In early 2008, as the recession was looming, I realised that there were going to be some significant changes in the fractional jet ownership market, even though I had no idea of how far-reaching the financial crisis would be. As of course, neither did anyone else!
However as Head of Sales at NetJets in London a that time, I could feel the winds of change blowing through the gilded streets of London’s West End. The ‘Credit Crunch’, as it was so quaintly called in late 2007 had started a few months before, and the Labour government of Tony Blair had announced the intention to tax ‘resident non-doms’ - a typical NetJets client - for the first time.
In early 2008 I was already noticing that a few people who had purchased a new private jet shared ownership contract in the euphoria of 2007 were trying to find a way to get out of the commitment that had seemed such a good idea a few months earlier.
Hence Fractional Jet Europe was born. The objective was to create greater flexibility in the market by putting buyers and sellers together. Out of that simple idea we created a totally new secondary market for fractional jet flight hours and shares where none had existed before.
I left NetJets in March 2008 and by a bizarre coincidence, or twist of fate perhaps, launched Fractional Jet Europe on 15th September 2008. Apart from that auspicious event, that date is perhaps most famous for being the day that Lehman Brothers collapsed.
At exactly the moment we pressed send on our first marketing email, people were walking out of the Lehman Brothers offices in Canary Wharf carrying cardboard boxes containing the contents of their desk drawers.
We suddenly had a lot of NetJets shares and flight hours on our books. Well things have calmed down since that day, thankfully. Over the last 10 years Fractional Jet Europe has put many owners and buyers together, to the benefit of both parties
Back in the early 2000’s the concept of owning a fractional share in a private jet was relatively unknown in Europe even though NetJets had been in business for almost 20 years in the United States.
The logic of the idea was compelling - pay only for the share of the jet that you need and have a jet guaranteed whenever you need one - but as with all new ideas, people took time to become comfortable with the concept.
It was the launch of the Marquis Jet Card in 2002 that really was the catalyst for NetJets in Europe. Buying 25 hours on the NetJets fleet was easy to understand and less of a commitment than buying a share. The hourly rate carried a premium, but it gave the buyer the benefits of a managed fleet (safety, security, guaranteed availability etc) in an easy to manage chunk. As people grew to know NetJets better many moved up from the jetcard to buying a share.
Depreciation is the single largest cost of owning an aircraft. An aircraft will typically depreciate by about 50% over a 5-year term, obviously depending on the market at the time.
Buying a fraction means that you are only exposed to a fraction of that depreciation cost, delivering you a substantial saving.
As an example if you were planning to buy a jet for $8m, over 5 years you would lose somewhere in the region of $4m in depreciation. And that is before you’ve flown it anywhere!
Let us say that you want to fly 100 hours per year, and rather than buy a whole aircraft you bought a fractional aircraft share instead. To NetJets 100 hours is one eighth of an aircraft - they can operate an aircraft for 800 hours per year. Therefore you need to buy only one eighth of the aircraft, or in other words a $1m share. Assuming the above 50% depreciation in the value of the whole aircraft, after 5 years your share will be worth the same 50%, i.e. $500,000. You have experienced a depreciation cost of $500,000 instead of $4m, a saving of $3.5m but flown in exactly the same aircraft. That saving will effectively pay all your flying costs for the 5 years.
While the benefits of a fractional ownership are considerable compared to owning your own aircraft, it still requires a substantial commitment, with a contract term of 3-5 years.
Hence why we created Fractional Jet Europe and the secondary market. It doesn’t require a recession of the magnitude of 2008 for people’s circumstances to change, they may simply decide to travel less or sell a business that required the use of a jet. When that happens we can find a buyer for their surplus hours or even their aircraft share. The owner has the flexibility to manage his commitment, and the buyer can benefit from a more flexible (and cheaper) way to access the world’s number 1 fleet of private jets. Both parties benefit.
Over the last 10 years we have saved our clients millions of Dollars, Euros, Pounds, while enabling them to fly with the world’s best and safest fleet of private jets.
Please contact us to find out how we can help you with your flying requirements.