Learn to Fly Private

Welcome to the second edition of Learn to Fly Private. When I first tweeted about a newsletter, I didn't know how much this would resonate with people. I guess the world of private aviation really is that opaque. I'm here to help make you a little more confident.

Were you forwarded this email? Join over 600 others learning how to fly private by signing up here.

This week we'll cover:

• Wheel's Up's New SMB Product
• Year End Tax and What It Does to Buying Jets
• (All New) Anonymous Question and Answer

If you have any ideas for future topics, hit reply to this email or shoot me a DM on X (the artist formerly Twitter) @prestonholland6.

Wheels Up, Change Up

I know that last week in my first newsletter I threw some shade at Wheels Up and the jet card model. I stand by what I wrote, but their announcement today has made a lot of sense. If you didn't catch last week, you can read it here.

Wheels Up announced yesterday the newest program change targeted at SME (small to medium enterprises) called "Up for Business" as the first new offering since a consortium lead by Delta bought 95% of Wheels Up with a debt facility worth $500m.

Lets Break It Down

This new program has significantly reduced the barrier for the private jet carrier's program for corporate travel, specifically targeted to small to medium businesses. They've done this by reducing the initiation fee (think, the first year you join the country club) and the yearly renewal fee. It's also set new hourly caps on trips in their PSA (primary service area).

Deposit Requirements (in Diamonds)

To get these, you must make a $250,000 deposit. This reply on X pointed out that in a world of 5% interest rates, this is a great deal for Wheels Up, which made me chuckle. I argued Delta needed to make back their money somehow.

The kicker is you can use this credit for any Delta flight, for any employee in any class. That all of a sudden changes the dynamic if you have a business that does a lot of Delta flying. At the $250k deposit level, you get one Diamond Medallion status upgrade and one Gold Medallion upgrade. If you up the deposit to $300k, you get two Diamond Medallion status upgrades. This means, if your business already charters 2-3 times a year in a King Air or Citation XLS and the rest of your company flies Delta, this is a way to cap your charter rates, and avoid dynamic pricing and broker fees. More on dynamic fees and use cases later.

Initiation Fee and Annual Fee

Welcome to the country club... but now it doesn't hurt as bad. You'll want to consult your tax professional of what this means for your business.

• Initiation Fee: Reduced from $29,500 to $9,995
• Yearly Renewal: Reduced from $14,500 to to $8,500

Capped Rates, Peak Rates, Dynamic Pricing, and Primary Service Area

Wheels Up has some pretty fancy tech that knows when and where people want to travel. This is the benefit of scale that other smaller operators don't have (their planes just get stuck waiting for you or come home empty. Oh yeah, you pay for that.) With this program, you will have contracted rates and will have many days you don't have to pay a surcharge on their owned fleet. This all has an asterisk, though. You have to be flying within their Primary Service Area (pictured below). If you want to dive deeper into how they make money, their SPAC deck is a fascinating read. Slide 20 and 25 help explain how this system works. Remember, a lot has changed since this deck was presented.

There are those that can fly...

Why would you choose this over the core program? For reference, the core program has very similar economics for an individual. In this program, you can have unlimited people in the company be "lead passengers" (i.e., Wheels Up members). Let's say you need to send your upper management team to a manufacturing location in a remote city. You can make any one of them the lead passenger. Why does this matter? Well, for some jet card programs (including the UP core membership), the principle needs to be on the plane and/or the one doing the booking. It's tailored more towards a HNW individual as opposed to using private aviation as a business tool. You can also now charter two planes on the same day once per quarter. I think this is a fringe benefit, but might be good for taking your sales team to the Bahamas when they crush their numbers (if you're doing it in this economy, good for you.)

My Take

All of private aviation benefitted from ZIRP (zero interest rate phenomenon) and then went crazy during COVID. Wheels Up is no different. Now, after an incredibly rocky SPAC, growth at all costs leading to bad business practices, a bailout, and selling off their jet management program, Wheels Up/Delta are blurring the lines between commercial, private business, and private personal travel. Let me say from personal experience, when 4-5 employees can do an in-person meeting and be back home in their own bed in the same day or skip the two travel days on the trip, productivity on those remaining days is very high. Also, you can use the deposit credit for any Delta flight. I'm in Chattanooga, Tennessee and when commercial, almost exclusively fly Delta. I would rather get stuck in Atlanta where I can take an Uber home as opposed to Charlotte, Dallas, or Chicago. If you're in or near a Delta hub, and charter even a few times a year, it all of a sudden starts makes sense. Any of your employees can fly using the deposit credit on any Delta flight in any class. Ask your accountant how it might help too (this is not tax advice.)

If you want to talk to Wheels Up or learn more about this program, check out their website here. If you buy, tell them Preston sent you. They'll have no idea who I am and I don't make money on you doing it.

Business Jet Demand and Year End Tax Harvesting

Ongoing Demand

IADA is an organization that represents the best of the best dealers and service companies in the private jet world. Think, Realtor Association but for private jets. (Full disclosure, we have a company Avbuyer, which is a member of this organization.) IADA released a report for Q3 2023 transactions. Their sample size is big, and tends to reflect the overall industry. YTD in September, 2023 transaction numbers were at 853 compared to 929 transactions YTD 2022 (8.2% decline). In YTD 2023, 191 transactions were sold below asking price vs. 59 in YTD 2022. I'm no economist, but that sounds like demand is softening!

Q4 historically is when the most transactions take place in both the used and the new market. The CPA calls and says "you have a tax burden!" so people go and buy jets. We have 6 clients this week with this exact situation. Business aircraft with 51% or more use qualify for 80% bonus depreciation, and then hourly can also be written off when using for work, so it makes it a very attractive offer. Then, when you can use 80% leverage on the aircraft and get 15-20 year terms, it gets interesting. We'll do more breakdowns on this in a future issue, but this is the general logic behind it. What I'm hearing from the industry is that so far, Q4 is as strong as it was last year. Every broker friend I've talked to is selling airplanes faster than they were 4 weeks ago.

A Tip if You're Buying This Year

Get your order in quickly. Pre buy inspections get backed up and you have to fly 2 business trips this year to qualify for the depreciation. You really need it in pre-buy by Thanksgiving to make the cutoff.

Anonymous Q&A

Let's face it: not a lot of people want to talk about flying private publicly. That's why I've created this section, where each week I'm going to use an anonymous question I get. All identifiable information will be scrubbed, but its good to know others are asking questions too. To get your question answered, reply to this email or send me a DM. I'll always get permission before posting.

This is the perfect use case for on demand charter (also called ad hoc). There is no point in owning an airplane outright, having a fractional jet card because you can't write it off or use all of your hours, or having a jet membership.

Usually, the cheapest way to charter is to book directly with a local individual operator. This only works if you can find them, and most of their websites are from 2004. If you find an operator that flies aircraft that fit your mission, this will be the cheapest way to fly. Alternatively, you can book through a charter broker. You'll pay fees for the convenience, but it is a one time transaction and you don't have to commit to any monthly fees. Be sure to book through a vetted, creditable broker. The key is to look for Argus certification. Another service you can try is JetASAP (not an endorsement.)

Alright, that's all.

​

Until next week.

Preston

p.s.

In case you didn't know, there are a lot of shady players in private jets. When you get a group of HNW or UHNW customers who sometimes don't understand the nuances of private aviation, bad players tend to inject themselves in the middle and it doesn't end well. Also, there is no regulation. Private aviation saved all that for the flying part but practically none for the transaction side. Vet your private aviation providers (including me). I mentioned IADA in this issue. They're legit.