Just Curious

[surplus1]

I'm just wondering ..... Do you corporate guys, particularly those with the "A" jobs see the growing "fractional" business as a threat to you future job secutiry?

Do any of you know of any good corporate departments that have shut down and switched to fractional programs?

 

[cvsfly]

Yes. As a small operator and the boss usually flying for pleasure vs business our flying varies. I think it is more of an ego thing saying he has his own plane and can direct his friends to our charter operation when they want to fly. He already has a fractional and to be honest he would be better off being totally fractional. Personally, I do think there is a better value in the larger traditional corporate business flight departments that have dedicated personnel. That said I do understand the value of the convienance, no headacks, on-demand nature of fractionals.

 

[501261]

About 2 years ago our company had a potential project across the country. To do this project the flight department was going to add another 100 hours to an already full flight schedule. To meet this challenge I aggressively looked into buying a 1/16 (50hours) of a C750 and another 1/16 (50 hours) of a C560 from EJA. The 10 would go across country and to Ultra to run day trips from the project.

Well, when you actually go through the numbers, it just makes no sense to buy a fractional. Since the acquisition costs are going to be a wash the only real variable is their monthly management fee and their hourly rate. I'm not going to use their actual figures (I think I signed a non-disclosure agreement) but on average their monthly management fee for a C560 is $10,000 and their hourly rate is $1400. Now doing the math on that shows that your hourly rate is $2600! Now that's 45% higher than our operating costs and 30% higher than the charter rate!

Yes, sloppy operators should be scared of the fractional. However, if you are in a quality department they really are not much of a threat at all, just another possible supplemental lift option (along with buying another airplane, charter, airlines, etc.)

Now the fractionals do some things very well, which is why they are so successful. 1, they have excellent customer service. 2, it is a known product. 3, incredibly good marketing. The bottom-line is that the big 2 are very well run companies that will continue to be successful. However, there is also a reason why Buffet thinks so highly of that BUSINESS and that's because it makes money.

Incidentally the company's project fell through, so we no longer needed the additional flight time.

 

[banned username 2]

I had heard that the fracs kinda push the following numbers:

If you fly less than 150 hours a year you are better off chartering.
If you fly between 150-400 hours a year you are better off with a Fractional
If you fly more than about 400 hours a year you are better off owning the aircraft outright.

Our new CFO had been with a company in the past who did the Fractional thing and all he had to say was "Wow, was THAT expensive!"

Our aircraft fly about 650-700 hours per year on the Falcon 50's and the Falcon 900's fly better than 800 hours per year... I think it would cost us a fortune to go Fractional... way more than it is costing us now... Basically our department runs nearly 5,000 hours per year...

 

[Gulfstream 200]

agreed...
the sloppy small operators may be threatened by fractionals but any department I know who flies 300+ hrs a year wouldn't consider the fractionals...some of the bigger ones may as a supplement but are usually disappointed in the service from what I hear...guess they just get used to thier own planes and pilots...

 

[Majik]

agreed...
the sloppy small operators may be threatened by fractionals but any department I know who flies 300+ hrs a year wouldn't consider the fractionals...some of the bigger ones may as a supplement but are usually disappointed in the service from what I hear...guess they just get used to thier own planes and pilots...

I think if you are a quality flight department, you don't have much to worry about from the fractionals. I fly for NJA and I agree, it sure looks expensive. Heck, it's real expensive!!! I generally ask the owner how long he or she has been in the program and if they are pleased. I've never had one person say anything negative. They all seem to love it. Many used to own their own jet or jets. Many still own their jets and decided to supplement their flight department. Most of the positive comments are directed at the fact that they are able to have so many different jets available to match their different flight requirements (short legs, x-country, overseas, 1 pax loads vs 12 pax loads, etc..). Also, if they have a maint problem, NJA usually has another jet cover their trip and most of the time it is a maximum of a 2 hour delay.
Although money is very important to you and me, I've never had an owner say that money was an issue or that they thought the program was too expen$ive. I'm not saying that one is a genius just because their net worth starts at $25 million, but I bet they pay somebody to do the math. We take delivery of a new jet every 3-4 days and there's a waiting line of people buying into the program. It must hold some sort of attraction to be that sucessful. I never would have believed it if I hadn't seen it for myself. There are tons of corporate jobs I would like to have and some that I would not. This one feels pretty secure, I like the schedule and, if the pay ever gets "right", will be a job that'll keep me happy for a long time. Most importantly, it was the company that offered me a job when I was looking for one

 

[Gulfstream 200]

Great to hear you like your job!
I also hope they pay you guys better, you seem to work VERY hard! well deserved raises should come!!
good luck!!!

 

[CL60]

Apples and Oranges

When Santulli came up with the idea of "aircraft owner timesharing," or fractional ownership, he was thinking about tapping into an entirely new market... those people and entities that fall into a certain annual income range who cannot actually afford, or who cannot justify the purchase of an entire aircraft on their own. (How far do you think frax would have gone if it were marketed as an aircraft owner timeshare? His marketing was superb).

Yes, some existing flight departments did fall into this new market category and adjusted accordingly however, there have also been other independent flight departments that have been created as a result of the fractional industry. (Many former frax owners branched out on their own after realizing they could not live without a full time aircraft).

Falcon pilot's numbers are correct. There is a slim marketing region that the frax operators have exploited and subsequently saturated and are now in the process of developing. The threat to the "A" jobs, as you put it, is minimal. Supplemental uplift is the only use that "A" operators can justify for obtaining a frax share.

By the way, another factor that a potential frax buyer looks at is the tremendous depreciation on the frax aircraft. The aircraft fly much more than a traditional corporate aircraft and thus depreciate much faster. Without offending any frax operators out there, we have looked at several first generation frax aircraft now for sale and have noticed that most are ready for varying degrees of renovation after only five or six years of service. Again, without offending anyone, some of the people I've worked for earlier in my career considered the frax to be a training ground for many first time jet pilots and were not interested in the frax for this reason alone.

Personally, I believe the frax industry has done more to stimulate the economy and the business aviation industry in general than any ohter entity in recent history. The aircraft manufacturers are pumping out more new and innovative aircraft than ever before.

Good luck,