Bob Knebel does not view private aviation as a luxury. As vice president of sales for Flexjet — the fractional business jet ownership program of Bombardier Aerospace — he talks daily with executives for whom corporate flight isn’t a perk or status symbol but a functional necessity for getting work done. Over the past year, however, scrutiny of private travel by public figures has prompted many of Knebel’s clients to reconsider how they fly.
“We had a customer about a year ago saying, ‘I need your service, I want your service, and I can afford your service. But I think it’s imprudent to purchase an asset in a rapidly declining market,’ ” Knebel said. “Our customers have known for a long time that business jet travel is essential to their jobs. Now they are asking whether they need the same number of hours, whether they have the right aircraft type, or whether they can minimize use without compromising operations. Those are sensible questions.”
Fractional jet ownership is one response to that reassessment. Launched by industry pioneer NetJets in 1986, fractional ownership lets customers buy a share of an aircraft for a set period — typically five years — sharing acquisition, fuel and maintenance costs with other owners. Most programs allow owners to upgrade or downgrade, accessing a fleet of different aircraft from the same provider. Fractional owners keep key advantages of private flying: privacy, security, the ability to schedule flights on short notice, and access to many more airports than commercial airlines serve.
“We have an entire department dedicated to researching airports you’ve never even heard of,” said Marylynn McKeown, marketing manager for CitationAir, Cessna’s private aviation division.
Fractional ownership is usually most attractive to companies or individuals who fly 100 to 300 hours a year, said Nel Stubbs, vice president and co-owner of Conklin & de Decker, an aviation cost consulting firm. Even organizations that own jets sometimes add fractional programs to their mix of travel options.
“Deciding on corporate aviation doesn’t mean you won’t use airlines at times,” Stubbs explained. “A company might use corporate aircraft for domestic travel and airlines for international trips. They may own a jet but still use fractional shares or card programs as supplemental lift.”
Participants in fractional programs pay up-front costs — such as aircraft acquisition, pilot and crew management, and hourly occupancy fees — which can be higher over time than fully owning and operating a plane. Fractional owners usually do not choose their pilots or directly manage maintenance, though many prefer handing those responsibilities to a management company.
“With jet management services, we hire the pilots and arrange maintenance and repairs so you don’t have to worry about it,” McKeown said. “It’s really a piece of cake.”
Even though fractional programs remain costly, the recession has pushed providers to become more flexible and to offer new models that better match customer needs.
“With the economy tightening pockets these days, people are much more focused on the hourly cost,” said Matthew Doyle, senior executive vice president of sales and marketing for Avantair, the fractional provider for Piaggio Avanti aircraft. “They are demanding: they won’t accept compromises in comfort, safety or aircraft condition.”
Some customers have accepted modest trade-offs to achieve significant savings. Under normal terms, CitationAir customers have access to Cessna aircraft 24/7, year-round. But members of the company’s JetShares program who agree to forgo up to 30 “premium days” such as major holidays reduce their costs substantially. Similarly, Flexjet’s Round Trip Pricing program rewards customers who preplan return flights with up to a 15 percent reduction in hourly rates.
Knebel notes that Flexjet learned flexibility during the late 1990s dotcom downturn, a period that forced both providers and customers to rethink the economics of fractional ownership.
“During that period of irrational exuberance, many people joined the fractional segment without understanding the economics,” Knebel said. “They thought, ‘I have my share of an airplane, don’t you?’ As those first contracts ended, customers told us they hadn’t always maximized value. We listened.”
In response, Flexjet introduced programs to address common concerns. Versatility Plus lets customers pool and roll over unused hours for later use. The Walk Away Lease offers an option to exit contracts with a 90-day notice, reducing the perceived risk of committing to a five-year share.
While those options proved popular, fractional card programs have been the top sellers recently. Card programs work like prepaid debit cards: members deposit funds and draw down flying hours against the balance. Though card programs carry the highest hourly rates within private aviation, they are cheaper in the short term than any form of aircraft ownership, making them especially attractive now. “The focus has shifted slightly from fractional to card-type programs. We’ve seen record sales in cards,” Doyle said.
Demand for flexible offerings has led providers to create hybrid solutions. Avantair’s Access program sells 25-hour blocks over three years at reduced rates. Flexjet expanded its card options to allow customers to split hours between aircraft types and divide card costs into two payments. CitationAir merged Cessna’s former Jet Card and Citation Shares programs and now offers a 12-month membership for a single fee that blends features from both solutions.
“Big corporations once maintained large fleets, but changing economics have shifted perceptions,” McKeown said. “Executives still need to reach remote locations, so we created a simpler contract that cuts capital costs and removes long-term commitments.”
Despite tighter budgets, providers continue to offer perks. New purchasers of a Flexjet 25 card received access to select Olympic events and a behind-the-scenes meeting with an athlete, while NetJets members have year-round access to Mayo Clinic medical services and around-the-clock care for their pets from the University of Pennsylvania Veterinary Hospital.
In the near term, however, the relationship between customers and fractional providers is likely to remain pragmatic and business-focused.
“Two or three years ago it wasn’t uncommon for executives to use a large aircraft like a Gulfstream IV for short flights even if that plane wasn’t well suited to the mission,” Doyle said. “Now companies see aircraft as business tools rather than perks. These programs let people reach destinations much faster: they can visit two or three cities in a day and return home. Doing the same on scheduled airlines might take a week.”