point the fixed cost rises. A two-pilot crew could support 400 flight hours or more per year. 

Operational Analysis 

The operational analysis primarily considers the owner’s projected travel schedule. If the schedule includes a majority of one-way trips, flights with many passengers, or a wide range of distances, whole ownership may not be the right option. 

Another rule of thumb says that you should consider whole ownership only if one aircraft can accommodate 80 percent of your projected travel requirements. Often a comprehensive aviation plan includes more than one aviation asset. A charter program, for instance, can supplement whole ownership and address the other 20 percent of your travel needs.