A decade ago, the only people with ready access to private jets were heads of state, top corporate executives and rock stars. Not anymore. These days, anyone with a couple hundred thousand dollars to spare can join the jet set, leaving commercial aviation’s frustrated masses behind at the ticket counter.
How to do it?
While you could charter a plane or buy a fractional share in a jet, the better option could be to purchase a private jet card.
At least that has been the experience of Peter Rohr, a private wealth adviser for Merrill Lynch in Philadelphia, who oversees about $1.5 billion in assets. Of his 87 clients, Rohr said, 22 used jet cards purchased through fractional providers like NetJets, owned by Berkshire Hathaway, and FlexJet, owned by Bombardier, or from private charter operators like Sentient Jet.
A representative of the working wealthy, Rohr described his card-holding clients as busy people with lifestyles that demanded efficient air travel, whether for a short weekend trip to the Bahamas or a business trip between London and New York.
“It all comes down to convenience,” he said, noting that his clients wanted to avoid commercial airports, control their own schedules and, perhaps most important, save time.
According to the most recent World Wealth Report, published by Merrill Lynch and Capgemini in June, private jets, yachts, high-end automobiles and other luxuries are the biggest “investments of passion” for high-net-worth individuals.
But private aviation, relative to other asset classes, is a challenging passion to indulge. Priced in the millions of dollars, jet planes are an expensive proposition, even when the expenses are shared among partners. Ownership costs are huge, as are operating costs and aviation taxes.
“Owning your own plane, which has to be registered somewhere and can be subject to VAT,” or value-added taxes, is a complex matter, said Andrew Penney, managing director at Rothschild Trust in London. In Britain and elsewhere, spending on a jet must be wholly and exclusively incurred as a business expense to be able to claim a tax deduction.
So it was a welcome development when NetJets, the world’s largest provider of fractional jet ownership, introduced its private jet card program six years ago. With no ownership commitment required, this is a big selling point for people reluctant to shackle themselves to a high-maintenance asset.
The cards have proven popular not only among those new to the world of private aviation but also among veteran jet owners. Rohr, the Merrill Lynch adviser, said he had a client who recently sold his Gulfstream III and signed up for a private jet card. “This was a person who could afford anything,” Rohr said. “For him, it was so much easier.”
Robert Dranitzke, the director of marketing, communications and corporate social responsibility at NetJets Europe, said the card program was “the most successful innovation we’ve ever had” since it entered the fractional ownership market in 1986. The company now has an estimated 4,870 cardholders worldwide. FlexJet, its closest rival, declined to disclose how many cards it had sold, but said that its card sales had risen 51 percent in the first half of this year from a year earlier.
Positioned as an entry-level product, the NetJets card program allows customers to purchase 25 hours of occupied flying time – meaning from wheels up to wheels down – with its fleet for a starting price of $131,900 in the United States and €131,000, or about $193,000, in Europe, not including taxes and fees.
The trans-Atlantic difference in prices is due to higher European costs for aircraft maintenance, pilot salaries and other expenses, Dranitzke said.
Card holders can choose to take larger or smaller jets and can alternate between NetJets’s U.S. and European programs, trading their hours and aircraft access. Available aircraft cover a wide range of possibilities, from a seven-passenger Hawker 400XP, often used for midrange trips, like from Dublin to Stockholm, to a 14-passenger Gulfstream V/550 capable of making the long haul between Manchester and Los Angeles.
NetJets, which controls more than 50 percent of the market for private jet cards, flies to about 5,000 airports worldwide, 900 of which are in Europe. FlexJet runs all of its international flights to and from North America. To meet a card owner’s requirement of a trip that does not pass through a North American airport, an itinerary within Asia, for example, the company relies on Skyjet International, which is owned by Bombardier and based in Hong Kong.
The private jet cards sold through fractional providers are more expensive than the cost of a charter service. With a NetJets Europe card, five passengers can take a Hawker 400XP from London Farnborough Airport to Nice, with total airtime of about an hour and 40 minutes, for €10,483. The price includes a high-density airport charge and is based on July jet fuel prices, and no VAT is charged because it is an international flight.
That same trip from a charter service costs about €7,800. If there were only four passengers, the flight would cost just €3,500 with Blink, a European air taxi service.
But when compared with traditional fractional ownership plans, the cards are much more affordable. NetJets, for instance, is selling a one-sixteenth share, the equivalent to 50 hours annually, in a Hawker 400XP for $400,000. On top of that come monthly management fees as well as occupied hourly fees, covering everything from pilot salaries, hangar time and insurance to fuel, catering and overfly fees.
Fractional providers are not the only alternative to private jet cards. As Rohr noted, some of his clients opt for private jet clubs, like Sentient Jet, which issue debit cards based on a minimum deposit of $100,000. Such cards allow for access to a variety of jet types billed at hourly rates.
Still, when it comes to service and safety, the jet cards offered by the major fractional providers are going to be hard to beat. In addition to young, well-maintained fleets (the average aircraft age for FlexJet planes, a combination of Challengers and Learjets made by Bombardier, is three years), they offer catered meals, first-class flight crews and top-notch pilots. NetJets says its pilots undergo roughly six simulated training sessions a year – more than twice the industry average.
With two decades of operational experience under their belts, fast-expanding global operations and hundreds of aircraft at their disposal, the leading fractional providers have the size and scale “to be very good at what they do,” said Barry Schuler, a U.S. venture capitalist.
Schuler should know. As a former chief executive at America Online, Schuler relied on both NetJets and FlexJet for his corporate and personal travel, and he recently bought his own jet, a Falcon 50. Though he doesn’t own a jet card, Schuler said that he was not ruling one out and that if he did buy one, it would be from one of the bigger companies.
“They have more aircraft and more experience,” he said. “They’ve also been through at least one business cycle. In the end you are going to get better service.”