Jet Advisors Blog

Recognizing when a Deal is Too Good to be True

Posted on Fri, Apr 11,2014


Aircraft Discussion The old saying 'if it sounds too good to be true, it probably is' holds true in most instances. It can be especially costly to you in the field of aviation if you fly charter, use a fractional service or have a whole aircraft or share a whole aircraft.

Aircraft are rather unique vehicles for travel in that most others wear out and get retired, but with an aircraft, as long as they are inspected and maintained to their manufacturer’s and the governmental agency that oversees them requirements they don’t wear out, to a point. This is one area to be concerned with if you are looking to buy a whole aircraft or share a whole aircraft with partners. Older aircraft have lower acquisition costs as compared to newer like aircraft but as aircraft age the maintenance and inspections become progressively more intensive. So you pay less upfront but the costs to keep the aircraft airworthy are higher, much higher than a newer aircraft. Also with whole aircraft ownership your travel patterns can cost you more. If you fly somewhere and stay, do you ferry the aircraft back empty to its base or do you keep it with you. If you keep it with you what do you do with your crew? Do you pay for them to fly home or do you pay their hotel, meal and rental car costs while they stay. Keeping the aircraft with you may not be an option if you share the ownership with others.

If you share the aircraft with others, who gets first priority for its use? If you are second inline do you not travel or do you have to find alternative means at your expense? Keeping in mind even when you are not using your aircraft you still incur expenses for its upkeep, hangar, crew, insurance, etc. If you have lease financed the aircraft you own or share, what are the aircraft condition requirements (cosmetically and mechanically) at end of the lease term? These can be substantial.

With fractional programs and charter operators what is your real cost? Like todays pricing for airline travel there can be many “hidden” costs. When a fractional company provides a proposal to enter their program do they include the depreciation on your aircraft asset (50% or more over a five year term), fuel adjustment (usually over a thousand dollars per hour) to your advertised hourly rate, flight time minimums, or taxes in the proposal? With charter companies you can ask the same questions, is the quote all inclusive or are there hidden charges like crew overnight fees, hangar fees if the weather is bad at your destination and catering charges. With charter or fractional programs, what if you make last minute changes to your itinerary or cancel the flight? What if the air transportation provider is late or doesn’t show up at all, what is your recourse?

As stated above, if the deal being offered appears to be great (too good to be true) compared to your other options, you need to find out why.

Topics: jet card, charter, fractional, fractional ownership, charter flights, fractional share, private jets, jet lease, fractional program, fractional jet program, fractional co-owner, jet co-owner, private jet co-owner, fractional light jets, fractional consulting

Quelling Nervous Flying

Posted on Thu, Mar 27,2014


Safe LandingIt matters if you fly commercially, or privately, if you are a nervous, or fearful flyer, to some extent. Most flyers (if you are not a pilot or the pilot for the flight) have some misgivings each time they fly, but some of us just resign ourslves to the fact that you need to fly and have little control over the many factors that could impact the flight.

Some factors that cause concern regardless of flying commercially, or privately, are obvious like the weather, over water flights, mountainous terrain, airports in the mountains and small airports (usually short narrow landing strips). Some are not so obvious but due to past accidents and the subsequent news reports still cause some concern. Some not so obvious concerns include security, aircraft maintenance condition, pilot complacency (dependence on automation versus pilot skills), pilot training and experience and pilot fatigue.

Outside influences such as hijacking, terrorist activities and the growing incidents of lasers pointed at cockpits are also thought about prior to flight by some. In private aviation hijacking and terrorist activities are unlikely but the threat from laser light (accidental or on purpose) is growing in the US and in Europe. After 9/11 and other previous horrible events (Lockerbie Scotland) commercial travelers were on edge and the recent “disappearance” of the Malaysian airliner has done little to quell those fears.

So how do you overcome your fears and what can you do? If you fly commercially there is little you can do to change a flight plan, the point of origin of the flight and the destination, checking the experience and training of the crews or the quality of the aircraft maintenance. These are all controlled by the airline. US airlines have a very enviable safety history; however you are still at their mercy when it comes to security check in, crowded aircraft and the unavoidable delays and cancellations. If you fly privately, either on your own aircraft, through a fractional program or by charter, it is a different story.

If you own or co-own the aircraft then you have firsthand knowledge of the crews experience and training and the maintenance status of the aircraft.  In addition, you pick departure and arrival location, times for the flight, who you fly with and most importantly you have the ability to terminate or not start a flight if there are any factors that bother you. If you participate in a fractional program you have the comfort factor (if your provider is one of the larger ones) that pilots are highly skilled and routinely trained, the aircraft is maintained as it should be (with a large staff overseeing such maintenance) and you have the ability to cancel or terminate the flight if you have a weather or other concern, however, you might get charged for the cancelled flight. With most charter operators they can provide you with their past histories and audit reports from independent aviation professionals and, as with fractional programs, you have the ability to cancel or delay flights for any reason but once again you may be charged for any itinerary changes or cancelations.

So what should you do? Do your homework on the method of air transportation you use and if using commercial stay vigilant. If you have your own aircraft make sure your crew knows your preferences and if you fly fractional or charter these companies usually build a profile on your likes and dislikes, make sure the profile is accurate.

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Topics: jet card, charter, fractional, fractional ownership, private jets, jet lease, fractional program, fractional jet program, fractional co-owner, jet co-owner, private jet co-owner, fractional light jets, fractional consulting, airports, Nervous Flying, Malaysia

Danger in the Skies, Laser Pointers

Posted on Tue, Mar 11,2014

Plane at SunsetLaser pointers have been commercially available since the 1980s and are seen everywhere from boardrooms, classrooms, in tools, cat and dog toys and even in gas stations as novelties. So why would the FBI offer a $10,000 reward to anyone that helps them to apprehend and convict someone pointing one of these seemingly harmless devices at an aircraft?

Most laser pointers available to the public are pretty harmless if used as they are intended to be and care is made not to shine them in someone’s eyes from close up. However, the danger to aircraft operations comes from the strong concentrated light they emit, the spread of this light at distances and the potential to distract, startle, cause flash blindness and the concern of injury (but at distances the risk of injury is low, at least from the laser beam). Currently there are no commercially available lasers that can physically damage an aircraft and it is unknown and doubtful that there are military lasers that could.

When using a laser outside at night it appears the beam ends at a relatively short distance from the user but that is incorrect and the beam spreads at longer distance like an ordinary flash light. At one half of a mile the beam from a handheld laser spreads to approximately the size of a doorway. When the beam spreads it has the potential to reflect from aircraft windscreens similar to when you are driving at night and an oncoming car does not dim their lights. Aircraft cockpits are kept in low light and the brightness of a laser beam can temporarily blind the crew, not a good thing when flying straight and level but extremely dangerous during the takeoff or landing phase of flight.

Lasers used in laser shows are 6 watts and green in color (green is the preferred color since that color can be seen more easily by the human eye than other colors and are less expensive to manufacture). Even though the light spreads at distances a laser show style laser can reach over 368,000 feet (70 miles) and at that distance the main danger is distraction. At lesser distances the dangers increase, eye hazard at 1,700 feet, flash blindness at 8,700 feet (1.5 miles) and glare at 36,800 feet (7 miles).

Commercial hand held lasers are usually about 5 mW and green in color but even at this lower wattage eye hazard could occur at 52 feet, flash blindness up to 262 feet, glare up to 1,171 feet and distraction up to 11,712 feet.

As mentioned above, this issue is being taken seriously as incidents continue to increase. In 2013 there were 3,960 (average 11 per day) reported instances in the US (up from 1,416 in 2009) and over 4,266 (average 12 per day) in Europe. If you are caught and convicted you could face fines and possibly jail time. A man in California was sentenced to 30 months in jail for pointing a laser at an aircraft and just last week another California man was sentenced to 14 years in prison for pointing a laser at a police helicopter. The second man’s girlfriend was also involved in the incident and is facing a $250,000 fine and 5 years in prision.

 

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Topics: jet card, charter, fractional, private jet, private jets, jet lease, airports, laser pointers

Fractional Jet Programs: Trouble in Paradise

Posted on Thu, Aug 01,2013

Private Jet Learjet 45XRYou reviewed the various fractional programs and selected the one that was the best for your travel needs. For years you enjoyed the flight services provided and everything was working as advertised and as you expected – then the service became erratic and a little later nonexistent.  What do you do?  More importantly, what can you do?

If you leased the fractional aircraft share and have consistently flown your allotted hours, you may be in good shape. If your lease was direct with the provider and not with a third party financial institution, your biggest problem might be simply finding another provider for your air transportation needs. However, if you purchased the fractional share, you’re in a completely different position.  Not only will you need to find alternative travel arrangements, but what do you do about your owned interest in the aircraft, your asset?

Most (but not all) fractional programs have a guaranteed buy-back provision in the event of default by the provider. Even if your fractional program agreements have the guaranteed buy-back provision and the service is discontinued, the cause is mostly likely due to the financial condition of the provider.

If your fractionally owned aircraft is fully sold into the fractional share program (i.e. wholly owned by you and other participants in the program and no fractional share is held by the provider), you can try to contact the other owners of the aircraft (FAA records are public information) and reach an agreement amongst yourselves on what to do with the aircraft. Options may include finding a third party manager for the aircraft with the owners sharing the costs of operation and use of the aircraft based on how much they own – I do not think this is feasible unless the aircraft is the rare fractional program aircraft with just a few owners – or selling it on the open market. However, any of the options may be difficult to pursue due to the structure of the program agreement you signed and the legal requirements if the provider has declared bankruptcy.

Selling the aircraft on the open market is probably the best option, but it will have its own set of issues to overcome. Is the aircraft airworthy? The fractional provider is required to keep the aircraft airworthy, but if the provider is in a financial bind, has airworthiness actually been maintained?  What about the engines that go with your specific aircraft? Some providers state in the program agreements that the aircraft will have a specific type of engine installed while others specify the exact serial number of the engines. If serial numbers are specified, where are the engines and how do you get them reinstalled on your aircraft?  Is your aircraft lien free? And - probably the most important item - where are the aircraft log books and are they complete and up-to-date? 

Even if your aircraft is airworthy, the appropriate engines are installed, there are no liens, and the log books are complete, what about its fair market value?  Even a small fractional provider going under can have a huge impact on aircraft values when that provider’s fleet is placed on the market. For instance, if 25 used aircraft of a specific type are currently for sale, with only 3 sales in the last 6 months, an insolvent provider with a fleet of 50 aircraft of that type would flood the market. The addition of 50 extra aircraft on the used market would add approximately 8 years of available used inventory, swiftly crushing that aircraft type’s market value.

If you find yourself in a situation where your fractional provider fails to deliver the service you signed on for and want help with the fallout, please feel free to call us at 617.600.6868 and we'll help you navigate your options and find a solution to your private jet needs.

Topics: fractional, fractional ownership, private jet, fractional share, private jets, jet lease, fractional program, fractional jet program

Fractional Jet Ancillary Agreements

Posted on Fri, Jun 21,2013

In previous blogs, I discussed getting into and out of fractional ownership programs and how those programs work. This is the final installment in the fractional program blog series, and now I’ll cover the ancillary agreements that make up most fractional programs’ document package.

The main agreements are the fractional aircraft purchase agreement (or lease, if you choose that option) and the fractional aircraft management services agreement – these two agreements form the core of the document package. Not all fractional providers have the same agreement structure but have combined the necessary terms and conditions into other agreements to make the program work. Other agreements include:

  • Fractional Share Gulfstream G200 Jetthe fractional aircraft owners agreement,

  • fractional aircraft dry-lease and exchange agreement,

  • aircraft acceptance form,

  • limited power of attorney,

  • corporate resolution,

  • warranty bill of sale and assignment, and

  • acknowledgement of fractional owner’s operational control responsibilities.

Different subsidiaries of the fractional provider parent are the fractional provider party to the diverse agreements to separate their respective duties and obligations.

The fractional aircraft owner’s agreement is the only document that does not include a fractional provider entity. This agreement is solely between the owners of a specific aircraft and sets forth their obligations to each other.

The fractional aircraft dry-lease and exchange agreement is the agreement that makes fractional ownership work. It is essentially a dry lease (meaning no services related to ownership or operation of the aircraft are included) of the program aircraft amongst the various owners. The services needed are provided by the fractional program manager and arranged by the administrator of the dry lease agreement.

Fractional Jet Share Ownership ProgramThe aircraft acceptance form evidences when and where the aircraft share was delivered to the program participant. Normally the date of this document is the date that all of the agreements become effective.

The limited power of attorney grants the program provider the authority to act on the program participant’s behalf with regard to filing requirements with the Federal Aviation Administration (FAA). Some fractional providers even draft it in such a way that they have the ability to transfer the aircraft share back to them or to a third party. You need to check with the provider since some offer other options in lieu of the limited power of attorney.

The corporate resolution goes hand in hand with the limited power of attorney, giving the program participant the authority to provide the program provider the limited power of attorney. As its name states, this is only required when the program participant is a corporate entity.

The warranty bill of sale and assignment is in addition to the FAA bill of sale that is filed with the FAA and passes title and registers same with the FAA. The warranty bill of sale goes further in that it not only confirms the program participant’s ownership of the share but indemnifies the participant in the event title issues arise.

Finally there is the acknowledgement of fractional owner’s operational control responsibilities. This document is required if the program participant elects to have its flights conducted in accordance with Federal Aviation Regulation Part 91 subpart k. Some fractional programs only operate under Part 135, and in that case this document is not required.

Topics: fractional, fractional ownership, private jet, fractional share, private jets, jet lease, fractional program, fractional jet program

Fractional Jet Agreements: What to Know Before You Sign

Posted on Mon, May 13,2013

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

 

Challenger 601-3RAs 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.

Maintenance

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?

Notice

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?

Customer Service

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.

Topics: jet card, fractional, fractional ownership, private jet, fractional share, private jets, jet lease

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

Sweet Flights from JetSuite: Embraer Phenom 100 & CJ3

Posted on Wed, Mar 13,2013


Embraer Phenom 100 Private JetJetSuite, with its headquarters in Irvine, California, provides charter services on its wholly owned or leased aircraft. JetSuite is a 7-year-old company founded in 2006 by Alex Wilcox (who also founded the discount airline JetBlue) and Keith Rabin, and the company was purchased by David Neeleman and Acadian Woods Partners LLC in 2010.  Although founded in 2006, their first flight was not until 2009.

JetSuite’s initial fleet plan was to use the all-new (4 passengers) Phenom 100 aircraft manufactured by Embraer of Brazil. The Phenom 100 is one of the most advanced and efficient aircraft in its class. Due to the popularity of the JetSuite program and the need for larger and longer-range aircraft, they began adding the JetSuite Edition Cessna CJ3 aircraft (6 passengers plus a smaller sideways-facing 7th seat) in 2012. JetSuite’s current fleet consists of 15 Phenom 100s and 5 JetSuite Edition CJ3s, and all are equipped with free WiFi. The Phenom 100s are used mainly west of the Mississippi and the CJs are used mainly east of the Mississippi.

JetSuite offers a hybrid program which is called a membership program; however, you do not need to be a member to take advantage of their flight services. The membership program provides 4 pricing levels with the following deposits: $50,000, $100,000, $200,000 and $400,000. Prices per “planned” flight hour start at $3,200 for the Phenom 100 and $3,950 for the CJ3, and the price decreases as the membership level deposit increases. Those at the $400,000 membership level pay  $2,900 for the Phenom and $3,650 for the CJ3. Non-members pay higher hourly rates than members, and members receive priority rights when booking trips. Each trip scheduled for members and non-members is quoted by their customer service group and locked in even if the flight is longer than anticipated. Additional charges may be added to the flight charges for use of non-preferred FBOs, requested departure time slides, and changes to an itinerary outside of certain time frames.

Along with the membership program, JetSuite offers occasional discount flights to and from specific airports on specific dates - these special offers are called SuiteDeals. These SuiteDeals are priced per trip and can cost as little as $499.

JetSuite uses ARG/US (Aviation Research Group/United States), a world leader in aviation safety research, as their independent, third party evaluator to verify compliance of all flights to ensure passenger safety. JetSuite has received an ARG/US Platinum rating. The Platinum rating is recognized as one of the highest in relation to operational practices and flight safety standards, and it is the highest-level safety audit rating in private aviation. All JetSuite flights are flown with two pilots, and all pilots are captain rated, attend CAE Simuflight annually for simulator training, and average 8,000 flight hours of experience.

JetSuite offers their customers pet-friendly flights, ground transportation (if needed, but at additional cost), and benefits from luxury partner Singapore Airlines. 

 

See how the Phenom 100 compares to other jets!

Topics: charter, charter flights, jet lease, JetSuite, phenom 100, embraer phenom 100, citation jet 3, cj3