PJP 011 | Should You Rent Out Your Private Jet?

Play

In this episode, kind of our series on how to get access to a private jet, we’re going to talk to the people listening who own or lease a jet already and are considering charting that jet to other people.  You’ll learn the pros and cons to making your jet available to the wealthy masses, and see how an investment in the business of flying people around on your airplane might not perform as promised.

Pros of Putting Your Jet on Charter

  • charter may reduce costs (but it will not eliminate them)
  • charter can potentially offset gross operating costs (owner receives 85% of charter revenue)
  • charter revenues should exceed variable operating expenses, leaving excess amounts to offset fixed expenses, potentially lowering aircraft operating cost
  •  possible reduced liability to owner if all flights are flown under charter operator's certificate
  •  possible access to other aircraft in certificate holder's fleet (if your aircraft is in maintenance)

Cons of Putting Your Jet on Charter

  • an owner will not make money chartering (otherwise charter operators would own most of their fleet, which isn't the industry case)
  • an owner gives up operational control to vendor potentially not aligned with family or business vision and goals
  • if an owner already uses aircraft a substantial amount, there is little opportunity for offsetting operating cost with charter revenue
  • if an owner uses the aircraft on long trips, charter operator won't have access to aircraft and you won't get much revenue
  • their is decreased availability of aircraft to support family or business travel needs (can't schedule owner trips when the aircraft is on charter trips
  • charter may lower aircraft resale or residual value (due to more flight hours put on aircraft)
  •  brokerage fees, operating costs, management costs, maintenance & insurance dig deep into charter revenue (ex: $1M gross, $125K net in a year)
  •  more legal, tax and FAA issues due to rental/passive income/losses which can affect ability to depreciate asset  /  state and local taxes are different for commercial ops  (IRS considers charter income passive income)
  •  bank may not want to loan on aircraft that will be chartered (or may loan offering higher lending rates)

Charter Can Drive Costs Up

(with little value received in return)

  • 1.  conformity inspection to get the airplane on a certificate
  • 2.  crew training costs increase to comply with FAR 135 regulations (vs. current 91 regulations)
  • 3.  wear and tear from non-vested parties using airplane
  • 4.  restrictions on operations (OpSpec A008) when flying 91 and 135
  • 5.  decreased asset values due to higher airframe times
  • 6.  may increase costs (due to unscheduled maintenance due to more flight hours put on aircraft)
  • 7.  may have to hire additional pilot (due to increase in flying vs. complying with FAR 135 charter duty time limits mentioned above)
  • 8.  may have to hire flight attendant to meet charter market needs

Takeaway

If you own a private jet, you can make it available for charter. But, you'll want to analyze all the moving parts carefully so you reduce risk and increase value in your private aviation ventures.

Mentioned In The Show

Conklin & Decker: Pros and Cons of Placing Your Aircraft on Charter

Business Jet Traveler : To Charter Your Jet or Not To Charter Your Jet

Subscribe in iTunes |  Give an iTunes Rating (here's how)

Email Tom  |  Tweet Tom

Question For Comment:

Do you, (or would you) make your jet available for charter?  Why or why not?

Leave your comment below, on the listener line at 586-330-0802, or email me at tom (AT) privatejetpodcast (DOT) com.

Share This Page
Get Exclusive TIPS Here
Want to hear more? Then, join me for exclusive "after the show" audio content covering Takeaways, Ideas, & Personal Stories (TIPS) on business and private aviation - available only in this private audio feed sent directly to you by email.
0 comments