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Learn to Fly Private

Welcome to the 28th edition of "Learn to Fly Private." One thing that often gets misunderstood is the fluctuation on hourly rates, whether it is charter, fractional, or whole aircraft ownership. In today's newsletter, I'm going to explain why.

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Now let's dig in...

The Truth Behind Repositioning Flights

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Some Real Life Scenarios

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Out and Back, No Repositioning

If the airplane is based in Savannah and is flying to Dallas, stays while the passengers are on the ground, and then flies home with the passengers on board, there are no empty legs. If you own, this is most likely you. If you charter at your local field and you aren't staying longer than 2-3 days, this also would be you. Using our benchmark numbers above:

• Hourly Costs: $15,000
• Fractional: $22,500
• Retail Charter Rate: $35,000

This is a very clean example but rarely, if ever, is it this straightforward.

Airplane Based At Destination

In this scenario, the airplane will fly empty between KSAV and KADS twice. Once when it comes to pick you up and once on its way home after it drops you off. The rate you pay per hour will go up, even though it is the exact same trip to you as the above picture.

• Hourly Cost: $30,000
• Fractional: $22,500***
• Charter: Best Case, $41,100 ($26,100 occupied rate + $15,000 direct operating cost) Worst case, $52,200 ($26,100 + $26,100)
  • $8,220-$10,440 per hour on your charter invoice

The fractional rate is going to be dependent on the agreed upon rate with the operator, and how they handle repositioning flights. Remember when we talked about the CJ4 program out of Milwaukee? You pay for the empty leg time at the same fixed $1800 per hour rate, unless they are able to sell charter into that empty leg, in which you don't have to pay to return the aircraft to base.

No operator is going to take a $7500 loss on a leg like this and stick around. Hence why in the article above, Fly Alliance charges $5,995 per hour to help offset these by showing to the customer "oh, you don't pay repositioning fees." There's always repositioning fees built into the price, whether you see it or not.

Floating Fleet Style Charter

Here's where scale operators of both fractional and charter operators have an advantage. Their fleet isn't necessarily based somewhere, so therefore if there is an aircraft nearby they aren't flying as far empty so they can pass along some savings to the consumer, and some margin they take for themselves. Imagine the thick line is your trip away from Savannah, and the aircraft only needs to relocate from Charleston. Then the thin line is your return trip, where the empty leg is from Austin to Dallas.

• Hourly Cost: $19,500
• Fractional: $22,500
• Charter: $33,930
  • $6786 per hour on your charter invoice

Notice, the fractional company can get away with only charging you for the occupied hours (5 hours x $4500) and still make margin on the trip. The charter burden isn't nearly as much as flying 2 dead legs between the destination, and the hourly operating cost for any operator is lower.

So What?

Use this as a framework and a model for the next time you realize a charter rate from a larger city is cheaper than from a smaller city. The customer is always paying for the empty legs, regardless of if you see it itemized in your invoice or if it's built into your total hourly rate.

Whether you are a fractional customer and pay an above operating cost price, are a charter flier and have a higher hourly rate than a fractional owner, or you own the aircraft and choose to fly it empty.

This data is all anecdotal, and please do not call your charter broker telling them that "Preston said it should be $6,786 per hour." Realistically, you're likely looking at around $8,000 per hour due to readily available aircraft, surcharges, landing fees, catering, etc. based on a conversation I had with the head of sales at Trilogy Aviation Group. Thanks Tyler for replying to my text late at night while I was writing this.

Until next week,

Preston Holland