Eaving home on the road down before.
Riding along on the speed jen I've in begging about. Flying private was once the province of billionaires, but that's no longer true. Sure, the top point one percent can drop fifty large buying their own jet, but there are many other ways to fly private beyond owning your own gulf Stream. There's fractional ownership, hourly charter jet cards, membership, and leases. Those are another way to go. Let's explore
this by speaking with Preston Hollins. He's the founder of Prestige Aircraft Finance, hosts a weekly private aviation podcast called the vip Set, and he's the author of the newsletter Private Jet Insider, providing advice and strategies to help clients navigate private aviation. So Preston, let's start with the basics. Besides bringing my dogs on the plane, what's the main reason people fly private? What are the benefits and drawbacks of private aviation?
Very The one thing that you cannot buy more of is time. They say that money can buy anything in the world except for more time. I want to challenge your audience to say there that is almost true until you start talking about private aviation. Private aviation is the only way to buy your time back using dollars and actually getting time back. Time is the number one differentiator
when it comes to find private. You go to a different part of the airport, you skip security, you drive up to the airplane, get on and take off, and oftentimes you're even going to an airport it is closer to your destination than the commercial airport is. So time is the biggest differentiator now. Is it's private, you don't have to deal with a lot of other people. There's some health benefits that come to it because you're not
being exposed to so many people. But at the end of the day, it is time that you're buying back. That is the biggest difference.
So there are obviously a lot of key differences between flying private and commercial. Time saving is one. You're avoiding crowds and lines. What are some of the other benefits of flying private.
It's really that the airplane moves on your time. So if you think about the last time that you have to rush out of a meeting to get to the airport, and you need it to because your flight left at six h four pm, that plane is leaving whether you get there or not. If you've ever had the experience of the last minute you're rushing on and you're running
down the airport. I live close to Atlanta, Georgia, and so I have had that experience many times in which I'm running through Hartsfield Jackson and trying to get onto the plane because i had a meeting that went long and I'm trying to get there. Prive deviation is different. The plane does not leave without you, and so it really creates maximum flexibility. It also increases a lot of
your ability to de stress. Right, you don't have kind of that stressful moment leading up to getting on the airplane. Catering you get to pick what type of food is on the airplane. You don't have to say, you know, cookies or pretzels. You can say I want both, and I actually want homemade cookies and I want real pretzels and an actual big bag. A lot of people want to try and make the justification from a dollar standpoint. They say, okay, I value my time at one thousand
dollars an hour. Let's say I'm an attorney, and you can actually put a dollar amount on how many billable hours that you have if you and you say Okay, my first class ticket's going to be one thousand dollars, and so therefore, when can I kind of justify the difference between first class and flying private. It's a tough comparison when you think about all of the additional fringe benefits that come with flying private. If you just try and do a cost calculation, you're never going to get there.
It's never going to make sense to fly private. Probably ninety nine percent of the time. There is the one percent fringe time where you're going to Nantucket and there's six of you and maybe everybody's going to fly first class, and maybe you can kind of make it make sense on a turboprop, but if you really boil it down, it's never going to net out from a cost dollar standpoint. But really what it is is it's all those fringe benefits that come from flying private that you really can't replace.
Since you brought up meetings and other related things, I'm curious how much of private jet usage is business travel and how much of it is recreation vacation fund travel.
It depends on the demographic that you're looking at. I think one big missnomer that is out there is that private jets are reserved for Kim kardashing and Justin Bieber. You look at how the public perceives private aviation, it's celebrities flying to Vegas going on a party. They've got all of their friends there. But really the bulk majority of private aviation actually looks like main street businesses that
have multiple locations a lot. In manufacturing, for instance, you think about just in time manufacturing, and you think about uptime in a manufacturing plant, and if private aviation can make sure that your plant is staying online for longer, that can be worth millions of dollars an hour to a manufacturing plant. So private aviation a lot of times looks a lot different than what you think if you look at like a per hour basis. As you kind
of broke it down, the majority is for business. Now, if you own an aircraft and you want to take depreciation benefits, it needs to be fifty one percent. This is not tax advice, but that is all of my tax friends say it's got to be fifty one percent. Use if you want to get that depreciation. But oftentimes it really is used a lot for business. Now you can use it for private purposes as well.
Well.
You can use it for vacation. It doesn't have to only be business. But the vast majority of travel in the private jet space is business, which is why the use private jet and business aviation are very interchangeable because it's oftentimes you know, those two things are often seeing hand in hand.
Huh, really really interesting. Let's talk about the variety of options that exist, starting with fractional ownership. What does that mean?
So there is a couple of different ways to fly private, and if it's okay with you, Barry, I'm going to take one half step back from there, and I'm going to break down the four ways to fly private. I actually wrote an article about this. It's at my website Pressinhollan dot com. That's a free plug for myself. But there are four ways to really fly private, and they go from the least committal, the least long term committal, to the most committal. So the least committal way to
fly private is to on demand charter. That means I'm going to call up my charter broker and I'm going to say I need to go from New York to Miami. I need to go tomorrow, and I have four people. You're going to make one transaction, you pay it, you fly the trip tomorrow, and then you're done. No more commitment. You don't ever have to fly private again if you don't want to. Ad Hoc charter is kind of the colloquial term ad hoc the Latin word for on demand, right,
So that's ad hoc charter. The second committal would be a membership or a jet card, so that is kind of the second phase. Those listeners of Bloomberg will be familiar with Exojet, they'll be familiar with Vista Jet. If you read any of the bond ratings, there's a lot of memberships and jet card programs. You are pre paying for an hour block. So let's say you put down a five hundred thousand dollars deposit and that's going to buy you x amount of hours on a certain aircraft type.
So that is the second, you know, second least committal. There are you know, membership fees that are sometimes associated with that, but you're not necessarily committing to one aircraft type or something like that. The next committal is fractional ownership, so you're buying in that was your original question. You're buying into a program. This is net jets. This is flexjet,
this is airshare. There's a few regional providers that do fractional program but you're buying a piece of an airplane, not too terribly dissimilar to a timeshare, where you're buying a portion of the airplane. You may never fly on the tail that you own on, but you are committing to that membership tier. So maybe you buy one sixteenth of an aircraft that allows you fifty hours per year. There's a monthly maintenance fee that's associated with it, and
then you pay per hour. You're committing to a program, you're committing to a flute. The most committal way to marry an airplane is to buy it, So this is I own the airplane. Now you can do that a couple different ways. Maybe me and Barry we both live in New York and we want to share an airplane, so we each go in fifty percent and we buy the airplane. But you're only flying on that airplane. So it's one tail, number one air after one set of pilots,
not as much membership. So that's kind of the range to set the baseline of the different ways that you can fly private.
So you wrote an interesting post that kind of explains the cost differences between all those four things. And what struck me is so fascinating was the least amount of money you spend annually for something like an on demand charter is going to be the most you spend on an hourly basis, and vice versa. If you make a
big commitment annually, your hourly costs are the lowest. When people are considering these things, is it simply a function of, Hey, how many hours do you think you're flying this year? Do you think it's fifty or one hundred hours? Is that what informs those choices between jet cards, hourly charter memberships, and fractional ownership.
Generally speaking, yes, when you talk about the first decision that you're making, when you're talking about how am I going to average my cost on an hourly basis, that is generally the right framework to think about. Now, it is not the hard and fast rule. I know plenty of billionaires who fly flexjet fractional who can totally afford their own aircraft, and they probably fly enough hours they
just don't want to deal with the hassle. Right So, but generally speaking, if you're going to say which bucket do I fit into private aviation. It's typically when you're thinking about how much am I flying per year? If you think about it strictly on a per hour that I am going to per hour that I'm going to actually fly, how much of my paying So let's say let's set the benchmark ten thousand dollars per hour that's going to be a super mid aircraft that's going to
be able to take you coast to coast. If you were to own in a fractional program and you took your purchase cost minus your resale costs, so there's a depreciation factor there. You took in all of your monthly costs and you average it out from time to time, that will actually be lower on a per hour base. But if you're only flying ten to fifteen hours per year, you're going to have a lot of unused hours. You
may not actually get the full benefit for it. So as you think about it, the typical breakpoint this is generally speaking, depending on the aircraft type, and everybody's different, but generally speaking, anything below one hundred hours you are typically going to win in a on demand or a
charter program. Anything above one hundred hours you should start considering fractional and then somewhere between one hundred and fifty and two hundred hours per year personal flying, you should consider whole aircraft ownership.
So I know, after we broadcast this, I'm going to get some calls from some clients and some colleagues who are going to ask, hey, I've put some couple of million dollars away and make a couple of million dollars a year. I'm tired of getting to the airport two hours early and fighting through TSA. At least I don't have to take my shoes off anymore. And they're going
to say, what's the best program for me? They do some business flying, They do a bunch of a few vacations a year every now and then they'll fly out. Oh my kids in Purdue, let me go out to the Midwest for someone like that? What sort of program would you recommend? And I know I'm giving you broad parameters and not anything very specific.
So I always suggest, if you are just getting into it, an on demand charter program is going to be what you want to do first, because you don't know what your personal preferences are. You don't know if you like flying on light jets or if you don't like flying on light jets. You don't know if you want the extra room, be able to stand up flat floor. There's a lot of variables that go into that. So I would say find a really good broker that has education forward.
Jets are moving from one place to another and not necessarily between. It's not like a hub and smoke model like the airlines, and so get a really good broker that can help educate you on what it is you might like and what it is you might not like. Try a bunch of different flavors of aircraft before you start committing to anything long term, because you just don't know what you don't know.
So, since you mentioned different flavors of aircraft, let's talk about a few. There's a Dessalt and Bombadare and Embryer and Honda jets came out a couple of years ago. They kind of surprised everybody. How broad is the range of jets that are available either for charter or least or membership.
Yeah. So when you're talking about flying in the backseat, right, so we're going to leave the people who fly in the front seat, which is another type of person. When we look in the backseat It ranges from turboprops, which is jet fuel that powers a propeller, so that's your King Airs, your Pilatus PC twelves. So that is kind of the call it the bottom end of the market. You're gonna have the least amount of range, the least amount of speed, but it's also going to be the
most cost of wheels up. If you ever watch college game day and you remember seeing, oh, the one that has the two propellers on the side, that's a king Air three fifty for instance. So that is kind of the bottom end of the range. You then have very light jets, which is going to take two to three passengers. That's very light jet, qualifies as the Honda Jet the
citation M two. Even the Suius Vision Jet, which is kind of in a league of its own as a single engine jet, is in the very light jet category. You then have light jets, which is going to be Emperor Phenom three hundred, the citation CJ three and CJ four. Light jets are really great for regional travel, not as great for coast to coast You're going to have to stop at some point. Then you have so mid size the citation XLS that's going to be you know, again
regional travel. You're not quite going to get New York to San Francisco, but you're going to get pretty close. Then you have the super mid sized jet, which is kind of like, you know, the differ between large and extra large shirts. It's like, oh, that was lazy. Super mid jets is a great example super mid jets. The Challenger three one hundred, three fifty thirty five hundred is going to qualify in that the citation latitude, the citation longitude.
The latitude cannot get coast to coast, but the citation longitude can. That's going to be your super mid size. Those are typically going to have a flat floor. They'll see around eight people at max capacity, and that's going to be the super mid sized jet. Is the first time we're going to unlock that New York to San Francisco, New York to LA trip. Then you start getting into the large cabin. So when you get into large cabin, you have the Challenger six o four six fifty uh
six five six fifty. You have the Falcon two thousand, which kind of feeds on that super mid size to large cabin.
Can you take those New York to London, New York to Paris.
You can get New York to London depending on which way the wind is blowing and how new it is.
Well, that's a little tight. And my assumption is as you go from small light to mid to super mid to large, everything not just the cost of the jet, but the insurance, the main and it's the hangar, the pilots. All of this scales up dramatically as you go from flying New York to DC versus San Francisco to Hong Kong.
Yeah, it scales up proportionately. As you get larger in the aircraft. You start having higher pilot cost you start having higher insurance costs, you have higher fuel burn on a per hour basis. So it does exponentially get larger. That's not to say, though, that people automatically enter the light jet category the turboprop first. There is a vanity piece to private aviation. They always say that the most
expensive part of the plane is the window. And that's because when the shade is up and you land at the FBO, you look out and you say, ooh, I like that one, and so you're tempted to kind of step up.
Really interesting. My last question how has the technology changed private aviation in recent years.
Yeah, so there's been a lot of software that's come to market over the last call it ten to fifteen years that have really impacted the way in which private flyers are interfacing with kind of the administrative layer of private aviation because it is such a tax complicated factor. There is tracking tools out there, there is services that will actually help you make sure. There's maintenance tracking softwarees.
There's predictive maintenance tracking softwares. There's logbooks scanning aviation in general. I know this is shocking, but aviation in general lags from a technological standpoint because of how conservative it is. So paper logbooks are still a thing. There are still maintenance records that are held in paper in a fireproof safe at the FBO. That's like still a very common thing. There has been a shift towards technology and aviation when
you look at private aviation, though. The challenge for software entrepreneurs. I get dms all the time on x to say, hey, I want to build XYZ software and revolutionize the market. The problem is in the grand scheme of things, it's not that big.
So people listening to this conversation are thinking themselves, Hey I'd like to fly private ballpark figures. How much money you need to have to make this really a worthwhile experience?
So generally speaking, it's two million dollars in net income, right, so that's kind of cash flow to you, and twenty million dollar net worth before you start chartering on a regular basis. So that's you know, probably vacations, that's probably some business trips. That's not you know, you're not pedal to the metal. Never have seen the inside of a commercial airport again, but you're seeing it less and less.
At two million dollars of income and twenty million dollars in net worth before you start thinking about buying a mid sized jet where you sit in the back and you have pilots and all of that. The number was between ten and twenty million of net income and around one hundred to two hundred million dollars of net worth. Now that includes privately held companies, that includes my operating company has been marked to market at two hundred million dollars,
and then I'm starting to think about an aircraft. But that is generally speaking, now, that is not the rule. In my day job, I look at people's financials and help them place debt for aircraft purchases. I will tell you that that number is not a hard and fast rule. It is a good rule of thumb. But for everybody it's different, right. It may be a higher net worth and maybe you're a lower cash flow. Maybe you're a really cash flow person and this is really what you
want to do. But those that's kind of a good general, you know, general term to start looking at kind of midsize jets and then as you kind of scale up, you're really not buying a brand new G seven hundred until you're knocking on the billion dollar market.
So to wrap up, if you're doing pretty well income wise and have a couple of shekels put away, you don't have to go out and drop tens of millions of dollars buying your own jet. You could do hourly charter, you could do fractional ownership, or you could do one of the jet memor membership cards that allow you to spend less time in commercial airports and more time getting to where you go quicker, faster, and more comfortably. I'm Barry rid Helts. You're listening to Bloomberg's at the Money