Charter/certificate/management question

[G100driver]

While I know absolutely nothing about South Florida charter companies I can tell you this: Start looking for another job. Nothing is worse than going down the tubes in charter end. Particularly when dealing with a snake in the grass management/charter company (they all are). The only one who makes money is them.

In order for the management company to price a Lear competitively it needs to charter for $1700-2000 bucks an hour. Your DOC is going to be in the neighborhood of $1200-1300/hour. The management company needs to make money right? They will probably only be willing to give you $1400-1500 bucks an hour.

Now, lets say that you want to fly 250/year in charter with a $300/hour margin. You clear $75,000 grand a year. Big F'n deal. You made your salary .... before benefits. Not mention your airplane will look like $hit, you will grow to truly hate your job and your boss will always be pi$$ed off because his maintenance bills are going through the roof and his airplane is never avialable and he is paying those management fees to boot.

Did I mention that you now will have to go to school twice a year instead of once? That is for both you and you co-captain. You are planning to have a co-captain right? If not, say good bye to your wife as well. No co-captain .... no life. You are always on call with no relief in site. You should be able to have the management company find you a SIC when you need it. Of course the management company owns and stands for nothing so they will ask you to pay for his/her training as well.

Sorry to sound like a butthole here, but I have been there done that. Both you and you boss are about to get hosed. If he/she cannot afford an airplane without going on charter then they cannot afford an airplane ...

 

[Publishers]

G100 may have that opinion but all the owners here that I know could afford whatever they want to. The tax effect of charter plus offset of some costs, reduction of fuel and hanger costs, all make it worth it to charter, especially if you only have 200 hours of your own need.

 

[G100driver]

I have never understood the tax offset when compared to devaluing your interior (yea I know you can replace and depreciate) and running extra cycles and wear and tear on your airplane.

Like I said, most charter companies own nothing and stand for even less. Unless of course you factor in making money for themselves and leaving you holding the bag.

Be sure and ask the charter company this when you are negotiating. "Let's say I do an aircraft re-position to L.A. to fly a guy back to FL. We break in LA and it is going to take 4 days to get fixed. Your customer is going to want another airplane, right? How is the aircraft owner going to re-imbursed for flying the airplane back and forth across the country while it is getting fixed?"

Publishers, what would your company do? If they say they will cover all the $20,000 in expenses then I stand corrected ....

 

[HMR]

If he/she cannot afford an airplane without going on charter then they cannot afford an airplane ...

EXACTLY! Great point about the LA mx scenario too.

I don't know ANYONE who's made money (i.e. a profit) from the "tax right-off". It just seems to prolong the agony for the owner. Last year I was doing indoc (contract job) for one of the largest PT135 operators in SoCal. When someone brought this topic up in class the DO responded, "I've been doing this for twenty years and still don't know how anyone can make money in this business".

Along the lines of what G100 said- If you pay pilots what they're worth, staff the A/C so the pilots can have some semblance of QOL and do decent maintenance-there's no way for anyone to make money on a charter. The customer won't pay the "high" price when the bottom feeder nextdoor will do it for half. That's why we have Lear capt's making 50K/yr, working 25+ days/month with a 500hr SIC.

 

[Publishers]

First-- let me answer the question of a mechanical.

The charter/management company is for all intent a broker of trips with the owner receiving on average from 80 to 90% of the revenue generated. Obviously the aircraft owner is going to lose on this scenario.

Without eventing the wheel and keeping it real simple-- the owner of a Falcon 2000 flies about 200 hours a year. You have capital cost per year of $1,000,000 ( does not matter how accurate this is). You have operating costs of $ 2000 per hour. Aircraft is chartered 250 hours per year at $4000 per hour net to owner. Revenue $1000000 cost $500,000. Net $500,000.

Now lets look at from owner cost of $1.0m plus 2000 per hour. It cost him $7000 per hour to fly his 200. With charter, it costs $ 4500 for the owner before we get to the tax consequences.

Charter company would get on 90% deal gets 100,000 for all the 135 stuff and selling the charter and dealing with the customers.

In our example, on the MX problem, he is out let's say $12,000.

 

[G100driver]

First-- let me answer the question of a mechanical.

The charter/management company is for all intent a broker of trips with the owner receiving on average from 80 to 90% of the revenue generated. Obviously the aircraft owner is going to lose on this scenario.

Of course the owner has 100% of the risk and costs. Charter/Management companies own and stand for nothing. If they would be willing to take the risk then I would be much more impressed.

Aircraft is chartered 250 hours per year at $4000 per hour net to owner. Revenue $1000000 cost $500,000. Net $500,000.

What you failed to mention was that it cost an addition $350,000 dollars to operate that airplane (250 X $1400 hr of DOC) Now that MX costs the owner real money.

I have the most respect for charter companies that actually own there own aircraft. Executive Flight in KEAT is great example. They own their lears, challenger, and turbo commander. All of their pilots go to school every 6 months ... AND they get paid a living wage. They may cost a bit more, BUT they do it right.

To give an example (I do not know if they still do this): when I thought about going up there in '99 the CP said that there was no pilot contracts. Instead he gave a $15,000 (?) cash bonus at the end of 3 years. WOW an incentive to be loyal, not the baseball bat the used these days.

To get back to the subject asked by Jonny. Your boss is going to do what he is going to do with or without you. Just remember you need his loyalty to you when it comes to dealing with the charter/management company. They WILL be dishonest with you, they WILL try and undercut your position with your boss and the WILL NOT take care of you, the pilot. Look out for number one ... the charter/management company will not because they are doing the same ... looking out for number 1.

Good luck.

 

[GVJeff]

Be sure and ask the charter company this when you are negotiating. "Let's say I do an aircraft re-position to L.A. to fly a guy back to FL. We break in LA and it is going to take 4 days to get fixed. Your customer is going to want another airplane, right? How is the aircraft owner going to re-imbursed for flying the airplane back and forth across the country while it is getting fixed?"
....

Lets say you fly your boss from Florida to L.A. for a meeting. The airplane breaks in L.A. and your boss has to charter another airplane to take him home. How is the aircraft owner going to get re-imbursed for flying the airplane back and forth across the country while it is getting fixed?

 

[G100driver]

Lets say you fly your boss from Florida to L.A. for a meeting. The airplane breaks in L.A. and your boss has to charter another airplane to take him home. How is the aircraft owner going to get re-imbursed for flying the airplane back and forth across the country while it is getting fixed?

There is inherent risk when OWNING an airplane. The charter/management companies own nothing ... while you take the risk.

 

[GVJeff]

I have never understood the tax offset when compared to devaluing your interior (yea I know you can replace and depreciate) and running extra cycles and wear and tear on your airplane.
....

Interior on the aircraft I fly these days (G-V) is about $2.5 million to re-do. First year tax benefit on a new G-V is about $5.5 million to have it on Part 135. Years following, it's about $1.2 million until year five at which point it becomes zero. That's a lot of interiors, and cycles.

 

[G100driver]

Yes Jeff, but that is depreciation. It is not as if those tax dollars just disappear.

I realize that for some owners charter is an OK. I just have yet to meet them. By the end they all hate the management companies and are soured on aviation.