Owning a private jet is a large investment, and it can seem like a waste of money that ties up capital that could otherwise be working for you. If you’re not using your plane all the time, it could be used to generate revenue. Turning your business tool into an income-generating asset.
That’s where an aircraft management company comes in. They will save you time, but handling all aspects of the management of your aircraft, from maintenance to flight crews to conforming with regulations, and then they will market the availability of your aircraft to drive revenue through the regular chartering of your plane to rent your private plane out to earn a profit.
This is a great way to increase the ROI of your investment in your private jet; earning a passive income on an asset that you already own and would otherwise be sitting in a hangar.
How do you make money chartering your plane?
As the aircraft owner, charter management and revenue is supplemental income designed to offset the cost of owning an airplane. Owners should expect an 80/20 split of the charter revenue earned (80% to the owner), but the owner owns the P&L of the aircraft and while 80% of charter revenue is retained by the owner, he is required to cover all of the costs of ownership. Because of this, it’s important to be mindful that it’s not exactly a revenue stream. There’s an opportunity to make a small amount of money, or offset the costs of owning a plane and break even, but it won’t bring in a lot of revenue.
8% is the general rule for profitability, but this can shift from month to month. You could make $180,000 in a month, but have fees of $130,000, setting the profit at $50,000. Of course, this number can change month to month depending on demand and how many flight hours your plane flies and how little unexpected maintenance is encountered.
Aircraft management costs: How much do aircraft management companies make?
Aircraft management companies have a higher profitability rate, but this is solely based on their ability to book flights on the managed aircraft. Their interest is well aligned with the aircraft owners as they don’t earn income if the plane isn’t flying.
If the plane isn’t in the air on a regular basis, the need for maintenance is less of a priority.
Aircraft don’t need maintenance and repairs like cars. Maintenance is based on:
- Unexpected maintenance
For an aircraft owner to make money from their airplane, they will need to fly enough hours to cover the calendar maintenance, crew salaries, hangar and insurance expenses along with any unexpected maintenance that may arise through use.
In most cases, aircraft management companies will require you to put money in an escrow account to address required maintenance. This is used as a reserve to take care of the maintenance to ensure they can take care of the aircraft and still get paid.
Types of aircraft management
Aircraft owners have two options when it comes to aircraft management services. The FAA regulates general aviation through Part 91 and Part 135 operations; Part 91 for non-commercial and Part 135 for commercial aircraft operations.
Part 91 is for aircraft owners who don’t plan to collect compensation for transporting passengers or cargo. This type of management includes general aircraft maintenance, the hiring and training of pilots, and meeting FAA compliance standards.
Part 135 is for aircraft owners who want to generate revenue on their assets. This management type includes monthly management fees, insurance, training and paying flight crew, hangar and fuel costs.
How is Stratos involved in aircraft management?
Similar to a recruiting service, Stratos Jet Charters can pair aircraft owners with management companies and help plane owners find the best company.
We have a comprehensive knowledge of every aircraft in the charter market and who operates what airplane types. We know how to get you from Florida to New York, to Aspen, and back to Florida. We know which operators service that area and the type of plane. We’ll vet the company and negotiate the contract to ensure our clients are being treated well and with the utmost respect.
At Stratos, because of our role as a charter broker we work very closely with aircraft operators, and we know how they maintain their aircraft and what kind of service an owner can expect.
However, because of our intimate knowledge of air carriers, we are able to recommend the right management company to the aircraft owner. We are confident that we can be your advisor. We can help you decide who is the best pick for managing your aircraft. And we can also assist you in driving revenue to your asset.