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13 May 2020
Although the idea of aircraft travel may currently be the last thing on many people's minds, for some people, access to aviation travel for business or personal reasons may be necessary even during these difficult times. Moreover, access to business jet travel in lieu of commercial flights will become even more in demand, as commercial airlines reduce the number of available flights, curtail routes or shut down operations altogether.
Further, with social distancing, some individuals may prefer a smaller cabin aircraft to a large cabin commercial aircraft and to avoid large airport terminals in favour of private jet fixed-base facilities that, without security lines, allow passengers to arrive only minutes before a flight.
Charter operators and brokers are currently feeling the pinch from reduced air travel requests. With plenty of supply and little demand, at least for the moment, charter rates should be relatively reasonable and, in some cases, negotiable. With the substantial reduction in the cost of oil, fuel costs are also lower for many charter operators compared with commercial carriers, many of which bought futures contracts in an attempt to hedge against what many thought would be increasing fuel prices in an expanding economy.
Once demand begins to pick up as customers defer to charter aviation rather than commercial aviation, charter rates could begin to climb to meet market demand. For those customers who regularly travel for essential business or personal reasons and who remain concerned about access to, or availability of, commercial flights in light of the pandemic and its after effects, it might be time to consider obtaining a jet card from a charter operator or management company.
Most jet cards lock in rates for a period, for example 12 months, which allows customers to hedge against increasing charter rates as demand begins to outstrip supply. Unlike on-demand charter, jet card programmes typically build into the hourly fee the cost of ferry flights, deicing fees, standard catering and the like rather than having to account for them separately in evaluating the actual cost of on-demand charter.
Unlike purchasing a fractional interest in an aircraft, which requires a substantial up-front capital payment without any assurance of a return on investment when the interest is sold, a jet card allows customers to have access to an aircraft for a substantially lower up-front payment and without the obligation to pay a long-term monthly management fee for what may be only a short-term need. Another benefit of a jet card compared with on-demand charter is that most card issuers closely monitor the quality of the available fleet in terms of maintenance and flight crew standards (eg, requiring their aircraft to meet Argus Gold or Platinum standards).
Not all jet card programmes are the same, so consideration, for example, of the frequency of travel and travel locations, how hours are calculated, whether federal excise tax is included and the like will be important.
Without knowing the magnitude of the impact that COVID-19 will have on the economy and, in particular, on the commercial aviation industry, as well as how long social distancing and other efforts to contain the pandemic will be in place, there are alternatives for those for whom aviation travel is a necessity, and access to private aircraft through a jet card may be one answer.
For further information on this topic please contact Steven Haas at Cozen O'Connor by telephone (+1 202 912 4800) or email (email@example.com). The Cozen O'Connor website can be accessed at www.cozen.com.
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