This is the third in a series of blog posts by David Beach, former Senior VP of Contracts at NetJets, on what questions you need to have answered before signing a management services agreement on a private jet.
Fractional Programs, Know the Terms & Conditions, Part 3
As stated in my last blog, a common facet to all fractional programs is the aircraft management services agreement. As this is, in my opinion, the most important of the numerous agreements that make up the contract package for program providers, it should be reviewed carefully and the terms and conditions clearly understood.
Who performs the maintenance and to what standards? Is the cost of maintenance covered by your monthly or hourly fees? Do you have exposure for modifications, refurbishment and/or Federal Aviation Administration (FAA) directives and/or manufacturers’ service bulletins and alerts? Do you have access to the maintenance records for your aircraft?
Flight Time Costs
Are flight time charges billed at actual flight time or estimated? Is there a per-flight or per-day minimum? How is taxi time accounted for and billed? What happens if your trip is interrupted by mechanical problems or regulatory requirements such as customs stops? Does the provider bill you for the additional landing and take-off, and does the per-flight minimum apply? How is the fuel consumed for your flights billed? Is it rolled into the hourly rate, and how is the cost of fuel calculated (providers’ actual or published average fuel rates)? How does the hourly fee escalate over the term of the agreement, and are there increases along the way as the aircraft ages and as the cost to maintain it increases? In addition to how your flight time is billed, you should know how your allotted hours (annual hours and contract term hours) are calculated and what the impact of under- or over-flying is and what happens if you trade to a smaller or larger aircraft. If you fly outside of the provider’s service area, is there a ferry fee, and does that impact your allotted flight hours?
In all programs there are notice periods for flight reservations. Does it vary by aircraft type, share size, area of travel and day of travel (peak or busy day versus non-busy day)? If you provide the required notice, does the provider guarantee to cover your flight? Does the provider have the ability to accelerate or delay your requested departure time depending on when notice is given or the level of demand for the departure day?
Most providers have a fairly large staff of customer service representatives. Do they assign an individual or team to your account or do you just get whoever picks up the phone? Will the provider’s customer service staff assist with flight-related services such as car rental, hotel reservations or shipping of excess baggage – and is there a charge for these extra services?
These are a few more of the areas you need to know about but there are more to come.