Learn to Fly Private

This is the 8th edition of "Learn to Fly Private." So far, from readers of this newsletter I have had phone calls with piston, turboprop, and jet buyers, Netjets fliers, Wheels UP fliers, Volato fliers, retail charter fliers, jet card fliers, charter brokers, charter operators, banks, and jet brokers. That's a lot of phone calls! But I'll always make time for subscribers of this newsletter... so that's why you can book a free 15 minute call with me using this link. I don't charge you, and I enjoy making new connections and new friends.

If you're new, first of all welcome! Second, you can see the past 7 issues of this newsletter here in case you missed any.

---

---

As always, I love your feedback and I want to make this stuff useful. Reply to this email or DM me on X at @prestonholland6.

A special thank you to Mark Rodgers at Silverhawk Aviation for the data in this week's newsletter. These are real numbers, based off of what they actually charge their clients. They did not sponsor this newsletter and they did not pay to be included, but they brought some transparency to the marketplace for this week. They're an operator of Cessna jets out of Lincoln, Nebraska. If you appreciated the data here, tell him! His email is mrodgers@silverhawkaviation.com

Now let's dive in...

The Real Cost: 3 Ways to Fly on a CJ3

One common question I get is about the real cost of ownership vs. partnership vs. fractional vs. charter, and I wanted to create a newsletter that, in a way, encompassed all of that to help give you a better picture. There are tax advantages to owning vs. chartering/dry leasing, but I am going to skip those for the purposes of this newsletter. As my accounting professor said in college, "it's all about cash floooooow." For tax questions, call my friend Daniel Cheung at Aviation Tax Consultants.

Charter the CJ3 On-Demand or Jet Card

We have discussed at length in previous issues the difference between on-demand charter and jet cards. For those that need a refresher, an on demand or "ad hoc" charter is when you call a jet and it comes to pick you up. That is the end of the transaction. A jet card is an advance payment (sometimes held in escrow) that you can spend for a (usually) favorable hourly rate in the future. The parts in parentheses are not a guarantee.

Chartering On-Demand

For a CJ3, expect to pay the retail rate which is anywhere from $6,000 to $8,000 an hour + FET (federal excise tax) + a possible fuel surcharge. There are some assumptions here that the airplane will stay with you on the trip. I had someone on X send a link from a Louisiana operator on a CJ2+ (the smaller version) at $3700 an hour plus crew expenses ($1150 per day) and handling fees. I wouldn't bank on that low unless you're in Baton Rouge.

Jet Card

The only hard data I have on Jet Card rates is from Jettly, but you can expect when you have a jet card for it to be less per hour than chartering on-demand. The lowest hourly jet card rate is likely through a local operator that offers a jet card. There isn't a great clearing house for this data, but we're working on trying to fix that. Expect to have a savings of 5-10% off the retail rate of charter, which would put this in the $5,400 to $7,600 per hour range.

CJ3 in a Partnership or Whole Aircraft Ownership

We're going to use this 2004 CJ3 that has an ask of $4,995,000. If you want to buy a jet today, I doubt you will pay full asking price. For the purpose of our illustration, though, we're going to use that price. When buying a whole aircraft, you will be on the hook for all of the fixed expenses. If you are planning to buy with 1 or 2 other partners, the fixed costs will be divided. This is what makes co-ownership attractive, and we broke it down a few weeks ago in this issue.

500 Hours a Year (The Hourly Costs)

When I talked to Mark at Silverhawk about collaborating on this newsletter, I asked him to get me data that he actually sees in his market and the numbers he gives his clients. For this, we're going to break it down with a total of 500 hours on the airplane in a year, with 300 allocated to owners and 200 allocated to charter on their Part 135 certificate (you must be on one to operate charter).

Charter Revenue (Net of Fuel and WiFi): $1250 x 200 = $250,000

This is the top line revenue an owner can expect in any given year based on the market demand that the operator sees. Now, a prudent owner will put hourly reserves away for maintenance and engine reserves. Engines must be replaced after a set amount of hours, so putting money away (whether on engine programs, basically an hourly hedge, or otherwise) is wise. These reserves come out to $750 per hour. So net of fuel, WiFi, and maintenance, the owner revenue is $500 per hour, or, $100,000 per year.

Direct Operating Costs (Owner Flies)

When you're in the aircraft as the owner, you will pay $825 per hour in fuel, $400 in maintenance reserves, $350 in engine reserves, and $131 in WiFi which totals a direct operating cost of $1,706 per hour.

Fixed Costs (Can't Avoid It!)

Here are the costs that come with owning the aircraft that you cannot avoid. Whether you charter or not, you will need to pay these. These are annualized

• Management Fee: $72,000
• Insurance: $30,000
• Hangar Rent: $45,600
• Crew: $157,500
• Debt Service*: $458,256
• Total: $763,356

Misc. Fees

Don't you hate these? It's like the cleaning fee at the AirBNB. Luckily, when you charter out your airplane the person flying has to pay them. These are per year:

• Trip Passthroughs (crew lodging, airport fees) $45,000​
  ​(to put this in perspective, $150 per hour. You only pay these when you fly, not when its chartered)

The Bottom Line

Expect to pay $4,217.19 per hour all in when an owner is flying. A reminder, this is assuming 300 owner flown hours, 200 charter hours, and financing the airplane, with data according to Mark at Silverhawk. That's better than paying $6,000-$8,000 per hour for on demand, but you have to be committed to flying (and paying for) 300 hours per year. A partnership can help offset this requirement and taking you down to 150 hours (2 partners) or 75 hours (4 partners) per year. Now it really starts to make more sense to buy in a partnership vs. chartering. Just make sure you like your partners and that you split holidays, because a jet partnership is more like divorced parents than a married couple.

If you were to pay cash for this aircraft, your hourly rate would be $2,539.67.

*When financing, your down payment would be $999,000 (80% LTV) and rates on a chartered airplane start at 8%. With these assumptions, your monthly payment would be $38,188. You will get 60% bonus depreciation in 2024. Food for thought. If you want to finance, reply to this email and we'll help get you set up.

My Take

These numbers were provided from a real operator, and this is what they tell to their clients. If you're only going to fly it yourself or other partners, these hourly numbers will come out different. Also, every charter market is different. Before purchasing an aircraft and placing it on a 135 certificate, find the operator that is going to be flying your airplane. The good ones will provide you with a pro forma and will help you analyze the actual cash flow you can expect on the aircraft you've selected.

Another option is to dry lease an aircraft, and next week we're going to talk about dry leases and the economics behind them. I'll be consulting with some friends in the industry to help give you the full picture, but this can also be a good option if you don't want to put it on a 135 certificate.

​

Until next week,

Preston Holland

​