As you shop for an aircraft, one of the many decisions you will make is how you will operate it. Will you create your own flight department, or hire an outside management company? (See “Choosing a Management Company” BAA July/August 2015).
The decision will be influenced by whether or not you want your aircraft exclusively for your own use, governed in the U.S. by Federal Aviation Regulations (FAR) Part 91; or to be available for outside charter and operated under FAR Part 135, either to generate outside revenue to offset the cost of your own flying, for tax reasons, or both.
What factors might inform the “91 or 135?” decision?
- Which offers better tax options for depreciation and/or cost allocation?
- Will you need to offset some of the fixed costs of aircraft operations, perhaps to cover the added expense of owning a larger or newer aircraft?
- Do you have divisions, subsidiaries, or related companies which will use the aircraft? If so, would charter provide a better structure for chargebacks?
- Is the specific make and model of aircraft you want appropriate to make available for charter? Not all aircraft are Part 135 compliant and capable. Some may require expensive retrofitting; others are not very popular as charter aircraft.
- How will you pay for the aircraft (cash, financing, or lease)? Some leases have clauses that restrict whether the aircraft can be chartered commercially, and if so, for how many hours annually.
Most owners who opt to offer their aircraft for charter choose to put it on the charter certificate of a management company, as obtaining one’s own certificate is a very difficult and lengthy procedure. In fact, in some countries it is not permitted. If you choose to make your aircraft available for charter, as you look for a management company, consider:
- Is the management company stable and financially strong? Does it value transparency in its dealings?
- How is the company perceived in the marketplace? What is its reputation? How long has it been in business?
- What is its safety record? Is it independently audited by a recognized third party, like Argus, Wyvern, or a respected aviation consultant?
- Where will your aircraft be based? If not at the management company’s home base, does the company have experience operating remote/satellite bases?
- Will routine maintenance be performed onsite by your own technician, or outsourced?
- Will pilots be provided by you, or hired and employed by the management company?
- How much charter business does the company produce? How will it generate the charter activity you require? For example, if you intend to buy a mid- or large-cabin airplane, and the company you’re considering has many such aircraft on its air carrier certificate, and has multiple sales offices, you’re more likely to get the charter hours you need.
- Will you be comfortable with strangers aboard your aircraft? How does it vet potential charter customers?
- Does the company focus on creating a cabin environment that is both professional and comfortable?
Once you choose a company, have realistic expectations:
- If your aircraft will be available for charter during peak holiday travel periods, be sure to give your management company plenty of notice.
- If you fly 300 hours a year, it will be difficult to achieve another 300 hours of charter on the airplane. The scheduling conflicts between your flying and charter would make this prohibitive.
- And perhaps most important to know is this: while you can reasonably expect charter to offset some of your fixed costs of flying, it should not be counted on to cover all of them.
Carefully examine the wide variety of intersecting safety, financial, usage, and personal considerations before choosing your aircraft operating model. BAA
Don Haloburdo is VP and General Manager of Jet Aviation Flight Services, Inc. A former U.S. Navy pilot, he has more than 7,100 hours flight time, and serves on NATA’s Air Charter Committee.