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Making Plane Sense
Fluto Shinzawa with Bill Quinn
12/01/2003
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Mateo knew he needed to fly between California and Hawaii three or four times a year, but his fluctuating business plans made it difficult for him to determine the exact number of annual flight hours. The easiest solution would have been to purchase an aircraft such as a Citation X or Excel outright, making the plane available for charter to offset his costs when he was not flying. Quinn conducted a benchmarking study to figure out fixed operating expenses (cost of ownership when the plane is not in use) and direct operating expenses (cost of ownership when the plane is flying). Quinn then divided the overall operating costs by the plane’s average speed to determine the aircraft’s cost per mile and its cost per seat mile.
However, Mateo did not want to spend the upfront capital required to make the purchase, eliminating the possibility of outright aircraft ownership. "His inclination was to reduce capital investiture, which pointed us back to fractional," Quinn says. "A lot of owners are sucked into buying planes because you’re able to shelter larger amounts of tax dollars in the plane. But that catches up to you, and he was sensitive to that based on experiences in the past."
Mateo’s other alternative would have been to join Marquis or Sentient. Marquis offers 25 annual flight hours aboard
NetJets-operated planes to its members. Sentient features a fleet of charter planes from operators nationwide, and its clients draw upon a prepaid bank of flight hours when flying with the program. However, Mateo predicted that he would fly more than 25 hours annually, eliminating Marquis as an option. Also, Marquis’ cost per mile would be 5 percent to 10 percent greater than that of fractional and 15 percent to 20 percent more than that of whole aircraft ownership.
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