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Friday, Aug 19, 2022
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Corporate Jets Not Just for Big Guys

Clay Lacy, owner and president of Clay Lacy Aviation estimates that almost all of top executives at the Fortune 2000 companies either fly on chartered jets or own one. But it’s not just the titans of industry that have the means to at least fly on a chartered jet. If enough executives are flying on a plane, the price of chartering a jet can actually be cheaper than flying first class. Additionally, firms that might not have deep enough pockets to purchase a plane can always purchase a fractional ownership. Flying privately might not be a viable option for every company, but it seems that as the industry has evolved and businesses are finding an increasing number of choices. With each company offering various jets at various prices, a businessman has to weigh many things when deciding between whether or not to fly corporate aviation: How many people am I bringing with me, how easy is it to get to the city I am traveling to, how much would a first class ticket cost on a commercial airline, and how many days do I want to spend in a city? Petersen Aviation, one of the fixed base operators at Van Nuys, provides a quintessential example for the prospective businessmen. The company offers four jets for charter, with the top of the line being a Gulfstream IVSP, which holds 12 passengers and charters for $5,000 per in-flight hour. At the bottom of the scale is a 9-seater Hawker 1000, which goes for $3,000 per in-flight hour. If a company filled the Gulfstream to the brim, it would run them roughly $415 per hour. For a flight to New York City, it would cost a company approximately $30,000 one-way. In comparison, 12 first class one-way tickets on United, from Los Angeles to New York City in August, would run a company about $27,000 and that doesn’t take in the wasted time and hassles normally associated with flying commercial. Tom Magglos, the general manager of Petersen, says that it’s perhaps the time delays that end up costing the company the most. “Businesses that once thought that corporate travel was only reserved for a certain stature are now finding that it’s now time and cost effective to use this mode of business travel. It’s pretty expensive to waste a day flying commercially,” Magglos said. Another option that smaller companies have is to purchase an airplane and have it managed by one of the corporate aviation companies. When the plane is grounded and not in use by the company, they can charter it to other firms and get an increased return on their investment. Lacy says that companies are increasingly finding this a cost-effective method. “Being able to get some income back and still have an airplane is the best value for local businesses,” Lacy said. “Many of the smaller companies are increasingly chartering flights, but they’re also utilizing this option. It gets the costs of owning an airplane way down.” But buying a plane is never cheap and it still remains out of the price range for most small firms. A new Gulfstream GIII can cost a prospective buyer, between $9.5 and $11.0 million. Accordingly, many of them are turning to fractional jet ownership, a practice pioneered by famed investor Warren Buffett, who started the fractional ownership company Net Jets. Due to the popularity of this practice, Van Nuys received a new entrant in the fractional ownership game when Global Jet Shares set up shop in 2004. The demand for this type of service has since skyrocketed. Global Jet Shares has seen 200 percent growth this year, with revenues projected to be in the $30 to $35 million range for 2005. The company currently owns three jets. “Companies love being able to lower the cost of ownership by owning just a fractional ownership of a jet. The costs of buying a fractional share of ownership have made things affordable to the masses, relatively speaking,” Ron Kelly, the president and CEO of Global Jet Shares, said. David Fischell, the owner of New Jersey-based small biotech firm Angel Medical Systems, recently inked a deal with Global Jet Shares to purchase a fractional ownership of one of their jets. “I use the jet to fly people in my company to places that are hard to get to. We do some animal trials in Kalamazoo, Michigan and getting there from the Jersey Shore isn’t easy,” Fischell said. “When you have to take a lot of medical equipment and a whole crew, you don’t want to have to get every last bit of luggage analyzed by commercial airline security. The benefits of flying privately are tremendous.” The costs of owning a fractional ownership aren’t exactly going to make mom and pop companies jump at the opportunity to fly corporate aviation any time soon, but they do represent a much more affordable option than buying an entire jet. Global Jet Shares offers 25 hours of flight time a year on a Gulfstream GIISP and Gulfstream III aircraft for $185,000, 50 Hours costs $360,000, 75 hours goes for $532,500 and 100 hours runs a company $700,000. In the future, as the sophistication of aircraft increases, many people speculate that this will correlate with a decrease in pricing. Mark Sullivan, the president and CEO of Van Nuys-based Skytrails Aviation, believes that the more affordable prices will only entice more corporate clients. “The next generation of jets are on the horizon and they are going to be the wave of the future. They are very efficient to operate and they can get you from point A to point B without having to go into the major congested airports,” Sullivan said. “These planes are four to six seaters and can get up to 35,000 feet at 1,500 miles an hour. They’re like air taxis that people will pay for by the mile. They are going to revolutionize things because it will be a pretty cheap way to travel.”

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