Amid the nonstop press releases and panels with private jet providers touting record increases in memberships and sales growth, keen observers look at actual flight hours and often wonder why the large gap?
After all, if flight hours for fractional and charter private jet operators were only hovering around 90% of pre-COVID levels in December, how can so many brokers and operators be reporting triple digit increases in sales?
A recent press release from Boston-based broker Magellan Jets noted both a 200% increase in jet card sales and a 20% decrease in flight hours. Vista Global’s said its XO unit saw a 240% increase in memberships that had an average deposit of $100,000. Flight hours were up 6%. They are hardly alone.
How can so many private jet providers be recording triple digit sales increases when flying is still … [+]
Simply put, the gap in numbers is at least in part that deposits to reserve jet card hours in advance are monstrously outstripping the actual flights those customers are taking. It’s being driven for good reasons, but not without a need for caution.
First-timers and returners looking to minimize the contact risk of contracting COVID-19 while traveling and others being hamstrung by reduced airline flights are turning to private jets. The two most popular entry-level options for private aviation are chartering on a trip-by-trip basis and jet cards. However, with the pandemic still raging and various travel restrictions, clearly buying is outstripping flying.
Jet card memberships seem to be doing particularly well. Many of the membership programs offer fixed one-way rates with guaranteed availability. The former means you don’t have to pay for repositioning flights, which can double the cost. The latter means that so long as you give advance notice by a contracted deadline – ranging from less than 10 hours to as much as a week for flights on peak days, you know how much you are going to pay in advance.
When you charter on a trip-by-trip basis, the pricing is based on when you call and when you are going. Brokers and operators essentially make up, or should I say mark up pricing based on what the market will support. With a fixed-rate jet card, you can book, cancel, book, cancel, and book again at your contracted rate if your plans change. With on-demand charter pricing, you have to get a new quote each time.
Another plus with jet cards is most programs have guaranteed recovery. That means if the operator cancels, your provider will get you a replacement aircraft like or better at no additional cost to you. If it’s a longer delay, you may even get some compensation.
With on-demand charters, if there is a mechanical or the pilot gets sick, there’s a re-quote. If there’s a difference – and at the last minute, it can be double what you paid – you can either pay the difference or decide to wait until the prices come down.
While some jet cards include free WiFi, catering, and deicing when it’s needed, with charters, you are billed extra, although connectivity is sometimes included.
In addition to the above reasons, the CARES Act induced holiday on the 7.5% Federal Excise Tax tacked onto domestic flights provided another incentive. Depending on the provider, funds depositing during the holiday last year can now be used on a tax-free basis yielding a $7,500 savings for every $100,000 worth of flights. Needless to say, December was a busy month for jet card sellers.
So where does all that money go? That depends. In some cases, providers use funds for operations. In other cases, they keep your funds in segregated or escrow accounts.
While there may be far fewer insolvencies of private aviation companies compared to the airlines, they do happen. Last year when JetSuite filed for Chapter 11 protection, around 900 of its SuiteKey members lost $50 million in flight credits. They were offered a cash value of between 3 and 15 cents, or flight credits on sister airline JSX. In a separate fiasco, former Treasury Secretary Steve Mnuchin lost over $200,000 when JetCard Plus closed its doors.
The risk of your losing money may be minimal. Some providers that don’t offer escrow or segregated accounts are part of large blue-chip companies. Berkshire Hathaway owns NetJets, and Jet Aviation is a unit of General Dynamics. There are also pay-as-you-go memberships with fixed rates and guaranteed availability where you pay a joining fee but don’t have to pay until you fly. However, the best way to hedge your bets is only to make deposits based on your flight needs for the next 12 to 24 months.
Rates don’t necessarily increase annually, and there are often incentives to buy or renew. Of course, the more hours you buy, the more credits and discounts. However, the more often you need to renew, the more often you can get retention bonuses and deals.
While some programs are refundable, others aren’t, so if you don’t overbuy, it makes it easier to look around, especially if you aren’t overwhelmingly happy with your current choice.
Many jet card flyers who jump in without doing enough research find their program’s policies didn’t correspond well to their flying needs. A common complaint is daily minimums that can range up to two hours on light jets and three hours on larger aircraft. There’s nothing less fulfilling than making a 50-minute flight and getting billed for 120 minutes.
Other missteps include not researching the primary service area, not understanding minimum seat guarantees, peak day surcharges, and the wide variances in booking and cancelation policies. And of course, don’t assume you can bring your furry friends or send the kids to see grandma and grandpa. Not all jet cards allow you to bring pets while the minimum age for unaccompanied minors also varies.
More advice is to negotiate. Bonus hours and flight credits are typical. However, I’ve seen companies offer to split deposit payments or offer lower, non-published entry levels for first-time customers.
While in many ways jet cards and membership fulfill that Uber-like promise of booking your jet with the click of your mouse, the main point is don’t buy more hours than you need.
I’m Editor-in-Chief of DG Amazing Experiences, a weekly e-newsletter for private jet owners and Private Jet Card Comparisons, a buyer’s guide comparing over 250 jet card programs from major players like Flexjet, Jet Linx, NetJets, Sentient Jet, Wheels Up, VistaJet, and XO to newcomers like FlyExclusive and boutique brokers. You’ll also find performance profiles of popular private jets, from turboprops King Air 350, Pilatus PC-12 and HondaJet to the Phenom 300, Challenger 300 and 350, Gulfstream G450, G550, G650, G700, Bombardier’s popular Global Express family, the iconic Learjet and S-76 helicopter used by both Queen Elizabeth and Donald Trump. There’s a free guide explaining various options and even a guide for first-timers and specifically what you need to know before chartering. And before you fly, find out what’s an FBO. You’ll also find a Deal Book, cataloging M&A activity and launches by key players. I’ve spent my working career in travel and luxury media, for 14 years at Travel Agent magazine, where I began as a reporter, then covered the airline industry as Aviation Editor and ended up rising to Group Publisher. In 2000 I started Elite Traveler, a consumer lifestyle magazine distributed globally aboard private jets, where I was President and Editor-in-Chief until 2014. In 2007, I co-authored of “The Sky’s the Limit: Marketing to the New Jet Set.” In 2014 I wrote “23 Ways to Create More Sales Opportunities 25 Minutes,” and in 2016 I co-authored “Secrets of Selling to the Super Rich.” Verb named me as one of the Top 25 Digital Luxury Experts to follow. For more private aviation and news on jet cards, private aviation memberships, and fractional ownership, visit Private Jet Card Comparisons’ news updates.