Special Report: Fractional Ownership
What began as a concept that met with outright skepticism and indeed some hostility by the established aviation industry has blossomed into a viable branch of business and personal transportation that continues to fuel manufacturers’ production lines, gobbles up flight crews and, at least for now, staves off recessionary pressures by keeping order books fat.
NetJets’ parent company, Executive Jet, claims that its fractional aircraft ownership program has introduced more people to business aviation during the last five years than the top five business aircraft manufacturers combined.
The concept of shared ownership of business aircraft gained additional credibility in 1995 when the first aircraft manufacturer– Bombardier Aerospace–started a competing program it named Flexjet. But unlike NetJets, which flew aircraft from several airframers, Flexjet limited its offerings to the stable of Bombardier business aircraft.
Raytheon Aircraft was the next manufacturer to jump on board with its Travel Air fractional-ownership program in 1997. Although it began with all-Raytheon equipment, it has since added two pre-owned Bombardier Challenger 601s.
Flight Options–now considered one of the Big Four fractional providers–elected to take a quite different approach when it began setting up shop in 1997. It acquired pre-owned aircraft when it went operational in October 1998. But the company has orders and options for 25 new Fairchild Dornier Envoy 7s, the business jet version of the company’s 728JET regional airliner.
The newest contender in the ranks of fractionally owned jets–although United Airlines announced its entry, it is not yet operational–is CitationShares, a partnership between Cessna Aircraft and TAG Aviation. The two companies announced their joint fractional program in July last year, initially aiming at entry-level frax buyers on the East Coast. Even though Cessna has hundreds of its products operating in other fractional fleets, this is its first semi-independent venture into its own shared-ownership venture.
It bought a 50-percent interest in TAG’s StarShares Holding, which was renamed CitationShares. Previously, StarShares operated new and pre-owned Raytheon King Airs within 700 nm of New York City for efficient regional travel in the crowded Northeast corridor.
While other fractional-ownership plans concentrate on jets, PlaneSense based its program on the Pilatus PC-12 turboprop. As part of aircraft management company Alpha Flying, PlaneSense boasts that the cruise speed of the PC-12 can deliver travel times comparable to those of a light jet on legs up to 700 nm.
Still another jet fractional-ownership company is Jet Linx Aviation, which operates two Mitsubishi Diamonds and two Beechjets within a 500-mi radius of Omaha, Neb. Don Seidholz, senior v-p of marketing, describes Jet Linx as unique in the world of fractional ownership. It sells shares in increments of 10 percent, but only up to 50 percent of an airplane. Half of the company’s business is charter, which he said “allows us to price our products much more competitively.”
As other fractional-ownership companies followed the NetJets lead, Santulli often has been quoted as saying he would rather have a large slice of a big pie than all of a small pie. And according to Aviation Research Group/US (ARG/US) of Cincinnati and AvData of Wichita, NetJets has very large slices–45.28 percent of the Big Four fractional provider fleet and 47.24 percent of the share owners.
Satisfied owners proselytize the advantages of having business and/or personal transportation available at a fraction of the cost of owning a whole aircraft, which causes Santulli to consider his competitors as complementary to the overall health of the fractional-ownership industry.
So assured is NetJets of its leadership position, this summer it introduced The Buyer’s Guide to Fractional Aircraft Ownership, which it described as “the first definitive publication” to help companies and individuals determine what private aviation solution is best for them.
Woodbridge, N.J.-based Executive Jet said 70 percent of its new NetJets business comes from existing owner referrals. No one illustrates the validity of that viewpoint better than billionaire investor Warren Buffett, who purchased Executive Jet for his Berkshire Hathaway conglomerate’s portfolio in July 1998 for $725 million in cash and stock.
Like Victor Kiam of Remington electric shaver fame, Buffett liked NetJets so much that he bought the company, and he has even put NetJets aircraft on static display at a Berkshire Hathaway annual stockholders meeting.
Fractional ownership blipped onto NBAA’s radar screen in 1995, when the association conducted a survey of membership attitudes on fractional ownership and asked whether respondents considered it a threat to the traditional flight departments that formed the core of its membership.
Testing the Waters
Although some trepidation was evidenced, flight department managers essentially believed that fractional ownership would neither hurt nor replace their flight departments, and most respondents believed that fractional ownership was an asset.
By NetJets’ own figures, 30 percent of its owners are public companies, many of whom own multiple shares and use NetJets to supplement their existing investment in business aircraft or as their primary aviation tool. It said that a number of companies fly NetJets more than 1,000 hr a year, including several that fly more than 2,000 to 3,000 hr a year to supplement their existing fleets.
Half of NetJets’ owners are private companies using their aircraft shares to help expand their business, and 20 percent are owners who use their airplane for “private, quality-of-life purposes.” This latter group includes people like Buffett’s aunt, who was already in her 90s when she bought a one-sixteenth share in a Raytheon Hawker so she could conveniently visit friends and relatives.
Taking note of the burgeoning fractional aircraft ownership phenomenon, NBAA’s then-chairman Allan Lane issued the following statement on Feb. 29, 1996:
“NBAA considers fractional ownership as a means of expanding the number of companies that will use business aircraft and thus offers the potential for increasing the number of company flight departments. Fractional ownership is one of the ways of filling the niche between chartering aircraft and full aircraft ownership. [NBAA believes that] the well managed and progressive flight department operating company-owned aircraft provides the most cost-effective form of business transportation.”
Despite some lingering animosity by NBAA members against fractionals, it should be noted that any fractional owner, regardless of the size of the share, has the option of joining NBAA as a full voting member. The fractional aircraft providers themselves are associate members without voting rights.
Shortly after NBAA took official notice of the rising number of fractionally owned aircraft, the FAA did too. FAA Administrator Jane Garvey said that the agency began looking into fractional ownership in 1996 when an aircraft management company requested that the FAA approve under FAR Part 91 the master interchange agreement for what it called a fractional ownership master interchange program.
Then, in the summer of 1998, the FAA asked NBAA to make recommendations on the applicability of current and possible future FARs on fractional operators, particularly with regard to safety and oversight. (No fatalities have been attributed to fractional operations, and fractionally owned airplanes flown by the major players have maintained a safety record nearly equal to that of Part 121 commercial operations since 1996.) Garvey indicated that she needed the association’s input as soon as possible because a decision was imminent.
But the question of whether fractionals should be regulated under Part 91, Part 135 or some new purpose-specific FAR proved to be highly contentious within NBAA. A verbal donnybrook was started when the NBAA board of directors decided to recommend to the FAA that fractional providers should be regulated under Part 91.
(Some of that animosity continues, as witness accusations that some fractional providers made use of Part 135 certificates to gain access to restricted airspace that was closed to Part 91 operators in the aftermath of the September 11 terrorist attacks. While that maneuver was perfectly legal, some disgruntled operators groused about the fractionals “having their cake and eating it too.”)
Following the board recommendations, NBAA solicited membership opinion but received little in the way of response. So the association joined forces with the National Air Transportation Association (NATA) and the General Aviation Manufacturers Association (GAMA) to create a set of safety guidelines for owners of fractional aircraft and fractional aircraft program managers.
That morphed into the 6,600-word Safety Guidelines & Responsibilities for Fractional Aircraft Owners and Fractional Aircraft Program Managers, which was forwarded to the FAA in January 1999. During that spring and summer, accusations were hurled at the NBAA staff and board of directors by a vocal group of members who claimed the membership was not consulted before the board took action.
NBAA conducted a poll of its membership and found that most wanted to carve fractional aircraft operations from Part 91 and put them under Part 135, provided that this did not adversely affect traditional flight departments. But NBAA president Jack Olcott explained that, according to the FAA, such a move was not possible. And it became apparent that moving fractional ownership into Part 135 or a new FAR would harm traditional flight departments.
In late 1999, Garvey appointed a 27-member Fractional Ownership Aviation Rulemaking Committee (FOARC), overseen by one of her top staffers, to help the FAA come up with a notice of proposed rulemaking (NPRM). Starting with the NBAA/NATA/GAMA safety guidelines, the group–which included Part 135 operators, fractional-ownership program managers, four airframe manufacturers, traditional Part 91 corporate flight departments, traditional aircraft management companies and industry trade associations–fashioned an NPRM incorporating most of the FOARC’s final product, which was adopted unanimously.
Called Part 91 Subpart K, the new section will regulate fractional-ownership operations and make some modifications to Part 135 on-demand charter requirements to level the competitive playing field. The public comment period was extended by 30 days from its original cutoff date of October 16, and the FAA wants to have a final rule out by next summer.
In the recent past, the seemingly unlimited growth of fractionally owned business jets was a driving force in the FAA’s move to have some regulations in the books. Fractional providers previously had targeted 120,000 companies with $30 million or more in annual revenues as potential owners, in addition to another 120,000 individuals who are worth $10 million or more. The potential market in the U.S. alone has been estimated at approximately 200,000 customers.
Despite the nearly year-long economic doldrums and the continuing fallout from the atrocities of September 11, fractional providers still express cautious optimism about the future. Although no one wants to trade on disaster, inquiries about purchasing shares in “private” aircraft have increased markedly, some fractional players told AIN.
“We saw some downturn in the economy in about the April timeframe,” said Richard Heckman, v-p of sales and marketing for Flight Options, “as did everybody else, from the best I could tell. So we readjusted some of our forecasts.”
He said the company still plans some “significant growth, but not at the level at which we were clipping along.” Pilot hiring and airplane acquisitions continued, although both were scaled back. “We viewed the economy as being off by probably 25 percent from what it was the previous year,” he continued. “Some people will tell you more, some people will tell you less.”
After September 11, Heckman said, “Our telephone lines lit up by about 300 percent over what we had been doing. The interest in the program in terms of questions being asked grew dramatically.” While he admitted that not all of that interest has turned into sales, he observed that people who were on the fence about making a decision to buy did swing toward making a decision.
“Time will tell where things go,” Heckman said. “We’re on track right now to add nine jets this next quarter and 10 jets the following quarter. And we add 4.7 pilots per airplane. So we’re still growing and we’re happy about that.”
But Heckman stressed, “We certainly would give anything to have those lives back, and I don’t want to be benefiting from such a terrible tragedy.”
Steve Phillips, director of marketing for Bombardier Flexjet, agreed that with the softening of the economy, everyone’s business has been down this year–whether it’s fractional, charter or whole aircraft. What has happened since September 11, he said, is that “we’ve noticed a very significant increase in inquiries. We’ve also noticed a sense of urgency among the people we’ve been talking to over the past couple of months about Flexjet.
“In other words,” he said, “they were sort of going along thinking about it, and now they are really thinking about it.” Like Heckman, he admitted that it is too early to tell if Flexjet’s business will show significant gains this year. “However, I believe it will certainly go a long way in helping us get to our target numbers for the year,” he said.
One of the ways that the economic slump has affected Travel Air, said president Gary Hart, is that some owners with whole airplanes who were underutilizing them–either personally or business-wise–were taking a look at fractional-ownership. “And we had a few people in the fractional-ownership program who–depending on how their companies were doing–downsized their share size because of business effects,” he said. “On the whole–if you are not taking into account September 11–it is on a slight uptick.”
Following the aircraft hijackings, Hart said, “a lot more people” are calling to get information on fractional ownership and flying on a private airplane from a privacy, safety and security standpoint.
NetJets Comfortably in the Pole Position
According to Kevin Russell, senior v-p of Executive Jet, as the economy has declined, more people have realized “how fiscally sound our program [NetJets] is.” And following the attacks, the issues of security, safety and convenience have “made the telephones ring” as more and more people reviewed their travel options.
He said that even before the terrorist attacks, NetJets’ business was up more than 35 percent over last year. “As a result of September 11, there is certainly a great deal of additional interest in private aviation,” he said. “The interest certainly comes to anybody in the aviation industry as a result of the concerns about safety, security and convenience.”
Although NetJets has not changed its pilot training in the wake of the attacks, he revealed that the company has taken added precautions. “There is never any question about training, there is never any question about investments in safety, there is never any question about investments in security,” Russell said, “because the safety and security of our NetJets owners are paramount in the mind of [Santulli].” He pointed out that being part of Buffett’s Berkshire Hathaway provides “a great deal” of financial support that most other aviation companies potentially don’t have access to.
Stateside, Executive Jet will be directly managing and operating in excess of 400 aircraft by the end of the year, with an order backlog of more than 570 aircraft. As of September, NetJets was flying five Citation S/IIs, 77 Citation V Ultras, 21 Citation Excels, 17 Citation VIIs, 40 Hawker 800XPs, 27 Hawker 1000s, 49 Citation Xs, 31 Falcon 2000s, five Gulfstream Vs, 44 Gulfstream IV-SPs, three Boeing Business Jets and 62 examples of various other aircraft.
In the past six years, Executive Jet has ordered 949 new aircraft for the NetJets program–totaling more than $17 billion–from Boeing, Cessna, Dassault Falcon Jet, Gulfstream and Raytheon. These include 30 BBJs, 68 GIV-SPs, 33 GVs, two Falcon 900s, 50 Falcon 2000EXs, 76 Falcon 2000s, 100 Gulfstream 200s (née Galaxy), 75 Citation Xs, 68 Hawker 800XPs, 100 Citation Sovereigns, 100 Hawker Horizons, 21 Citation VIIs, 100 Citation Excels, 24 Citation Encores, 77 Citation V Ultras and 25 Citation Bravos.
NetJets’ acquisition costs begin at $340,000 to $400,000 for a one-sixteenth share of a pre-owned Citation V Ultra, depending on when it was delivered to NetJets. At the highest end is $23.25 million for a half share of a Boeing Business Jet. The monthly management fee runs $5,224 for one-sixteenth share of the Ultra, and $165,920 for the half interest in the BBJ. The occupied hourly rate is $1,318 for the Ultra and $4,360 for the BBJ.
NetJets currently has more than 1,800 pilots on staff, and last year the company said it received more than 8,000 “qualified” pilot applications, from which it hired 450. Its pilots train 23 days annually, “typically twice the time most commercial and private aviation pilots spend training each year.”
The economy notwithstanding, the concept of fractional ownership is also being embraced overseas. NetJets charted the way, introducing NetJets Europe in 1996. That was followed by the launch of NetJets Middle East in 1999, and Executive Jet is planning NetJets programs in other parts of the world, including South America and the Pacific Rim.
“Richard Santulli changed the face of private and business aviation, not only in the U.S., but in the world today,” Russell declared.
The company has committed more than $1.4 billion in aircraft and resources to the NetJets Europe program, and its owners can interchange to the NetJets Middle East and U.S. NetJets programs. NetJets Europe offers six different aircraft types, including the Citation S/II, Citation Bravo, Citation Excel, Citation VII, Hawker 800XP and the Falcon 2000. In the Middle East, where it has committed more than $1 billion, NetJets flies the Hawker 800XP, Falcon 2000 and Gulfstream IV-SP.
NetJets considers its shareholders as Part 91 owners, although it observes Part 135 guidelines for landing distance and crew duty “because we think they add an additional measure of safety.” Russell said NetJets will operate under Part 91 Subpart K when it becomes a final rule.
Flexjet Makes Dent in Market
Bombardier Flexjet, based in Dallas, said in the past four years it has grown an average of 40 percent per year and is now making “aggressive strides” to become the preferred fractional jet ownership program in the world. As part of this effort, Bombardier recently introduced Flexjet to the European market.
Beginning inauspiciously with just 22 owners in 1995, Flexjet in North America has grown to more than 560 owners and is projected to increase to well over 700 by the end of this year. The original fleet, which included 15 aircraft, has grown to more than 110 aircraft currently in operation. It is projected that by the end of this year that will reach 150–composed of 28 Learjet 31As, 34 Learjet 45s, 56 Learjet 60s, 30 Challenger 604s and one Global Express. They will be joined shortly by Bombardier’s newest offering, the Continental, which is undergoing flight test.
Pricing on the Flexjet fleet starts at a $418,000 purchase price for a one-sixteenth share in a Learjet 31A and goes up to $1.475 million for the same size chunk of a Challenger 604. The monthly management fees are $4,270 and $9,280, respectively, and the variable hourly rate is $1,310 for the Learjet and $2,610 for the Challenger.
Flexjet now employs more than 1,000 people–560 of them flight crew. The company said its pilots are trained to “the highest airline and safety standards.” They are type-rated for one aircraft and fly only that specific model. In addition, all pilots receive ongoing training and flight checks throughout each year, according to the company.
Travel Air Holds Its Own
Raytheon Aircraft’s Travel Air fractional-ownership program began in 1997 with 13 aircraft and 42 owners, and now boasts a fleet of 107 aircraft and more than 800 owners. In its first venture outside the Raytheon family fold, Travel Air announced earlier this year that it plans to add pre-owned long-range Bombardier Challengers to the program.
Hart said that Travel Air decided to add two Challengers primarily because the type has longer range and a bigger cabin than anything Raytheon currently produces. “The [super-midsize] Horizon is on order, but is still a couple of years down the road,” he said. “We needed an airplane that would give us coast-to-coast, Hawaii and Europe capability. We go to Hawaii and Europe in the Hawker now, but we needed an airplane with a bigger cabin and longer range to allow us to really compete in the marketplace with the other players.”
Hart said that Travel Air has not been looking at anything larger at the present time, “and I don’t know whether we’ll go larger than that in the future or just stick where we’re at.”
Travel Air’s fleet currently includes 26 Hawker 800XPs, 51 Beechjets, 28 King Air B200s and two Challengers. The company is also accepting share orders for Raytheon Aircraft’s three all-new business jets: the recently certified entry-level Raytheon Premier I; the light midsize Hawker 450, which was announced at last year’s NBAA Convention; and the Hawker Horizon, which is currently undergoing flight test.
Prices begin at $277,200 to purchase a one-sixteenth share of a King Air B200 and go up to $1.27 million for a one-sixteenth share of a Challenger 601. The King Air monthly management fee is $3,618, while the variable hourly rate is $815. The Challenger’s monthly fee is $9,250 and the hourly rate is $2,750.
Raytheon Travel Air, which is headquartered in Wichita, employs more than 700 people, including 500 pilots. Since its creation, the program has logged more than 150,000 flight hours on more than 107,000 flights. It said it averages 170 flights per day and has an on-time record of 98.5 percent.
According to the company, Travel Air last year was named best in service for the second consecutive year by an ARG/US survey of fractional aircraft owners. In addition, Raytheon said it was named in the same survey as tops in crew professionalism and program scheduling.
Quoting a report by Amstat, an independent aviation research firm based in Tinton Falls, N.J., Travel Air claims it offers the newest fleet among major full-service aircraft fractional ownership companies, with an average fleet age of 2.5 years.
Flight Options Finds Own Niche
Flight Options’ Heckman said that earlier this year, the Cleveland-based company introduced the entry-level Cessna CitationJet for $195,000 for a one-sixteenth share. “We felt that a good new product for us in a downturned economy was the CitationJet,” he said, “and that has proven to be terrific. We are selling a CitationJet a month based on those economics.”
In addition to two CJs, Flight Options’ fleet of pre-owned aircraft currently includes 29 Beechjet 400s, nine Citation IIs, eight Citation IIIs, two Citation Vs, 18 Hawker 800s, seven Falcon 50s, 11 Challenger 601s and two Gulfstream IVs.
Along with the CJ’s purchase price, a buyer would pay a monthly management fee of $4,110 and $995 for each occupied flight hour. The GIV is currently the most expensive aircraft in the Flight Options fleet, with a one-sixteenth share purchase price of $1,437,500, a monthly management fee of $11,550 and an occupied hourly cost of $2,800.
Flight Options aircraft are already certified to Part 135, and “we are positioning ourselves to operate under Part 135 totally,” a spokeswoman said. It has also adopted the “best practices” guidelines that emanated from NATA’s Business Aviation Security Task Force. The company employs 390 crewmembers, including pilots and flight attendants.
The company also offers a Flight Options Europe program in partnership with ChauffAir, whereby participants are able to purchase access to Citation Excels and Hawkers in increments of 10, 25 and 50 occupied hours per year. For the European program, according to Flight Options, there is no requirement for large deposits or initial acquisition capital. Its international operations control center is in Farnborough, UK.
Another Star in the Frax Market
When Cessna bought half of TAG Aviation’s StarShares turboprop fractional aircraft ownership program, it inherited six King Airs, two of which have already been disposed of. CitationShares now has 14 aircraft–not including the remaining King Air C90s and B200s–consisting of a mix of CJ1s and Bravos. By year-end it expects to take delivery of three more Citations, one of which will be an Excel.
Purchase prices for a one-sixteenth share are $295,281 for the CJ1, $388,919 for the Bravo and $615,313 for the Citation Excel. Monthly management fees are $3,724, $4,010 and $5,775 for the three business jets, respectively. The primary service area (PSA) is east of the Rocky Mountains–territory that includes Colorado, eastern Canada, the Bahamas and Bermuda. Flight hour rates inside the PSA are $995 for the CJ1, $1,100 for the Bravo and $1,400 for the Excel. Outside the PSA they are $1,144, $1,265 and $1,600, respectively.
Based in Greenwich, Conn., CitationShares already has about 120 customers. “From the marketing side we are selling east of the Rocky Mountains to include Colorado,” said John Hall, senior v-p of sales and marketing. “Operationally, we are flying wherever our customers want to fly.”
CitationShares is currently flying under Part 91 and does not maintain a Part 135 certificate. We really operate under what we believe Part 91K is going to be,” said Hall, who noted that FOARC chairman Jim Christiansen used to sit on the CitationShares board. “So we’re very familiar with 91K and we are building our infrastructure and our operations based on Part 91K.”
He described the initial CitationShares effort, which flies out of Westchester County Airport in White Plains, N.Y., as a “regional rollout” of a national program. “We are not seeking out West Coast customers yet,” he said. “If a guy in Texas calls us today we would sell him a share. When we launched the program, we wouldn’t sell somebody in Texas a share in an airplane.”
Hall said CitationShares began flying almost immediately because it quickly acquired a core fleet of seven Bravos and one CJ1. As the owners either leave the King Air program or upgrade to jets, the turboprops are being consolidated and downsized, so that eventually CitationShares will be an exclusive Citation operation.
Despite being a new player on the fractional scene, Hall said the company is watching the economy very closely. “We were in the process of scaling back our 2002 projections just based on the economic environment,” he said. “We didn’t see the industry growing at the rates that it had been growing at historically, and we still haven’t finalized the numbers yet.”
Hall acknowledged that CitationShares was looking at reducing the number of aircraft it would acquire next year to be better aligned with the economy. “What we want to do is sell into a backlog versus having inventory sitting on the ground that we’re trying to sell,” he explained. “So that’s our objective when we place our orders.”
However, since September 11, he said that the demand for fractional ownership and the demand for travel in fractional airplanes has spiked, while the economy has continued to slow down. “So what we’re trying to figure out as a company, and probably the industry as well, is whether the spike is now a trend, or is the spike going to pull back as a result of the slowing economy to something below where it was,” he said. “My opinion is that the spike will become a trend, but it is going to pull back some from where it is now as people try to figure out which way the economy’s going.”
CitationShares expected to take delivery of its first Cessna Excel at the end of last month, and Hall said that will “get us through next year, and we’re looking at where we go in 2003. We haven’t made any definitive plans.”
The slowing economy has served to reduce Cessna’s backlogs, so CitationShares does not have to plan as far in advance. “We can be a little more tactically oriented,” Hall elaborated. “We can respond to what the market demand is versus what we hope the market demand is going to be.”
PlaneSense, a Nashua, N.H.-based fractional-ownership company that is part of Alpha Flying, designed its program around the Swiss-built Pilatus PC-12 turboprop single. At press time, Alpha president and CEO George Antoniadis was expecting to have taken delivery of a 10th PC-12, and he told AIN that the company has orders for more. Unlike the top fractional providers, “We are not touting multi-hundred orders here, but we are looking at significant growth of the fleet,” he said.
According to PlaneSense, the PC-12’s cabin seats six passengers and two crew and is larger than a King Air 200 or a Learjet 35. With six passengers, the range is about 1,600 nm at 270 kt, giving it one-stop transcontinental capability. The executive interior sports a fully enclosed lavatory, and a large cargo door allows for oversize items.
An eighth-share purchase price of $419,000 allocates 87 occupied flight hours annually to the buyer, while a quarter share provides 175 hr of passenger-occupied flight hours. The eighth-share management fee is $4,401 per month and the quarter-share management fee is $8,802. Occupied flight time is $561 per hour, which counts only when the owner is in the aircraft. There is no charge for reasonable ground delays, deadhead flights or repositioning.
All flights are conducted with two pilots, and there are currently more than 35 pilots on the company’s roster. PlaneSense is a Part 91 operation that operates and maintains its aircraft to Part 135 standards.
The company boasts that the PC-12’s operating costs are less than half those of similar size jets and about 20 percent less than similar size turboprops. With eight hours’ notice, Alpha Flying guarantees an airplane wherever the owner asks for it, and it pointed out that a number of its owners actually send the airplane to pick up an important client/prospect and transport them to meetings–“an impressive display of your corporate image.”
“We have seen a rush of inquiries lately,” said Antoniadis, who describes PlaneSense as “a low-cost participant” in the fractional-ownership business. “But we also see that the consumer is more cautious. I believe that PlaneSense is well placed for these conditions because it is a cost-effective program.”
He said this year the company expects to exceed 4,000 flights, which each average 1.3 hr. The program’s primary area is east of the Mississippi, and Antoniadis said that the strategy of PlaneSense has been to be a regional program that can be expanded. To that end, it has forged a marketing operation with Epps Aviation at Atlanta’s DeKalb-Peachtree Airport (PDK), opening up the Southeast as an additional market and a possible aircraft base at PDK.
“We are looking at geographical expansion possibilities,” Antoniadis said. “We do have orders for more aircraft. We do have a good inflow of inquiries and, although we do perceive that the economy is going through some shocks, we still see interest in our program.”
Jet Linx sells 10-percent shares in its Diamonds and Beechjets for $325,000, which gives the buyer 80 hr a year. The monthly management fee is $3,500 and the hourly fee is $1,250. Marketing v-p Don Seidholz said that the company is unique in the “whole joint ownership arena in that half of our business is charter and the other half is joint ownership.”
He claimed that structure allows Jet Linx to price its product much more competitively than anyone else in the industry, since it also generates cash flow and revenue from the charter side. An ancillary benefit, he said, is that “we find that anybody who charters one of our aircraft usually ends up being a prime prospect.” He added that Jet Linx is close to having all of the available shares sold out on the current aircraft, and it is looking for other aircraft.
“It’s almost as if the charter is acting as a marketing arm to an ownership program,” said Seidholz. He further distinguishes joint ownership from fractional shareholding, and cites as a primary difference the option of shareholders to use their own pilots if they wish. Jet Linx, which has 11 pilots and a chief pilot, operates under Part 135 and will continue to do so in the future, he said.
According to Seidholz, many clients are looking at joint ownership programs for a variety of reasons– the biggest one of which is expense. “The second biggest one is the access to multiple kinds of aircraft,” he continued, “and third, in the uncertainty after September 11, was access to certain airports. Insurance rates are projected to go up by 200 percent, too.”
Meanwhile, United Airlines announced last month that its entry into the fractional fray would be named Avolar, operated by United BizJet Holdings, a wholly owned subsidiary of UAL Corp. United BizJet Holdings consists of three subsidiaries: BizJet Services, a large-jet charter/ shuttle operation; BizJet Charter to provide on-demand charter using smaller aircraft; and BizJet Fractional, the fractional operations arm for which the Falcons and Gulfstreams were ordered.
For the latter, UAL placed orders at the Paris Air Show in June for as many as 100 Dassault Falcons and 25 Gulfstreams valued at $3.75 billion, including maintenance and support.