Offsetting Costs By Chartering Your Aircraft
This is a post by guest author Dean Kantis, founder and owner of Micro Jet Network, Inc and Charter My Jet. Dean was asked to contribute to this blog because of his expertise in aircraft brokerage and matching aircraft owners and operators for charter operations. Any thoughts expressed below are entirely Dean’s and do not necessarily reflect the views of Universal Weather and Aviation, Inc.
There are many benefits in owning a business aircraft such as being able to operate directly to your business destination, avoiding commercial airlines with long lines, and having an aircraft available at any time the passengers requires it. However, you will find that the associated costs in maintaining an aircraft when not used can prove expensive for many. A great solution to this problem is to offset those costs by chartering your aircraft through a charter operator.
The following is an overview of what you need to know should find yourself considering this:
1. Common problems operators experience with maintenance costs
Our experience has shown that approximately 45% of the aircraft owners do experience financial swings and need to find another avenue to help “cover maintenance and calendar inspections” because they are no longer using their aircraft 200+ hours per year. Also, many times, operators are “locked into” a maintenance airframe and/or engine agreement that they sign that has a minimum of 125 hours per year, and if they only use 85 of those hours (per year), they still have to pay the minimum of 125 hours. On the other hand, it may be that the operator’s minimum operating requirements were 200 hours per year, but they are only using it for about 125 hours per year–or wasting about 75 paid hours of engine and maintenance plan costs. The Federal Aviation Administration’s (FAA’s) website offers some statistical data on these costs.
2. How to create clean charter revenue near you
If you fit into this category where you need help adding some hours and usage to your plane every year and you have some flexibility, then the best solution for you is to be “matched” with the best charter operator (part 135) who can take care of your aircraft as good or better than you, while simultaneously maximizing the quality of flight hours that it has the potential to be flown. Sounds simple right? Wrong. There are over 4,000 registered part 135 operators in the U.S., and the FAA has been downsizing since 2013. Their goal is to reduce the amount of charter certificates down to about 2,000 and then delay creating any new ones. Concurrently, the FAA is going through it’s database to remove all of those charter operators that are part-time, don’t have an exclusive aircraft conformed to be actively flying, and/or don’t have a qualified Director of Maintenance (DOM), Director of Operations (DOM), or Chief Pilot (CP). Another consideration is how you, the aircraft owner, decide and choose which charter operator will be the best choice for maximizing the quality of flight hours for your specific aircraft.
3. What the normal charter revenue split is
Usually, the industry standard split for “charter hourly revenue” is 85% to the aircraft owner and 15% paid to the charter operator. But, that’s just the standard before you get into “other costs and benefits” that a more experienced operator may provide. Thus, the split may change to 90%/10%. Also, the more hours that an operator can guarantee may justify paying them the 15% as they will have more incentives to promote/utilize your aircraft over another aircraft owner’s aircraft which is only paying 10% to the charter operator. This can be tricky, and there is a thin line or balance to fine tune. Each 1% point can mean thousands of dollars lost or gained monthly. Consulting a professional that best knows how to locate and negotiate the best terms and conditions for the aircraft owner is extremely important.
That’s where the professional advice, experience, and 135 operator network comes in. There are only a handful of companies that will be able to match the charter operator with the aircraft owner based on criteria determined through a very thorough questionnaire system. These companies will typically charge a small percentage or a flat fee, but it is typically worth it if an aircraft owner can add 10, 20, or 50 charter hours per month, which will help offset much of those annual maintenance and calendar inspection costs. The trick is for the charter operators and the aircraft owners to find each other, get “matched,” and maximize the profiency for that particular aircraft.
4. How to determine the best charter operator for your aircraft
The biggest concern any aircraft owner will have is that someone else isn’t going to watch over, fly, and manage their plane as well as they would. The reality though is quite the opposite when working with an experienced charter operator. There is usually more risk involved with an aircraft owner singularily owning and operating it’s own aircraft. The reason? Resources and experience. In many cases, the charter operator conducts many more aircraft operations than the individual owner, has all of the systems in place, and has 10+ years experience. In our experience, 99% of the time, charter operators will do a much more proficient job daily in running the operations, scheduling, detailing, and flying the aircraft than a single aircraft owner can do because there isn’t just one person relied upon. The reality is that when matched with the right charter operator you get an entire aviation team making sure that the aircraft is used to the best of its extent. All this can be easily covered and thoroughly addressed with the charter operator and legally binded through your agreement’s mangement terms and conditions.
All of these costs can quickly add up to be hundreds of thousands of dollars annually which the aircraft owner will have to pay out of pocket anyway even when the plane sits. It is our experience that there is more value to the aircraft owner by matching them with the right charter operator, and this can be clearly spelled out in the agreement that’s signed between the two parties. We recommend you work with experienced professionals to help you navigate these waters, match with the right operator, and ensure your agreement is structured in your best interests.
If you have any questions about this article, contact me at firstname.lastname@example.org.