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How to Reduce Your Jet Ownership Costs

How to Reduce Your Jet Ownership Costs

Whether you are traveling for business or personal leisure, owning a private jet can be one of the best investments you can make when you love to travel in luxury. If you’re unsure if owning a jet is right for you or if you’re looking to lower the overall expenses of your jet, there are several ways you can lessen your ownership costs and even make a profit. For example, many jet owners charter their jet when they are not using it or turn to an aircraft management service.

If you’re interested in reducing your jet ownership costs, here is a look at the differences between fixed and variable costs and some ways you can reduce those expenses.

Fixed vs. Variable Costs of Jet Ownership

You can divide jet ownership costs between variable costs and fixed costs. Variable costs are defined as expenses that are subject to change, while fixed costs stay the same over a specific period. By knowing the differences between these types of costs, you can better plan for the future and manage your overall expenses.

What Are the Fixed Costs of Owning a Private Jet?

What Are the Fixed Costs of Owning a Private Jet?

When you own a jet, you’ll have a few costs you know will stay the same over time. These costs can vary based on the jet’s size and type, but once you’ve agreed to the terms, these costs won’t be subject to change. Some of the fixed costs of owning a private jet include:

  • Capitalization costs: Your capitalization costs relate to the amount of money you have to pay to purchase or lease the aircraft, including the interest related to it.
  • Insurance costs: If you own a jet, you also have to purchase insurance to legally fly it. Your insurance expenses, such as liability and hull coverage, will come at a fixed rate.
  • Hangar: When you’re not using your jet, you’ll store it in a hangar. This hangar space will come at a fixed fee per month.
  • Management fee: Many private jet owners will hire a management team to handle various administrative services, such as accounting, record keeping, aircraft scheduling, maintenance coordination, and Federal Aviation Administration (FAA) compliance monitoring, among other tasks. These services will come with a set fee from the management company.
  • Flight crew: Your jet needs a crew to fly it, and you’ll have fixed costs related to hiring a company to screen and interview flight crew candidates. A hiring or management company will also conduct a background check on candidates before presenting them to you. Along with paying for the screening and hiring process, you’ll also have fixed expenses that account for a crew’s salaries, benefits, uniforms, drug testing, and communications.
  • Flight crew training: You may also have expenses from continuously training crew members. These training costs are fixed, as training is conducted annually. Flight crew training ensures your pilots are as well-trained as possible and updated on the latest aviation information.

What Are the Variable Costs of Owning a Private Jet?

In addition to the fixed costs of owning a private jet, there are also several variable expenses. These include:

  • Parts and maintenance: Since you can’t account for every repair or replacement part your private jet will need, any expenses incurred from maintenance or parts fall under variable expenses. You can usually hire an aircraft management company to facilitate repairs and replacement costs.
  • Fuel: The costs to fuel a private jet are some of the main variable expenses you’ll have to pay whenever you travel. The price per gallon can change based on market fluctuations and by the location where you’re buying fuel, with some jet owners choosing to negotiate an airport’s fuel price in advance to better plan for their coming trip’s expenses.
  • Crew meals, travel, and hotels: Whenever you fly, you’ll need to cover the changing costs of your crew’s travel expenses, such as their lodging and meals.
  • Landing and parking: Whenever your aircraft arrives at its destination, you’ll likely have to pay a parking and landing fee that varies based on the airport. Since airports can charge different fees, it’s a good idea to check the costs of landing fees in various airports before deciding on your route.
  • Oil and other operating materials: Your aircraft may need materials like oil, nitrogen, aviator’s oxygen, methanol, and TKS fluid for maintenance and proper operation. Since you can’t always predict when you’ll need these items, they’re considered to be variable costs.
  • Cleaning and upkeep: You can schedule regular cleanings, but your costs can vary at times due to the location of the cleaning service or the need for more in-depth cleanings. Depending on how often you use the aircraft, you may have to pay for more cleaning services to ensure your aircraft is sanitized and always looks its best.
  • Catering: Whenever you order catering for your flight, you’ll pay for the costs of it, with the expense varying based on the cater’s pricing and the type of options they provide.

Using Charter Revenue to Reduce Aircraft Ownership Costs

Using Charter Revenue to Reduce Aircraft Ownership Costs

With all of the fixed and variable costs related to jet ownership, you may want to reduce your ownership expenses. Many jet owners offset their annual operating costs through charter revenue. When you allow others to charter your jet, they’ll essentially rent your jet for a particular period and pay you whatever price you set. By chartering your jet, you can reduce your fixed costs significantly, such as your capitalization expenses, and even make a profit over time.

To charter your jet to other private flyers, you’ll need to define your scope of operation under the FAA’s 135 Air Carrier certificate. Applying for this certificate and having it approved will allow you to charter your jet to other flyers.

Below are some of the primary factors that influence the amount of revenue you can gain if you decide to use your jet for charter flights:

  • Age of aircraft: Newer aircraft tend to be more in demand than older aircraft. Due to the higher market demand for newer aircraft, a more recent model can often attract more flyers and increase your revenue as a result. Additionally, newer aircraft typically don’t have as many maintenance needs, resulting in lower variable costs for your jet.
  • Fixed and operation costs: Different aircraft come with different fixed and operational costs. These expenses can vary based on your jet’s make and model, with some aircraft featuring higher margins between their direct operating costs and the charter rate. Selecting an aircraft with fewer expenses related to private jet operating costs, such as fuel burn, maintenance, and engine expenses, can help you raise the profit you make per chartered flight.
  • Human capital: When you charter your flights, you can offset the costs of hiring pilots and crews for your personal flights. Instead of hiring individual crews per flight, you can end up hiring a two-person pilot team for around 350 hours a year. If you don’t plan to fly 350 hours on your own, chartering can help you reduce your human capital costs per flight by ensuring you get full use out of your crew and avoiding hiring new crews every flight.
  • Engine reserves: Typically, engine companies attribute engine reserves to hourly expenses, with many engine companies requiring jet owners to pay for a minimum annual dollar threshold. Even if you don’t fly enough to meet this annual dollar threshold, you’ll still have to pay for it. If you charter your jet, you can more easily meet this minimum and reduce your annual fixed costs as a result.

Should You Select an Aircraft Management Service When Chartering Your Aircraft?

Private jet owners can hire an aircraft management service to handle the chartering of their aircraft. When you hire an aircraft management service, you add your jet to a licensed charter fleet. Since an aircraft manager knows how to optimize your chartering services, you can raise your private jet chartering profits.

An aircraft management service partner will also often have the expertise and industry connections required to help you save on parts, maintenance, fuel, fleet insurance, and hangars. They’ll manage your flight crews and ensure they’re trained appropriately as well.

Aircraft management services can also manage the charter revenue process, reaching out to potential flyers and adding charters that work for your schedule. A great aircraft management partner will have accounting services available that track how much your charter revenue is offsetting your annual costs, too.

Overall, an aircraft management service can reduce costs, increase revenue, and take much of the responsibility of managing your aircraft off your hands.

Other Options to Save on Jet Ownership

Other Options to Save on Jet Ownership

In addition to using chartering revenue and an aircraft management service to lower your cost of jet ownership, you can also find a few other ways to reduce your overall expenses:

  • Co-ownership: One way to lower your costs is to co-own your jet with at least one other person. By co-owning your jet, you save at least half of your money on fixed costs and the initial purchase price. Keep in mind that you’ll have to iron out terms with any of the other co-owners under this model.
  • Fractional ownership: Through a fractional ownership program, a buyer can purchase shares in a jet. The size of the share you buy translates to the number of hours you can use the jet, helping you get the private jet experience without paying the full costs of ownership. Fractional ownership can be great for buyers who know they’ll only use a jet somewhere between 500 and 400 hours each year.
  • Cooperative ownership: Similiar to fractional ownership, a cooperative ownership agreement involves a cooperative owner buying a jet and then selling shares of the aircraft to one or more other flyers. Instead of having a fractional ownership program handle the management of the aircraft, the cooperative owner will be responsible for it. If you’re a cooperative owner, you can make money on your jet by charging members for shares, and you receive more control over the terms of the jet’s use compared to a co-ownership or fractional ownership model.
  • Leaseback agreements: In a leaseback agreement, you allow another organization to lease your aircraft from you. Leasing a private jet to others is often a good choice if you don’t fly your aircraft a lot and want to save money on your operating costs. If you choose this route, make sure the organization leasing your jet has terms that work for you.
  • Pick an affordable fixed-based operator (FBO): When you own a jet, choosing the right FBO can help you save costs as well. Since an FBO can handle your fueling, maintenance, parking, tie-down, and storage costs, finding the right FBO can help you keep expenses down. Some FBOs offer significant discounts if you sign up to use many of their services.

Should You Own or Charter a Private Jet?

If you’re deciding between owning a private jet or chartering it, the biggest consideration you’ll want to take into account is how often you plan to fly. If you’re not flying more than 200 hours, the costs of owning, operating, and maintaining a private may be too great to justify owning a jet outright. If you only plan to fly occasionally, a private jet charter can be a more financially savvy option, as you get all the luxury of private flying without the costs of owning the aircraft.

However, even if you plan to only fly occasionally, purchasing a private jet can still be a good choice. With all of the options you have to split costs and make revenue off a private jet, it can be an excellent investment opportunity. By chartering the flight to others, you can reduce your overall costs of owning the jet and potentially make a profit.

You might also want to consider the entry costs of purchasing a jet. A newer and more capable jet can come with higher costs that may not make sense for your needs. If you don’t want to pay for entry costs, then chartering a private jet is a great choice.

Buy a Private Jet or Book a Charter Flight With Latitude 33 Aviation Today

Buy a Private Jet or Book a Charter Flight With Latitude 33 Aviation Today

At Latitude 33 Aviation, we’re dedicated to helping our clients find the right private flying experience for their needs. We regularly charter flights for our clients, delivering a stress-free, luxurious flying experience.

We also have jet acquisition and jet brokerage services if you’re interested in purchasing an aircraft. If you already own a private jet, our aircraft management services can assist you with various administrative services and help you offset costs via charter revenue.

Take a moment to review our jet acquisition services today. If you’re interested in chartering a flight or have any questions, you can request a quote or contact us directly.

What Is Fractional Jet Ownership?

What Is Fractional Jet Ownership?

Fractional jet ownership is perfect for many private flyers who want the luxury and convenience of owning a private jet but don’t want to pay for the full costs of sole private jet ownership. By joining a fractional jet ownership program, you can get the many benefits of private flying without the full expenses of purchasing an entire private aircraft. As a fractional aircraft owner, you can customize how much of the aircraft you own to match your private flying needs and spread costs among other owners.

If you’re interested in fractional jet ownership, learn more about how it works, its benefits, the costs associated with it, and information about when it’s right for you. You may also want to review the main documents required for fractional jet ownership and some popular alternatives to jet sharing.

How Fractional Jet Ownership Works

How Fractional Jet Ownership Works

Fractional jet ownership refers to a form of professionally managed aircraft co-ownership. When someone wants to participate in a fractional jet ownership program, they’ll purchase a share of the jet, giving them partial ownership over the aircraft.

This share gives them an allotted amount of occupied hours per year that they can use to fly the aircraft. The flying time usually ranges between 50 and 400 hours, and most fractional jet shares will come in a multiple of 1/16th.

When you enter into a jet sharing program, you’ll most likely need to sign an aircraft management agreement lasting for multiple years. You should also know that you may not use the plane you specifically own every time you fly. In fact, it’s possible you may not ever step foot in it. Instead, the company running your fractional jet program will usually have a fleet of similar aircraft available for use, bringing you the closest one as needed.

How Do Fractional Jet Shares Work?

If you want to understand fractional jet shares, you should first know that a fractional plane’s operating time is generally a total of 800 hours per year. Since a fractional jet has 800 hours available per year, an owner’s share will represent a fraction of that number. For example, a 1/16h share will translate to the owner receiving 50 hours of flying per year.

Other popular shares include a 1/8 share equal to 100 hours, a 1/4 share equal to 200 hours, and a 1/2 share equal to 400 hours. Usually, you won’t see shares less than 1/16, as anything under 50 hours usually doesn’t justify the cost. Overall, you can expect higher costs for shares that come with higher hours. Additionally, you may find fractional jet ownership shares that go by the number of days you plan to use the jet rather than hours.

Benefits of Fractional Jet Ownership

Benefits of Fractional Jet Ownership

Compared to full aircraft ownership, fractional jet ownership comes with several advantages that many flyers love. Some of the primary benefits of partial jet ownership include flexible availability, greater privacy, multiple jet options, and personalized investment opportunities. These advantages make fractional jet ownership an excellent travel solution for many flyers.

Here are some additional benefits of fractional jet ownership:

  • Flexible availability: When you’re a fractional jet owner, you usually have aircraft ready for you quickly. Most fractional providers can have an aircraft ready in only a few hours. If you need flights fast, fractional jet ownership can be a great choice.
  • More depreciation deductions: If you use your jet for business flights, you may be able to utilize depreciation deductions related to owning the jet that are not available when chartering. This ability to use depreciation deductions can give owners some tax benefits.
  • Multiple jet options: After purchasing a fractional jet share, you can often use multiple jets of the same type — even if the particular jet you own a share in is at another location while another owner uses it, you still have a jet available for you to fly on. Some fractional jet share programs also allow you to use different jets comparable in size and type to the jet you own fractional shares in.
  • Personalized investment opportunities: When you know you won’t need a personal jet year-round, you’ll love how customizable jet share programs are. You can choose various share options to purchase the number of hours you know you’ll need during the year, with some plans allowing you to bank unused hours over your contract’s length. This level of personalized investment allows you to see the benefits of jet ownership without the higher costs related to purchasing an entire jet.
  • Greater privacy: Flying on a private jet gives you the ultimate in privacy whenever you need to travel. Additionally, since the jet is registered under the fractional company’s name, your travel will stay out of the limelight, as your name won’t be attached to your flight activity on publically available data sources.
  • Reduced flying costs: Fractional jet ownership provides owners with the comfort, convenience, and time-savings of flying private without as many expenses related to owning a full jet. As a fractional jet owner, you won’t have to pay for an entire jet, and you’ll avoid paying the full costs associated with a jet’s services, maintenance, and crews. These reduced financial responsibilities make fractional jet ownership very cost-effective for many flyers.

What Are the Costs Associated With Fractional Jet Ownership?

While you’ll see reduced costs when you choose fractional jet ownership instead of full jet ownership, you’ll still have some expenses you should be aware of. Before you decide to purchase a share of a jet, it’s crucial to understand what costs you’ll be responsible for.

To give yourself more information on the expenses associated with jet sharing, review the main fractional jet ownership costs below:

1. Acquisition Cost

When you first purchase a share in a jet, you’ll have to pay an acquisition cost, otherwise known as a capital fee. These fees will be directly tied to how large your share in the jet is and the type of aircraft you’re purchasing.

For example, a share in a smaller jet will often cost less than a share in a larger one. You might find that a 1/16 share in a smaller jet may only cost a few hundred thousand dollars, while a 1/4 share in a larger business jet might come with a cost in the millions.

2. Monthly Management Fees

Management fees include fixed costs related to owning a jet, such as insurance, comprehensive pilot training, aircraft subscriptions, and administrative expenses. They also include paying for hangar space while the plane is not in use and is being stored.

As a partial jet owner, you won’t have to pay for the full amount of management fees related to owning an entire jet. The cost of your monthly management fees will come down to your share’s size. So, someone with a 1/4 share will pay more than an owner with a 1/16 share of the same jet.

3. Occupied Hourly Fee

Along with management fees and acquisition costs, you’ll also have to cover an occupied hourly fee. This fee includes costs related to in-flight catering, the crew’s wages, fuel, maintenance, and engine reserves. Essentially, the occupied hourly fee relates directly to any expenses incurred while using the jet. Since you may take shorter or longer trips and have different in-flight catering needs, these fees vary based on your particular requirements.

When Is Fractional Jet Ownership Right for You?

When Is Fractional Jet Ownership Right for You?

Knowing if jet ownership is right for you often comes down to how much you plan to use a jet per year. The general rule of thumb across the industry is that fractional jet ownership is only cost-effective if you use a jet at a minimum of 50 hours a year.

Essentially, using the jet less than 50 hours wouldn’t justify the jet’s cost, and it might be better for these types of private flyers to charter flights instead of purchasing shares. Of course, if you need to use a jet for more than 50 hours a year, fractional jet ownership is likely an excellent option.

You should also be comfortable with the jet type you purchase. Private flyers who often travel with different sized groups may want to avoid buying a fraction share, as the jet you purchase a share in may not have the capacity you need for larger groups. Fractional shares are often a better option for people who don’t plan to have much variance in the number of passengers they normally fly with.

How Do Fractional Jet Agreements Work?

When you enter into a fractional jet agreement, you’ll have a few documents you’ll need to sign and agree with.

1. Binder or Deposit Agreement

A binder agreement, or deposit agreement, refers to a provider’s document requiring a buyer to place a deposit before they hold the buyer’s share. A binder agreement guarantees the owner’s pricing won’t change, states a firm delivery date, and identifies the particular aircraft the buyer is purchasing a share in. The agreement should also let the buyer know when their deposit becomes nonrefundable.

2. Purchase Agreement

The purchase agreement is a document the buyer uses to purchase their fractional shares from a provider. This agreement covers the provider’s warranties and representations related to the aircraft’s condition and title. It also lays out how the provider will repurchase your share after the agreement, as well as terms and fees related to leaving your agreement early.

3. Master Dry Lease Exchange Agreement

A master dry lease exchange agreement dictates the relationship between the aircraft’s fractional owners. This agreement usually has every owner sign off on other owners using their aircraft. By signing this document, owners also receive the ability to use the provider’s fleet in place of the aircraft they own a share in.

4. Management Agreement

In this agreement, the buyer agrees that the provider will serve as their aircraft’s manager and fractional program’s administrator. The agreement covers how many hours the owner can fly, their flying costs, and when they can fly. These agreements can also stipulate how rollover hours work, the owner’s right to interchange, where owners can fly, and peak travel days when the owner will have more restrictions. Additionally, it will explain how the provider calculates flight time and how far in advance you have to reserve the aircraft.

Are There Alternatives to Fractional Jet Ownership?

For some buyers, fractional jet ownership isn’t right for their flying requirements. Luckily, buyers can choose from several alternatives that may fit their needs more closely. Find out more about the alternatives to fractional jet ownership below:

  • Purchasing a jet: If you fly frequently and don’t want any restrictions on your flying, purchasing a private jet is a great investment. When you own a private jet, you can fly as much as you’d like and change your schedule at any time. Many buyers also enjoy owning an entire jet, as it can be an investment opportunity. They can sell it back later and even rent it out to other flyers to make a profit.
  • Private jet leasing: When you’re not sure if you want to own a jet, a private jet lease is an excellent choice. With a lease, you essentially rent the aircraft for a specified period of time and sell it back to the leasing company at your contract’s end. Leasing a private jet can give you plenty of information about whether you want to eventually own a jet and help you make an informed buying decision. Private flyers also enjoy leasing because they can switch to another plane when their contract ends.
  • Jet cards: Another popular alternative to fractional jet ownership is purchasing a jet card. These cards allow you to buy a set number of flight hours in bulk, allowing you to save on costs compared to individually purchasing a flight every time you need a private jet. If you purchase a jet card, you’ll prepay for a number of jet flights, with the card’s terms guaranteeing availability and a fixed hourly rate. Hourly rates for jet cards are higher than fractional ownership, but they do not require as large of an upfront capital outlay.
  • Aircraft charters: When you only fly occasionally and don’t want any long-term commitments, chartering an aircraft is a great decision. Since an aircraft charter is only a one-time expense, aircraft charters don’t require you to place a large sum of money down up front, and you won’t pay ongoing fees. Additionally, aircraft charters allow you to choose various types of jets each time you fly, giving you the flexibility to select the right size and type of jet for your needs.

Explore Jet Chartering and Transaction Services From Latitude 33 Aviation

Explore Jet Chartering and Transaction Services From Latitude 33 Aviation

At Latitude 33 Aviation, we’re ready to give you the ultimate in private flying luxury. We regularly provide our buyers with jet acquisition and brokerage services, as well as extensive aircraft management and private jet charter services. We also have a premier aircraft fleet made up of light, midsize and heavy jets, with every charter aircraft option offering an upscale and lavish experience.

Request a quote to charter a private jet today. If you’re interested in owning a jet, please feel free to inquire about our sales services.