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Private Jets

While to the majority of the world traveling in a private or corporate jet is opulent and extravagant, for a select few companies it is a practice that has a quantifiable benefit.


Private jets are expensive. I mean really expensive. Even one of the smallest and most inexpensive private jets, a Citation Mustang, is almost $3 million. And that number doesn't include the operating costs. On top of the purchase price there is fuel costs, insurance, pilot pay, maintenance, storage, catering, and so on. An hour long flight in this jet could easily surpass thousands of dollars, but only get you a few hundred miles.

Citation Mustang.  Credit

Upgrade to the ever popular Gulfstream V (G5) for $50 million and run it from coast to coast and costs are pushing upwards of $75,000-$100,000, one way.

Gulfstream V.  Credit

Believe it or not though, this is still cost effective for some companies. Take banks and their executives, for example. An executive that makes $20 million a year makes around $9,000 - $10,000 an hour (assuming a 40 hour work week for 52 weeks). If that executive takes a commercial flight, even a nonstop one, total travel time (from door to door) could equal 8 or 9 hours due to arriving at the airport early, checking in, airport security, flight delays, baggage claim, and so on. Multiply that out and that executive is traveling and not working for $72,000 - $90,000 worth of pay. And if two or three executives are making the same flight from New York to L.A. it may cost the company $270,000 just in paid compensation to the executives for travel, not including airfare. Now bring a private jet into the picture.

Let's say it costs on the higher end to run that G5 New York to L.A. at $100,000. And instead of leaving from busy JFK airport where the passengers' travel time is greatly extended and is far from the company's headquarters, that jet leaves out of White Plains, NY, only a short drive from the corporate HQ. All of a sudden a 8 hour coast to coast trip is about 4 hours. The $100,000 in flight costs, plus lost wages to the executives is around $220,000. But beyond the lost pay, the extremely important decision makers of the company have only lost 4 hours of effectiveness, instead of the longer time it takes to fly commercially.

To pile on top of that, companies see a huge value in the extremely high security that is provided by traveling in a private jet. When the head of a multi-billion dollar company needs to travel, especially abroad, that asset needs to be protected, and a private jet does that. That is why this method of travel is so important to heads of state and nations.

Furthermore, some companies opt to rent out their jet while it is not being used by company personnel.  By doing this, they can help offset the costs of ownership and be able to justify the jet even more.

For those companies and people out there that cannot justify the cost of full ownership of their own private jet, there are companies out there that sell something called "fractional ownership". This is where an individual or company throws money into a collective pool and buys a percentage of a jet. Then, based on the percentage of ownership, time spent using the jet is divided up so that all parties receive flight time commensurate with their fraction of ownership.

Some companies move a step further from this model. A company like NetJets buys multiple aircraft of the same make and model, then sells blocks of time on those jets. So, say, I were to buy 100 hours on the Dassault Falcon 7X, and I called up and said I needed to fly from Key West (EYW) to Nassau (MYNN, or NAS) in the Bahamas, then onto Bern, Switzerland (LSZB, or BRN), they could dispatch a jet to Key West to pick me up. The benefit of owning a handful of 7X's is that they can spread them out all over the world and be able to have a a jet ready to any of their customers in a matter of a few short hours. Pretty wild, no?

Falcon 7X.  Credit

Of course there are certain segments of people out there that can afford to travel in a private jet because they enjoy that lifestyle and not because of any economic benefit.  This is a more obscure and undefinable justification of using a private jet.

I try to keep politics off the blog, but in the news recently there has been talk of the corporate jet tax break that some companies enjoy.  I really don't know the tax code well enough to understand what kind of break companies are getting, or even if they should be able to get a tax break for owning a jet.  In cases where the company jet isn't abused and is only used for the most important business trips, there can be a cost benefit for owning and maintaining a company/private jet.

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