Jet Advisors Blog

What to Know About Buying a Challenger 604 Share

Posted on Wed, Apr 10,2013

Are you thinking about buying a fractional share on a Challenger 604 through Flexjet? A Hawker 800XP through NetJets? A Phenom 100 from JetSuite? Are you leasing for the first time or want to make sure you've got all your bases covered before you enter a new agreement?

David Beach, former Senior Vice President of Contracts at NetJets and current VP of Administration at Jet Advisors, is beginning a series of blog posts on what you need to know before you agree to a fractional share or lease on any airplane. 

 

Fractional Programs: Know the Terms & Conditions (Part 1)


Challenger 604 fractional share lease private jetWhile at first glance, they appear to be very similar in structure and offerings, not all fractional programs are the same - and I am not referring to just aircraft types offered. The terms and conditions governing the programs vary for each provider as well as the agreements used. Consequently, the terms and conditions as well as the documents should be reviewed and understood before you sign on the dotted line.

The document that accomplishes this is either a fractional interest purchase agreement or lease agreement. In either of these agreements, there are things to be aware of, and in some cases, they can be negotiated away or made more favorable to you.One thing, though, is common to all programs. To become a member or owner (as the fractional programs refer to customers), you must acquire ownership of an interest (also referred to as a share) in an aircraft.  This is accomplished in one of two ways: either an outright purchase (yes, you buy a “piece” of the aircraft) or through a lease. In the purchase scenario, you receive a bill of sale for the share and are registered as a partial owner of the aircraft with the Federal Aviation Administration (FAA).

Does the provider make reasonable efforts to position the aircraft in a "tax-friendly” location at time of delivery?

What is the guaranteed term of ownership or leasehold? Most programs have a 5-year initial term (60 months), and some give you the option to terminate early after a preset minimum term of ownership or leasehold. If you terminate early, are there penalties or fees? Most ownership structures have a brokerage fee due at termination based on your share’s fair market value at the time of termination regardless of whether you go full term or terminate early.

Since the brokerage fee is based on your share’s fair market value, how is that value determined? Do you have the option to dispute it, or is it take-it-or-leave-it? Is the repurchase at termination guaranteed in a certain time frame, or does provider have to find a new buyer before they buy back the share?

Business corporate private jetWhat are your rights if the provider defaults or ceases to do business? For the large providers this is unlikely, but if it did happen, the market would be flooded with aircraft, values would plummet, and you would be holding the bag along with the other owners with shares on the same aircraft.

Another provision to be aware of is assignability. Can you freely assign to an affiliate or to a third party that is unrelated to you or your company? If the share can be assigned, are there fees required for documentation, filings, movement of the aircraft, etc.?

What are your obligations for registering the share with the Cape Town Convention on International Interests in Mobile Equipment (International Registry) when you purchase it and when you sell it back? While not a major expense, signing up to the International Registry and filing or consenting to the purchase and sale back will cost at least $1,000.

 

 

Top Issues When Buying Fractional

Topics: fractional, fractional ownership, private jet, fractional share, jet lease, Flexjet, NetJets, JetSuite, phenom 100, embraer phenom 100, Hawker 800, Hawker 800XP, challenger 604

XOJET: Challenger 300, Cessna Citation X, Hawker 850XP

Posted on Thu, Mar 21,2013

Bombardier Challenger 300 Private JetXOJET was founded in 2006, and their headquarters are located in Brisbane, California. The base aviation service model XOJET uses is charter; however, in addition to one-off charter booking, they offer four distinct programs. These programs are:

  • XOJET Preferred Access Program, which allows customer to gain preference over customers and control pricing based on their flight needs,

  • XOJET Coast2Coast Program, which allows customers to access customized coast-to-coast charters,

  • XOJET Elite Access Program, which provides guaranteed access to the XOJET fleet with pay-as-you-fly pricing, and

  • XOJET Membership Program, which allows the customer to pay only for charters taken.

Each program has its own unique terms and conditions. XOJET Preferred Access Program has a $200,000 upfront refundable deposit that is drawn down as you fly. The XOJET Coast2Coast Program is sold in 25-hour increments with a prepayment upfront for those hours. The XOJET Elite Access Program has a $100,000 refundable deposit, and flight hours are billed as they are incurred. The XOJET Membership Program has a nonrefundable one-time membership fee and an annual fee (annual fee is refundable in some cases). These fees are determined based on anticipated annual usage. Other terms and conditions apply, and the details can be found on their website at XOJET.com.

Hawker 850XP Private Jet

The current wholly owned or wholly leased fleet operated by XOJET consists of 16 Bombardier Challenger 300 aircraft and 29 Cessna Citation X aircraft. With Aircell GoGo BizAv technology in every Cessna Citation X and Bombardier Challenger 300, XOJET’s fleet was the first fleet (2010) to be fully equipped with in-flight Wi-Fi Internet connectivity. While a fleet of 45 aircraft is impressive by itself, XOJET has a strategic alliance with Travel Management Company, LTD (TMC) that broadens XOJET customers’ aircraft selection by providing access to 30 Hawker 800/850XP aircraft and 23 Hawker 400XP aircraft operated by TMC. The TMC Hawker 800/850XP fleet also provides GoGo BizAv Wi-Fi technology.

With one of the youngest fleets, XOJET also focuses on safety. XOJet pilots have an average of 7,800 flight hours of experience, and they go through an initial 300-hour customized training program at CAE/SimuFlight and a 150-hour training program in subsequent years. Not only are the pilots trained above FAA standards, XOJET has developed a comprehensive safety and quality management system called XOPS which encompasses flight crews, flight operations, and maintenance.

XOJET Concierge Access offers their customers exclusive access through a dedicated concierge for travel on their fleet to a variety of special events, leading hotels and resort properties, and unique destination experiences. Just a few of XOJET’s travel partners are Virgin Galactic, Art Platform LA, Jazz Aspen Snowmass Festival and The Armory Show NYC.

  

See how Challenger 300 compares to other jets!                  See how the Citation X compares to other jets!

Topics: Hawker 400XP, Hawker 800, XOJET, Citation X, Challenger 300, Hawker 850XP, Travel Management Company