What are the chances of a private jet being your next big investment opportunity, rather than a big mistake? Until a few years ago, you would probably be right to pass it by, but today it’s another story. The world is changing rapidly, and perhaps it is time to consider the advantages of a private beyond strictly an investment perspective. Profiting from private jets today is a real possibility, and a favourable chance to build a valuable asset in the air as well.
If you are even considering private jet ownership, you are headed for a great start, but what is the probability of turning this asset investment into a profit? No matter how busy your schedule is, you likely won’t be needing your new business jet every day.Does this mean your aircraft shouldn’t generate income when you are not flying? There are several reasons why the answer to this question may to your benefit both as a private jet owner and as an investor.
The COVID-19 pandemic has changed the way we travel. People are looking for safe, point-to-point travel without the having to pass through passenger terminals or being seated closely to people they don’t know. In this context, the private aircraft industry is opening to a much wider market than ever before. Safety is the new priority. The stereotype of a private flight being solely for the rich, famous, and the perceived extravagance is being deconstructed. Everyday more and more people are boarding private jets. From business people who need to make urgent trips or attend strategic negotiations, to families with children and pets that wouldn’t be comfortable on an airline, the market for charter flights is increasingly diverse. By making your aircraft available for charter, you are turning your aircraft into a revenue generator.
Before you consider purchasing a private jet solely as an investment, be warned that an aircraft is a depreciating asset and the amount of time that the aircraft will need to be chartered to create a profitable revenue stream is unrealistic for the majority of private jet owners. The simple fact is, an owner purchases an aircraft for their own use, for business and private flights, and this use limits the amount of time that the jet will be available for charter.
Experience has proven the charter operator’s rule of thumb, that an owned jet has to fly a minimum of 800 hours per year to begin to make a profit. A private jet owner will be challenged to generate so many revenue flying hours on top of their own use. However, this does not mean that an aircraft owner should not consider chartering their aircraft.
Offering your aircraft for charter is more complicated than simply advertising your aircraft on the internet. An operator must be approved by the Civil Aviation Authority in which the aircraft is registered, to operate an “aircraft for hire”, essentially commercially. A private jet owner with their own flight crew will, generally, not be approved for commercial operations and for a single aircraft owner, this would be prohibitively expensive.
Aircraft management companies that hold their own Aircraft Oprating Certificate for commercial operations can, however, be contracted to manage an owner’s private jet and under the umbrella of their AOC, offer the aircraft on the market for charter. The aircraft management company will oversee all aspects of the aircraft’s operation, both when used by the owner and when chartered to third parties. Many of these companies also offer charter broker services.
The contracted aircraft management company will charge the client fees to manage the aircraft, both monthly and flight hour related, and will retain a portion of the fees received from charter. Revenue received by the owner can be used to offset the cost of ownership, ultimately lowering the cost of flying the private jet for the owner, whether they are travelling for business or pleasure.
This is a highly effective model that offers advantages both to the management company and to the owner. There are many factors that influence the amount revenue that an owner will receive from chartering their aircraft including aircraft type, location, availability and expectations.
Before considering acquiring an aircraft, it is important to first decide if its use will be strictly private or if the jet will also be chartered. This decision will not only affect how the aircraft will be operated and if an aircraft management company is required, but also how the cabin will be designed for higher usage and the features that will be required to make the aircraft as attractive as possible for potential charter clients.
Tech is Your All
The technology for aircraft charter is always improving. Perhaps the most impactful aspect of these is the prevalence of apps that place your aircraft literally in your customers’ hands. The UI/UX industry is always finding new ways to make the customer more interested, and the transaction more convenient. The simplicity of making a charter booking has increased drastically through these new apps, attracting more new users to private jet charter
New Business World Needs New Solutions
More and more organizations now operate across several countries; this applies to companies of different sizes, not just multinational giants that have their own corporate jets. Business people need to make time-critical trips that wouldn’t be possible on an airline; entire teams need to be flown to work at an overseas site; companies need to send people and products to an important trade convention in a different state, and so on. There is now a greater need for flights that commercial jets, in many cases, simply cannot cater for. So here is an opportunity to lower an owner’s cost of aircraft ownership.