What if the aircraft owner loses more money than he makes? What if the charter operator makes substantial profits while the aircraft owner loses money? Is that even possilbe?
Please see the screen shot below of one of our excel files. In this case if a Lear Jet model 55 owner allowed a charter company to piggy back his aircraft on their charter certificate, this is what the numbers could look like. The Lear 55 is an average/typical aircraft. However, the mechanics of how the Lear 55 works in the current charter model is the same for all aircraft.
As can plainly be seen from this example, the Lear Jet owner handing over his aircraft to a charter operator is a windfall for the charter operator, not for the aircraft owner. In this situation, the Lear Jet owner is losing $125,000 chartering our his aircraft for 200 hours a year. Meanwhile, the charter operator is earning $164,000 a year from those exact same 200 hours.
This is exactly the opposite of what the aircraft owner wanted or expected. The aircraft owner is adding to his operating expenditures (fuel, maintenance, engine reserves) by $125,000 a year. Meantime the aircraft owner is not reducing his fixed costs at all (pilots, training, payment, insurance, hangar…even the liquor in the bar). What piggy back chartering is really doing for the aircraft owner, is adding dramatically more variable costs every hour his aircraft is flying charter. These added costs/expenses are coming directly from the charter operator through the added costs of the charter operators “charter and management fees”. Even if the charter operator reduced his management fee by half or even eliminated it altogether for this aircraft, the fees to the aircraft owner would still add $80,000 to $100,000 to his costs annually.
By obvious necessity when the aircraft owner supplies his plane to the charter operator, he is also supplying and paying for all the assoicated fixed costs mentioned above as well as the variable costs in the excel equation. None of which accounts for the extra hours or useless wear and tear on his aircraft.
Think about it this way,”If aircraft actually made money from charter, would the charter companies not want to own their own aircraft?”
If you would like us to create a fully interactive and dynamic excel exclusively for your aircraft, please click here and let us know through our contact form what aircraft model you own. We will send you a custom excel via email as soon as possible. Thank you. AC 360.
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