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NARA Roundtable: To Charter or Not to Charter, That is the Owner's Question

Executives from National Aircraft Resale Association (NARA) companies sat down recently to examine whether aircraft owners are better off chartering their airplanes when they are not using them. Well, it depends. Here is their discussion

Owners who are thinking about making their airplanes available for charter flights should be realistic: the goal is offsetting operating costs, not turning a profit.

"They're never going to make money in charter – we've tried it; it doesn't work," says David Deitch, Vice President of Sales for Jet Aviation, an aviation services company that helps owners put out planes for commercial charter use around the world.

Still, offsetting even a percentage of an owner's annual aviation budget is an attractive proposition. And there are other possible benefits – as well as potential downsides to consider before making a plane available for charter use in the first place.

An owner spending $5 million a year on a large-cabin plane might recoup $600,000 to $700,000 through chartering it out, Deitch says. However, adding 200 hours chartering use on top of the owner's 200 hours in the air increases wear and tear on the plane, with a larger maintenance bill to match.

Owners should make sure whatever management company they're working with presents them with a variety of financial scenarios before purchasing a new plane or utilizing an existing one for part-time chartering.

The amount of time the owner uses the plane is the biggest consideration. Anything above 300 to 400 hours total use requires the additional expense of hiring another pilot certified for commercial charter flying, plus triggers the added maintenance mentioned earlier.

On the other hand, some owners may fly their airplanes 40 hours or less a year, while paying for service programs priced for 200 to 300 hours of use. "So they're going to have a cost without the benefit of use," says Matt Bosco of West Coast-based Axis Jet, an aircraft sales, management and charter operator -- unless they recoup it through chartering the plane.

Bosco points out that most aircraft benefit from or may even carry a manufacturer's mandate for regular "exercise" – that is, being flown at least once a week. "If you don't fly it, you're going to end up with mechanical issues," he says. "You're going to have dispatch reliability issues." A crew that only flies 40 hours a year isn't really proficient either, he adds.

It really boils down to "asset preservation," Bosco says. "We tend to keep the aircraft under 300 hours for (owner) and (charter) use. But everybody has a different scenario."

Deitch and Bosco, who are both NARA members, say owners should look beyond a glossy brochure or the first page of a web site in choosing an aircraft charter company.

"Are they IS-BAO (International Standard for Business Aircraft Operations) registered?" Deitch asked. "Is their SMS (safety management system) just a book that's sitting on a shelf or is it actually a program that's utilized every day? Do they have a risk assessment tool, particularly when you look at safety?"

Deitch notes that there are third-party safety auditors such as ARG/US (Aviation Research Group) and Wyvern that can give owners a good idea of a company's performance. "You really have to critique the company," Deitch says.

The value of a one-on-one relationship with somebody in a charter company can't be overestimated either. "Do you have a relationship with somebody that takes care of your aircraft?" Bosco asks. "If there is a problem, do you have a connection with somebody who can assist? Because they're machines, they're going to break. There are going to be issues, and how are those issues resolved?"

A charter company's insurance and financial stability are other things for an owner to evaluate. Bosco says there are companies with a "very, very minimal amount" of insurance. Other companies have extended credit to charter clients "and they were never able to recover the cost." Axis Jet requires payment in advance for trips. Jet Aviation guarantees owners it will pay them within 30 days of a trip.

Working with a reputable charter company can also ease other owner concerns, such as worrying about who gets to charter the aircraft, what happens in the case of damage to it, and will the owner have access to the plane when needed? Deitch says standard industry agreements make charter clients financially responsible for any damage to a plane and most understand restrictions on things like "red wine, pets and children with crayons."

"The reality," Bosco adds, "is that most people that are spending that kind of money are really quite respectful. We just don't have issues."

Beyond charter operations utilizing a single aircraft, Bosco said, owners shouldn't be "left without their aircraft." Companies like his can transfer charter activity to another aircraft in their fleet.

The bottom line is that aircraft owners shouldn't go into chartering lightly or with unrealistic expectations, but rather with all the right information they can gather.

Posted on: December 27, 2017

Written by: Devri Pitts