A large aircraft-management company with a high demand for its charter service might not be a jet owner’s best option.
This story is adapted from a study that Robb Report Private Aviation Advisory Board member Kevin O’Leary conducted as part of his PhD coursework at Embry-Riddle Aeronautical University. O’Leary is the founder and president of Jet Advisors, a private-jet acquisition, brokerage, and invoice-validation firm in Bedford, Mass.
The cost of operating a corporate jet with an aircraft-management company can be sizeable, in some cases nearly $1 million a year for a large-cabin aircraft capable of international flights. Among the items included in the annual operating budget that a management company will recommend are its management fees, the salaries for pilots and other staff, and liability insurance and hangar costs. By making the aircraft available for charter, however, a management company can provide revenue for the jet owner that offsets a portion of these operating costs. Therefore, when choosing between aircraft-management companies, a jet owner should consider the net charter revenue that each company will likely yield while also analyzing the proposed operating budgets.
We looked at three aircraft-management companies—one with a high demand for its charter services, one with a medium demand, and one with a relatively low demand—and determined which represents the best financial option for a jet owner. We found that of the three management companies, the smallest one—the one with the lowest suggested operating budget, the lowest charter demand, and, by far, the highest fuel surcharge passed along to the traveler—would very likely produce the best results for the client.
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