The risks of operating a business aircraft are very low, but they are not zero. In the event of an accident, an owner can face a significant liability issue - thus a corporation may look to insulate itself from some of the risk by having a degree of separation between itself and the aircraft.

Insulating oneself may involve having the company aircraft placed into a single-purpose entity, a flight department company (Bizplane1, LLC). In the case of the business aircraft, the regulation governing a commercial operation is FAR Part 135. Without this certificate, our hypothetical flight department's pilots can have their licenses revoked for providing illegal charter. This issue even comes into consideration if a senior executive wants to reimburse the company for personal use of the business aircraft.

If the parent company wants to have the additional liability protection that separation may provide, having the aircraft in a Part 135 charter entity is one way to do it. The aircraft operator has command and control of the aircraft in FAA terms. Thus, the parent corporation has that level of separation for risk management and the CEO can charter the plane for personal use if so desired.

 So why not just get your own Part 135 operating certificate? Let us count the reasons. The process can be time and money consuming. 

Obtaining & Maintaining Part 135

The FAA has very specific requirements for obtaining and maintaining a commercial operating Part 135 certification. In order to become certified that these requirements are met, there is a lengthy review and approval process. Issuing new Part 135 certificates is not the FAA's primary mission and with budget restraints, the process can be very long - 18 to 24 months long!

Operating & Maintenance Specifics

The Part 135 operator also must have very specific aircraft operating and maintenance procedures in place, and they must be fully documented and approved by the FAA. The organizational structure of the operator is also mandated by the FAA to have certain positions such as chief pilots and directors of maintenance. These positions must comply with certain experience and training requirements. The operator must comply with drug testing and record-keeping too.

Owners’ Citizenship

A possible issue with some corporations owning a Part 135 operator is the actual owners' citizenship. The Part 135 rules stipulate that the entity's ownership as well as several of the major management positions be held by US citizens. If your corporation does not meet the FAA defined citizenship requirement, it cannot own a Part 135 operation.

 Alternative Separation...

There is, however, another way to achieve separation: You can place the aircraft with an existing charter company, and the aircraft can still be in a separate LLC owned by the parent company while the crew can be employees of the existing charter company.

With the execution of specific management and charter agreements, the parent company can charter its own aircraft. In this case, the charter-management agreement can also allow the charter operator to charter out your aircraft while not in use by your company. This chartering can generate some revenues to offset the costs of owning an aircraft.

For this procedure to work well, there needs to be a clear understanding between all parties involved, however, not only for legal and operation purposes, but also for financial considerations.

To make the operation legal to the FAA, the crew does need to be under the control of the charter company, not the aircraft owner/parent company.

While the primary means of risk management for a business aircraft are training and insurance, the option to operate the aircraft under Part 135 may be one to consider if additional risk management strategies are desired by your company.

Business aircraft are amazing. They are capable of speeds approaching that of sound, range exceeding that of most airliners, and comfort and convenience that make every trip productive and restful.  But there are limitations that must be respected and followed, cautions David Wyndham.

Limitations on aircraft extend to more than just the laws of physics or the bounds of engineering.  Here in the US, the Federal Aviation Regulations (FARs) establish a set of safety parameters in an effort to balance what the aircraft (and crew) are capable of achieving with what is prudent from an approach to safety. Furthermore, there are multiple levels of safety, and what was acceptable last week may not be acceptable today just because of how the aircraft is being operated or who is in control..

The FARs do not assume a uniform standard of safety. They are designed to let those with the most responsibility and authority have the most leeway in the operation of the aircraft. The FARs also make some judgments as to the ability of the passenger to control the flight. Underlying all these boundary conditions is the rule that the pilot in command is the final authority regarding the safe operation of the aircraft.

At the most restrictive safety-level is the scheduled air carrier. The airline passenger has no control over the aircraft.  He or she cannot schedule a trip, change the destination or hire the pilots. The paying passenger is under no obligation to understand any of the FARs. The only rule the paying passenger must know is the 3-1-1 rule by TSA!Under air carrier operations, the FARs absolve the passenger from all responsibility as to the safe conduct of the flight. In return, the FARs place the most restrictive level of safety on the aircraft and crew as to how the aircraft is operated. Things like weather requirements for take-off, approach and landing, the length of a crew’s work-day, and what must be functioning on the aircraft for it to be dispatched are all tightly controlled by the FARs.

The next basic safety level also covers paying passengers, but it applies to on-demand charter (FAR 135). The charter regulations also state that the paying passenger has no responsibility for the safe conduct of the flight. Unlike the airline passenger, however, the charter passenger does have the ability to schedule a trip, change the itinerary and state who else flies on the aircraft.  The charter passenger is assumed to have more “knowledge” of the flight. Within that, the FARs allows a bit more leeway in terms of how the aircraft can be operated. It is still restrictive of things like weather requirements, crew duty day, etc. but not to the same level of the scheduled air carrier.

The most flexible level of safety lies with the owner, or owner-operator. This individual does not buy a ticket, but has a significant level of authority over selecting the aircraft, hiring the pilots and deciding how the aircraft is to be operated. The FAR covering these operations are called FAR Part 91. FAR 91 covers a wide range of not-for-hire flying, including the private pilot flying a small plane to her favorite airport lunch-spot on a sunny afternoon to the global business jet carrying executives to far flung locales. While the operations under FAR 91 can differ considerably, they all confer the responsibility for the flight to the owner and operator. 

This regulation is the most flexible in what the pilot(s) are allowed to do. One example of this is a “zero-zero” take-off. This means the aircraft can take off with zero forward visibility and zero-feet cloud height. There are aircraft with that capability! There are also considerable levels of risk in the event things go wrong. If the aircraft and crew are capable of such a feat, then FAR 91 may allow it. Please note that even if FAR 91 allows a certain privilege, the prudent  pilot may not elect to pursue such a course of action.

The big restriction under FAR 91 is compensation. Yes, you can buy a business aircraft and hire pilots to fly it for you, but you cannot offer your aircraft and pilots to others outside the owner’s responsibility for a fee. FAR 91 does allow some sharing of expenses - think of it as chipping in for gas—but  it is very clear that in order to maintain the flexibility of the regulations, there is no commercial for-hire activity.

Where this aspect of the FARs can be a source of confusion lies in the fact that on a given day, the same trip may be flown under different regulations. Yesterday, your own business aircraft may have safely and successfully flown on a trip that you specify. Today, your aircraft is not available. You may schedule a charter aircraft of the same type as your own aircraft. The weather and conditions may be exactly the same, but you may be told that you can’t fly the trip that you just flew yesterday. The for-hire charter flight is different from the private flight in your company aircraft, so different regulations apply.

The FARs are designed to protect the “flying public.”  As such, the same aircraft can have different “capabilities” depending on how it is being operated.

When evaluating aircraft runway requirements, both take-off and landing distances must be considered. As with take-off distance, there are several factors that affect the landing distance.

Aircraft represent a beautiful balance among competing elements such as weight to be carried, wing area and planform, installed power, the environment, and the desired performance the designer wishes to achieve.  Want to carry a lot of weight at high cruising speeds?  Select an aircraft with large sweepback wings and lots of power.  But expect the runway required for takeoff and landing to be long, particularly if you want to operate from airports located at high elevations in hot climates.  Want to operate from airports with limited runway length?   Use an aircraft with large wings without sweep and fitted with special devices such as high-lift flaps and leading edge slats.   Anticipate limited cruising speed, however, since the wing shape that allows short take-off and landing distances does not favor high-speed cruise, and flaps and slats must retract into the wing when not in use to limit their drag (which adds to cost and weight of wing construction). 

The following factors influence the minimum runway length for safe operation of a business aircraft:

• Aircraft Weight

• Runway Elevation

• Runway Air Temperature

• Runway Slope

• Runway Condition

• Winds

• Regulatory Statutes

Lets look at landing distances. Landing distances are commonly calculated from 50 feet above the ground. The amount of distance required from touchdown to a full stop is referred to as landing ground roll. Harkening back to Physics 101, the momentum (kinetic energy) of an object increases with the square of its speed: doubling the speed quadruples the momentum. To stop in the allowable runway distance, the aircraft’s momentum must be fully dissipated at the conclusion of the ground roll. 

When landing, aircraft have what is called high-lift devices that change the aerodynamic characteristics of the wing. Things like flaps on the rear of the wing and slats on the leading edge change the curvature of the wing to allow the aircraft to be flown at slower speeds. As they also create drag that inhibits the ability of the aircraft to fly at high speeds, these are deployed for take-off and landing and retracted at other times. 

For any given aircraft, the heavier it weighs, the more runway it requires for take-off and landing.  A heavier aircraft requires more airspeed in order to stay airborne. This increased speed equates to a higher amount of energy needed to be dissipated upon landing.

At higher elevations, the air is less dense (thinner). As a result, an aircraft needs more airflow over the wings to generate the lift needed to counteract the aircraft’s weight.  So as the airport elevation increases, the speed the aircraft needs to fly increases. This increased speed during the approach and landing increases the length of the runway needed.

Higher air temperature also reduces air density.  . So a warmer day has the the same effect as if the runway were at a higher elevation: it forces the aircraft to use more distance for landing.

Landing uphill shortens the landing distance and landing downhill lengthens it. It is all connected with the ability to decelerate the aircraft. This is the opposite of runway slope’s effect on take-off distance. Most runways are very close to level so it is rare to see this having a significant impact on aircraft operations. But pilots are required to calculate the influence of runway slope in their determination of required runway length.

Stopping your car on a wet or snowy road requires more distance. Landing on a slippery runway decreases the ability of the aircraft to stop the same as for your car.

Headwinds slow the aircraft’s speed over the ground. So when landing, the aircraft touches down at a slower speed due to the headwind. Crosswinds and gusty winds make the handling of the aircraft more difficult as it transitions from air to ground. Thus  in gusty crosswinds, the approach speed of the aircraft is increased to compensate and maintain a high level of safety. 

For the shortest landing distance we want a lightweight airplane landing uphill into a headwind at a sea-level runway on a cold day!

To this point all of our discussion has centered around physics. Our last point centers around the regulatory requirements for calculating how much runway is needed for a safe landing.  While the wise pilot adds for the unexpected, aviation regulations also can require additional margins for error. Under a not-for hire operation (Federal Aviation Regulation FAR Part 91), the aircraft owner can decide how much added runway they wish to have as a safety margin.

If the flight is conducted under for-hire regulations such as FAR Part 135 for on-demand charter or FAR121 for the airlines,  additional safety margins are specified. They state that the aircraft must be able to land within 60% of the available runway. 

If your aircraft, for its weight and operating conditions, needs 4,000 feet to land from 50 feet above the runway, that distance allows for no added room in case things are not exactly as predicted. Under FAR 91, the pilot decides how much extra runway is needed for a safe landing. Under a for-hire operation, the FARs dictate that the 4,000 foot landing distance be accomplished on a runway no shorter than 6,667 feet (4,000 divided by 0.60). Under European aviation regulations (EASA), for a slippery runway an additional 15% of length must be added, bringing our required runway length to 7,667 feet. 

Regardless of what authorities require, many pilots operate to the for-hire regulations when evaluating runway lengths.. In addition, the pilot may add further to the safety margin in reduced visibility, at night, or when landing at a strange airport after a long duty day! So just because you landed there last week does not mean you can land there safely next week!

Today's modern business jets are at the leading edge of aerodynamic design. These aircraft fly faster, further and consume less fuel than their first generation predecessors. What they are capable of is amazing. Regardless of their abilities, today’s aircraft are nevertheless still bound by the laws of physics and aerodynamics, meaning there are limits to what they can do. Consider the following article a primer in aircraft performance designed to enable you to better understand the limits of these magnificent machines.

The confusion will often start with the sales brochures which list the maximum capabilities of the aircraft. Typically they focus on range, speed, and payload (or seats). It is important to realize that when the brochure states “Maximum Range: 2,350 nm;

Executive Seating: 8 passengers; Maximum Speed: 470 knots,” it does not mean that this aircraft is capable of taking eight people 2,350 nautical miles at a speed of 466 knots! It simply states that the aircraft can fly 2,350 nautical miles, it can fly with eight people on board, and it is capable of reaching speeds of up to 470 knots - just not all at once.

Think of it like you would your car. You wouldn't expect your Sedan to get 28 MPG at 130 MPH!

Following are some important parameters to consider:

Aircraft useful load: This is the amount of weight that can be carried, and includes people, baggage and fuel. Fill up the tanks with fuel for that maximum 2,350nm range, and you may only have enough useful payload left for three or four people. Conversely, fill up the seats and baggage capacity of the same aircraft, and you may have enough useful payload left to fly a 1,800nm trip.

Speed: Our aircraft, like our sample Sedan (above), is capable of traveling at very high speeds. But the best fuel economy is found at a much lower speed. With our car, to get 28 MPG we may need to drive at 40 MPH as opposed to 130 MPH. With the aircraft, we may need to slow to 430 knots as opposed to 470. Best economy speeds are slower than the maximum speeds.

Runway length required for takeoff: This will vary depending on many parameters. Again, the brochure may list a runway length of 5,000 feet. But that is with very specific parameters. Can you remember that time you drove to the mountains? Pulling onto the highway with a car full or people and bags it took a while to accelerate to the required speed. With the aircraft, it is similar. In a nutshell:

• Heavier weights = more runway length

• Hot days = more runway length

• High altitude airport = more runway length

In addition, aircraft safety planning also requires that the aircraft be able to maintain a safe rate of climb in the unlikely event of a loss of power. Aircraft climb faster when they weigh less because they have more power compared to weight.

Our aircraft may only require 5,000 feet of runway at sea-level on a normal day, but if you were to fly from Denver, Colorado on a warm day it may need over 8,000 feet for take-off. At some point, the runway length and the ability of the aircraft to climb will require that the weight of the aircraft be kept below its "maximum" weight. So the extreme may be an aircraft that can take-off at sea-level from a 5,000 foot runway with four people and fly 2,350nm, but  may only be able to manage a trip of 850nm from an 8,000 foot long runway in the mountains on a warm day.

Fuel Tankering: One last consideration is what value you place on the aircraft's flexibility to carry fuel and passengers. In general, if you buy a significant volume of fuel, you will get a price discount. This is commonly available at the aircraft's home base, where you buy fuel on a regular basis.

If you can carry extra fuel in your tanks purchased at home for $4.75 per gallon, you save money by avoiding the purchase of fuel on the road at $6.00 per gallon. This is known as "tankering."

This carriage of additional fuel purchased at a lower price needs to be balanced with the runway and climb requirements of the airports being used for any particular trip.  Also, the heavier the aircraft, the higher the fuel consumption (which means higher cost of operation). Nevertheless, when all factors are considered, tankering may reduce total trip costs, especially when fuel purchased at the destination airport is particularly expensive.  

The more you consider the performance of aircraft, the more you will realize that they are a series of compromises. They can offer speed, range and payload but often require trade-offs in two of those areas to maximize the third.

Aviation, like most highly technical fields, is dominated by numbers. The pilot must know the operating speeds, the weights, and the fuel required to reach the destination. The mechanic is concerned with safety tolerances, pressures, torques, and a myriad of other values. The aviation manager is responsible for the budget and should know the costs of maintenance, salaries, training, as well as the management of the people: the pilots, maintenance and support staff. 

To the executive and Board of Directors, all these numbers are not important in their ability to manage and control the overall corporation. You do not have the time to directly manage the aviation function, nor human resources, legal, marketing, etc. You hopefully have a talented team assembled whose jobs are to manage those functions. But, with all the recent attention paid to the corporate aircraft by the Wall Street Journal and the White House, you do need to be able to address whether the aviation function is adhering to the stated policies regarding the effective use of the aircraft. 

The aviation function is a service department and as such, service is a top priority (right after safety which should not need to be stated). Service quality can be hard to quantify, save for periodic survey's among those serviced. But there are some other metrics than can be used to measure ho effective the aviation department is doing the job.

Budget versus actual expenses

The aviation department must operate on a budget and any variances outside the budget need documentation. Under the rule of "no surprises," major expenses must be identified and budget for well in advance.

Cost Per Mile (running averages)

Aviation maintenance comes infrequently and sometimes in large costs. A running average of those costs should be available covering a 12, 24, 48 month interval. The goal is to identify increasing cost trends over time.

Trips flown (compare to previous year's if available).

This may include locations (by city, region, country as appropriate). The goal here is to ensure the aircraft are being used where the company's main business is, or in support of major projects. Also, rapidly increasing activity may be a sign that additional aircraft may be needed later.

Denied Trip Requests: Trips unable to be flown (number and percent of flown). 

Is supply meeting demand? If the number of trips flown is increasing and trips denied is also increasing, then you may need more aircraft. The reverse trend may indicate under-utilization.

Dispatch Reliability

Dispatch reliability is the percentage of time a departure is made within a set amount of minutes of schedule. You can't control the weather or the delays imposed by Air Traffic Control, but you can control the quality of maintenance and the people who operate the aircraft. Delayed or missed trips due to unscheduled maintenance events should be extremely rare. If not, there is a problem. A departure should never be delayed because the crew showed up late for work. 

Aircraft Availability

This is defined as the amount of time an aircraft is available for flight (scheduled to fly or ready to be flown) compared to its normal operating year. For example, if the aircraft is normally scheduled six days per week, then its operating year is 6 x 52 = 312 days. If for 45 of those days the aircraft was not available to be flown due to maintenance requirements, then its availability is 86% (312-45)/312. Save for a major scheduled maintenance event, this number should be high. The concern with this is a decreasing availability due to unscheduled maintenance. 

Number of Months Since an External Safety Audit

Safety should be second nature and spelled out in the aviation department's policies and procedures which you or another C-Level Executive have personally endorsed. A safety audit is an external validation of the safety culture and should be performed about every 24 months or less.

Number of rings before the phone is answered at the aviation department.

This is a bit trite, but worthy of consideration. The aviation function is a service function. The level of service should be at the highest levels. Phones should get answered by real people. Executives should not have to wade through a menu of options to talk to someone in the aviation department (to repeat this menu, please press 9). In place of counting phone rings, periodic surveys of the users asking "how are we doing" can suffice!

Corporations need the essential support of human resources, accounting, and information technology. While their budgets may increase or decrease, their function remains. Hopefully, the business aircraft can also fit into that same category - an essential business toll that is required for the efficient (and profitable) running of your company.

Fortune 500 companies engage in Business Aviation, their reasons for having access to business aircraft may not coincide with your own reasons. How do you justify the use of a business aircraft?

A rational, well  constructed  justification for employing Business Aviation is no longer an option.  It is a necessity. It should be clear to your shareholders and others that  the business aircraft is an essential business tool. One way to help in this approach is to have some means to support the value of the aircraft to your organization and enable you to state "Yes, our aircraft is an essential business tool without which our company would be a competitive disadvantage in today's rapidly changing economic environment."

With the inevitable change of Board leadership, someone will ask the question "Why do we have the aircraft?" There needs to be an answer.

There are many tangible benefits to having an aircraft. These include, but are not limited to:

• Time Savings

• Flexibility and Reliability of Operations

• Productivity

• Ability to attract and retain key personnel

• Ability to support customers in an effective manner

Some or all of these will apply to your situation. No one will deny the ability of the business aircraft to serve, but the question that still gets asked is “Are the benefits worth  the cost?”

As an example, assume a trip is needed from New York City to San Antonio. Bus fare is $219, and the travel time, 50 hours. Via the airlines, you can make the trip in 5.5 hours flying, plus airport time, for about an 8-hour travel day.  Business airfare for last minute travel may run $1,200 per person, or $4,800 for four persons. On the business jet, a charter may take less than 4 hours total time and cost may be about $10,000 for up to six persons.

No one will say that the bus is the “best value” way to travel, even though it is “cheaper.” However, many may question the value of the business aircraft. The business jet fee is eight times the airline ticket for a savings of “just” four hours. However, when evaluating the travel in greater detail, you may need an overnight stay (or two) at San Antonio versus having the ability to return late in the same day on the business jet.  Furthermore, you can conduct business with your travel associates without concern that company business will be overheard by a stranger.

In order to determine the value of the business jet over the airline, you need to understand both the total time needed for the travel and the lost opportunity cost of that travel. 

The business aircraft has but one master, you. It will travel on your schedule and thus, offers significant time flexibility. The airlines have set schedules in order to try and fulfill most travelers’ schedules. How can we compare the time and cost of both alternatives?

The National Business Aviation Association (NBAA) has a tool called Travel$ense. It is software that calculates the actual hours spent in travel, productivity advantages and trip expenses. Travel$Sense uses actual airline data to allow your travel specialist to compare the time it takes the business aircraft to complete your trip, and the time needed on the airline. In addition to calculation the total travel time, it also has user-defined inputs for productivity and salary.

Using such a tool, you may calculate that the San Antonio trip takes 40 hours round trip on the airlines while the business jet takes 16 hours. But the next step is the critical one, the value of the time.

Time can never be saved. It can only be spent wisely.

In spending less time in airports and in airline seats, you can be more productive. However, you need to recognize some value to that time. In 1987 a company called PRC produced a study that looked at the benefits of business aircraft travel versus the airlines. It looked at both the tangible and intangible benefits. It then went a step further to try and assign a value (or cost) of the time spent (or not spent). It used business school research, industry data and insurance data to assign a salary multiplier to an executive’s time. The PRC study was further reinforced in 2001 by a similar study performed by Andersen Consulting that looked at the impact of business aviation on shareholder value.

While an executive is worth more than his or her salary, whether that value to a company is two times or five times greater is a subject for much discussion and controversy. A senior executive with a seven-figure salary and benefits package has to be worth at least $500 per business-hour to the firm.  Business-hours spent in the office, with a client, or working somewhere quietly without disruption are more productive than business hours spent waiting at the airport. Whether it is Travel$ense or a spreadsheet, such an analysis can show that the time spent not traveling can be put to productive use, and that increased productivity can offset the added cost of using the business aircraft option.

Time is a precious, limited commodity and you realize that using private air travel is a very effective way to spend your limited time. 

Within the confines of business air travel, you have many options, and many different costs associated with those options. Here is a way to put some numbers to the options.

Charter is good for limited flying (less than 50 hours per year) and for

• Two or more vastly different travel requirements (short and long trips)
• Doing “out and back” trips (not one-way)
• Needing to separate personal and business use of the aircraft (two different tax impacts)

Charter is the first step that you can take into business aircraft. You only pay for the time used, and there are no long term commitments. Charter is also a good alternative if you need a limited amount of flying per year. If you are flying more than 50 hours per year, there may be more cost effective ways to secure use of a business aircraft.

Charter offers a choice between many different aircraft types, so you can match the aircraft to the mission. Charter can provide you with a small, relatively low cost alternative for the short trip (think of a light jet flying New York to Portland, ME), and a bigger aircraft for the long range trip (think New York to Portland, OR). 

With charter, you generally pay for every hour the aircraft is flying, whether you are on board or not. Other charges can include catering, landing fees, and taxes. Ground time, overnight fees, and minimum daily billings can make one-way trips costly. So unless you can nab a special one-way offer, charter may not be the best option for that type of trip.

The IRS looks at business use and personal use very differently. If you are using the personal aircraft for both business and personal trips, the charter may be an easy way to separate the two. Or, if the trip is of mixed use, the all-inclusive cost of the charter is a known value to use in computing the deductable cost. 

Discounts are usually offered if you agree to purchase and use a set number of charter hours from a single provider within a specified amount of time. This is usually called block charter.

Jet Cards are good for use when your travel is in the range between 25 and 100 hours per year. Jet cards are essentially block charter programs. You pay an upfront fee that guarantees you a set number of hours use of an aircraft. Most jet cards start at 25-hour blocks. These cards can be for a specific aircraft type (e.g., Citation X), or category (e.g., Mid-size jet). Depending on the program provider and promotion offered, there are both one-way cards (pay only for occupied legs) and round trip cards (pay all hours the aircraft flies).  If your travel is mostly out and back the same day, the round trip prices are the better deal. Some jet cards also offer concierge services such as booking limousines, hotels, theatre tickets, etc.

Once you near the end of your 25-hour block, you can purchase an additional card. The cards do expire, but only in the sense that the rates expire. As with charter, you can select from different categories of aircraft in order to max and match to the type of air travel that you do. 

With charter and jet cards, you have no ownership and no responsibilities (legal/operational), and no long term debt. 

Fractional ownership is best for those who consistently fly 75 – 250 hours per year, fly a lot of one-way trips, and do not want the full responsibility of a whole aircraft. 

Fractional aircraft ownership is a concept under which an aircraft management company facilitates the sale of shares of an aircraft to a number of co-owners, who in turn employ the management company to operate the aircraft on their behalf under a dry-lease exchange agreement.  Hours are billed by block time, plus there is the acquisition cost and monthly management fee to consider.

Ownership contracts run typically for five years. Shares are normally sold in 50-hour/year increments (or one-sixteenth shares). Total share costs are proportional to the share size: 50-hours annually will cost half of what 100-hours annually will cost.

With charter, the commitment is for the individual flight, with jets cards, the commitment is for the block of hours, and with fractional ownership, the commitment is for the block of hours and a calendar period. 

With a fractional program, you generally fly on the same type of aircraft. Those aircraft are outfitted almost identical to each other and the crews are trained to the same standards. Some fractional programs also offer concierge level services, one call for all the travel needs. If your business can use a tax deduction, the share’s acquisition cost can be 100% deductible if the aircraft is used for business.

As with charter and jet cards, you can select from different aircraft with different capabilities. You may trade up or down in aircraft size, and you  may have access to multiple aircraft at the same time. Fractional ownership offers guaranteed aircraft availability when booked in advance.

If you like control, fly more than 250 hours per year  and enjoy the pride of ownership, then whole aircraft ownership offers the highest levels of service and potentially the lowest costs. You can select the aircraft; you can hire the crew, and leave “your stuff” on “your aircraft.” You have complete control, and responsibility, for the aircraft. If you work with a management company, they can assist you in the process. 

With your own aircraft, the more flying you do, the lower the average cost per hour becomes.  Whole aircraft ownership makes financial sense when annual usage exceeds somewhere around 250 to 300 hours.

How much flying and what types of flying you do will help frame the charter-jet card-fractional discussion. Charter is the best way to have access to many types of aircraft with no long term commitment. If your annual flying increases, jet cards may be a better deal with discounts for “buying in bulk.” Fractional ownership provides much of the benefits of whole aircraft ownership while sharing the fixed costs among multiple owners. Whole aircraft ownership offers the most control, and with sufficient annual flying, the potential for the lowest average total cost.

It all starts with your requirements in terms of where, how often and how many people you need to transport.

Let’s assume you’ve heard of the benefits of using Business Aviation to fulfill your necessary business travel requirements, and you’ve even received some advice on a potential aircraft that would fit your needs - is it time jump in to the market and buy? I recommend that you obtain impartial advice in the arena of aircraft acquisition.

I had a prospect who was interested in getting their first business aircraft recently. A Board Member and golf-buddy had just obtained one, and suggested that Business Aviation was the best way to travel. Pleased with his newly acquired light jet, he suggested that his fellow golfer also acquire a similar model. My prospect had already started hangar construction at his local airport, and within a week an aircraft salesperson was bringing in the suggested jet for a demo ride.

I asked my prospect if he was in the same business and did the same sort of traveling as his golf partner. Did he analyze the details of his intended acquisition? Did he have a budget in mind? How many passenger did he intend to transport, how far and how often? While the aircraft in question was a fine design, I suggested that there may be better or more cost effective alternatives.

An aircraft is a business tool that enables you to get your job done safely and efficiently. There are many different models, and each is designed to harness the laws of physics differently to achieve slightly different objectives. Sometimes, you need a different tool than your neighbor to do a different job.

Whatever the reason for getting an aircraft, it pays to have a good Aircraft Acquisition Plan before presenting your request to the Board.

An Aircraft Acquisition Plan must at a minimum:

- Identify and quantify the transportation needs.
- Differentiate between "required" (must have) criteria and "desired" (nice to have) criteria.
- Identify the aircraft best capable of meeting the transportation needs.
- Analyze all the costs involved with acquiring an aircraft: such as acquisition, operating and residual values.
- Consider taxes and market depreciation.

Once an aircraft is in operation, it usually remains with the purchaser for at least five years, and often for much longer. Therefore your Aircraft Acquisition Plan should cover a period of at least five years, or as long as you expect to operate that model.

The purchase plan should be void of emotional issues and stay as far from subjective criteria as possible. Having firm numbers doesn't remove all questions, but it does offer a justification based on reasoned thought.

In detail, an effective plan consists of the following elements:

- Real, not imagined or fanciful needs.
- Key missions and evaluation parameters.
- Technical analysis.
- Operational alternatives.
- Financial analysis.
- Tax planning.

Objective evaluation parameters
Identifying the key mission for the aircraft is an internal process. That task will, in turn, lead to developing the objective evaluation parameters. Those parameters can be things like payload, passenger seats, range, runway performance, etc.

Once you have a set of parameters, you will need to determine which aircraft are capable of meeting them. You know what you want the aircraft to achieve, but how does that translate into aircraft choices? What are the costs of these choices? Where do you get the information about possible options?

While business associates who have used aircraft can provide insights, be careful. If I feel sick, I see a doctor. If I need to design an addition for my house, I see an architect. If I happen to be seeing my doctor at the same time I am contemplating modifications to my house, the fact that my doctor does or does not have a nice house is immaterial. My doctor may know a good architect, but is that architect the one I should consult?

Aircraft salespersons know their aircraft well. But they work for the seller, not you the buyer. This truism applies to both the aircraft manufacturer’s sales teams as well as independent brokers. They are an excellent source of information, but their end-goal is to get you to buy their aircraft.

Aviation trade publications provide a good overview, and will give you an idea of options offered by the manufacturer. But do you have the time to go through all of them?

There are databases of aircraft costs, selling prices and performance available. Such references are relatively inexpensive and some provide highly detailed data. But how does that information apply to your situation? Like any technical profession, aviation is loaded with specialized terms and acronyms. You need to access what is important to your business travel and how your requirements translate into airplane-speak?

For truly impartial direction, bring in an objective aviation consultant - someone who has no conflicts with what aircraft you buy, or even whether you buy. That individual can guide you along the decision-making path, and ask the pertinent questions that can lead to a well informed aircraft decision:

•    How far do you travel?
•    How many people will travel, and how often?
•    What are the locations that you frequent?

A consultant’s fees will be insignificant compared to the costs of owning and operating a business aircraft - more still owning and operating the wrong business aircraft. Making an informed decision you’ll be happy with for years ahead depends on thorough and impartial data.

So what did happen to my prospect I referenced at the beginning of this article? He ended up with the same type of plane as his golf buddy. But at least he had some neutral, informative data to validate his choice!

Business aircraft can be a valuable business tool. Making the right aircraft choice depends on having data that is comparable and appropriate to the mission assigned to the aircraft. Selecting the right aircraft and the right operating options will provide a positive experience that demonstrates the true value of the aircraft as a business tool.

Where do you begin?

Clearly define what is expected of the aircraft. This can be as simple as four passengers nonstop from point A to point B.  From there other criteria can be developed to define the operational parameters for the aircraft. 

It is important to understand that aircraft are compromises. With increased capabilities come increased costs. No one aircraft can do it all.  So it is critical to get advice early on as to what is capable and what is not regarding an aircraft. Here are a few things to keep in mind:

The acquisition cost is but a small part of the overall cost of owning and operating an aircraft. Fuel, maintenance, crew costs, training, hangar, parking, and insurance are all needed before the aircraft first takes off. These can run into the hundreds of thousands of dollars per year. Maintenance costs are highly cyclical, and if not planned for, can present significant surprises. 

Market depreciation is real and is a cost, not an income.  From time to time aircraft values do increase, but that is a temporary aberration.  Aircraft are complex mechanical devices. While the maintenance required does keep the aircraft value from decreasing rapidly, over time the value of the aircraft will decline. As one example, a large business jet that sold for $25 million new in 1991 today is worth about $8 million. To replace that same aircraft with it's current production counterpart will cost over $35 million. 

You need to have a plan. A well-designed aircraft acquisition plan will show that the recommended aircraft, with modifications or upgrades and the associated acquisition and implementation schedule is the lowest cost alternative capable of accomplishing the assigned mission. To accomplish this, an aircraft acquisition plan must:

     • Identify and quantify the real transportation needs

     • Differentiate between "must have" and "nice to have" requirements.

     • Identify the aircraft best able to meet the technical requirements.

     • Balance acquisition cost with operating costs for the greatest benefit with the least investment.

In formulating the plan it is important to remember that the aircraft acquisition process takes time.  Once an aircraft is in the service, it will probably stay there for five to ten years. This places a premium in the planning process.

As we go forward, I plan to touch on these and other high-level subjects involved in owning a business aircraft.

TO BUY OR TO LEASE -- THAT IS THE QUESTION.