Risky Business? 10 Reasons Consumers Keep Buying Private Jet Cards

Forbes Lifestyle Travel Risky Business? 10 Reasons Consumers Keep Buying Private Jet Cards Doug Gollan Contributor Opinions expressed by Forbes Contributors are their own. I write about private aviation and the business of luxury travel Following Jun 6, 2023, 02:33pm EDT | Press play to listen to this article! Got it! Share to Facebook Share to Twitter Share to Linkedin Wheels Up keeps losing money. The Financial Times reports VistaJet and XO parent Vista Global’s mounting debt puts it in a precarious position .

Together they have around $2 billion in money they have collected from jet card customers for future flights and considerably less cash on hand. At the end of December, Vista had taken $832 million in jet card payments taken for future flights versus $134 million in cash. It has since raised $500 million in a bond offering, and the way VistaJet’s jet card is structured, as a three-year program with annual or quarterly payments, the company has a consistent flow of money coming in.

While recent articles have highlighted the risk of putting your money into a jet card program, the . . .

[+] benefits are often compelling for private jet flights who want fixed-pricing, flexibility, and easy booking. Doug Gollan You cannot get your payments back, but you can get out early, although it is expensive. Vista collected $35 million last year in early exit fees.

In its Q1 financials, Wheels Up reported it had $363 million in cash and $976 million in deferred revenue – deposits from members for future flights at the end of March. While the amount of cash a jet card provider needs on hand to fulfill a dollar’s worth of flying varies by model – a charter operator with owned/leased fleet, a charter operator with managed aircraft, a fractional fleet operator, some type of hybrid, or pure charter broker – it does raise the question, why would you give a jet card provider a six-figure amount of cash for future flights? The Rewards of Jet Cards As much as it may seem like risky business, card programs are a staple in the charter market because they make flying privately easy. MORE FOR YOU American Airlines And Fidelity Investments Sued Over ESG In 401(k) It Seems Ukraine s French Made Recon Vehicles Are In Position To Break Through Russian Lines The Ukrainian Terminator Vehicle Is A Frankenstein s Monster Of Captured Russian Components They fill the gap between owning your own jet or the five-year commitment of fractional ownership and chartering on a flight-by-flight basis.

Typically, you buy jet cards in increments of 25 hours or a deposit, generally starting at $100,000 or $200,000. It’s a bit like steady dating instead of marriage. Jet cards and memberships are just another way to charter a private jet.

So what are the benefits of joining a program? 1. Guaranteed Availability with Fixed Hourly Rates While with on-demand charter, you have to call a broker or operator each trip, jet cards and memberships that offer guaranteed availability with fixed rates allow clients to fly with as little as 24-to-96 hours’ notice, including contracted pricing, usually an hourly rate. It enables customers to budget annual travel costs with some accuracy, which is particularly important for corporations.

2. Easy Booking Chartering flight-by-flight means calling a couple of providers, waiting for quotes, and then reading each contract, as the terms vary from provider to provider and one aircraft to another. Users therefore save time booking via phone, email, text message, or apps confirming flight within minutes.

While there are a few that do offer instant booking with guaranteed pricing, it’s pretty much limited to their own fleets. Those press releases you read where brokers claim to be like Expedia or Google Flights are false. For the most part, they are providing estimated pricing, that then must be confirmed.

Far from coming back with pricing that represents the entire base of charter operators as you get when searching airline fares, the hard quotes you get back are simply the providers who have chosen to respond to your request. For people where time is money, jet cards save time in the booking process. 3.

Rate Locks On-demand charter prices will vary trip by trip. Many guaranteed availability jet cards offer rate locks from 12 months to, in some cases, the expiration of funds. In fact, it’s one of the challenges of operating a jet card and why many brokers and operators eschew the product.

They view it as too risky, and if you don’t know what you are doing, it’s easy to lose your shirt. 4. Guaranteed Recovery at no extra cost If you charter a private jet and the operator cancels, it’s unlike the airlines where you get rebooked on the next flight.

In the charter sector, you get a re-quote, which depending on how close you are to departure and where you are flying, can carry a premium of up to 50% of what you originally paid. You can also get a refund, but if you had rented a villa in Los Cabos, you would still have to find an alternative way to get there. Many jet card providers – as part of their offering, will get a replacement aircraft at no additional cost.

In these instances, the jet card provider is almost always losing money. In fact, it’s one area some card providers limit their exposure by capping the amount they will cover if the re-quote is more than your original price. Cancelations happen more than you think.

JetASAP, an on-demand platform that enables subscribers to get quotes directly from operators, sells insurance to cover mechanical cancelations, which it says impact 12% of flights. 5. Flexible Cancelation In private aviation, you pay one way or another.

I always say a good on-demand charter broker is like gold. It’s just there is a lot of mediocrity. There are also the cancelation terms with on-demand charters, which often carry a 100% penalty from when you sign the contract.

Most fixed-rate jet cards allow members to cancel without penalty as little as 24-to-96 hours before departure. Once you’ve lost $30,000 for a golf trip because you sprained your ankle the week before – or $250,000 on a charter from Miami to Zurich because the client canceled Friday’s meeting (VistaJet allows members of its Program to book and cancel with as little as 48 hours notice), you sort of understand there is always a tradeoff when you fly privately. 6.

Occupied Hours Pricing Another reason folks buy jet cards is typically within a designated primary service area, the Continental U. S. , or even Mexico, Canada and the Caribbean with certain programs; you only pay for the time you are in the airplane flying.

You don’t have to pay for repositioning flights. This can mean flying from or to a more convenient airport. For example, you get a better rate chartering a jet based in Palm Beach if you go to Palm Beach instead of making the operator fly the empty repositioning leg down to Miami.

This is particularly amplified if you live anywhere but the East Coast. While on-demand charter is competitive with jet card pricing and often lower between the Northeast and South Florida, it can be twice the cost if you are flying in the Midwest, again, because you are paying for those repositioning flights. 7.

Peak Day Price Guarantees Booking flights on-demand is Economics 101 with supply-and-demand. That means around the holidays, you can pay double what you would normally pay. While some jet cards have surcharges, others have no or minimal surcharges on peak days, although they have longer windows to book and stricter cancelation terms.

8. Inclusions In on-demand charter, most everything is a la carte from deicing, FBO fees, hangar fees, airport fees, catering, and even WiFi is often a plus, plus. While some jet cards also charge extra for these extras, there are card programs that include all or many of these fees in your hourly rate.

Again, it makes it easier to budget. If you do a lot of winter weather flying, you can save tens of thousands of dollars in deicing charges alone. 9.

Pet Friendly In chartering flight-by-flight, you always have to specify if you are bringing pets, as not all charter aircraft accept your furry friend. It’s the same with cards, but when joining, there are cards that guarantee you can bring pets at your contracted rate. 10.

Lifestyle Perks While not a driving reason to sign-up for a card, several jet card programs have extensive lifestyle partnerships, including both Wheels Up and Vista Jet. Sentient Jet, part of the Flexjet group and a major player in the market, provides its members with nearly $200,000 in value adds and discounts . Are Jet Cards right for you? The card programs aren’t right for everyone.

For the most part, you book into a category, so if you want a specific jet or configuration needs, booking on-demand is probably going to be the best option. The same is true if you want an aircraft under 10 years old – most card programs guarantee aircraft vintage 2000 or more recent. You can often get a better price for a same-day roundtrip with on-demand charter booking it as a one-off.

The last major failure was JetSuite in 2020, when members of its nearly 1,000 Suite Key jet card members lost $50 million, or an average of about $50,000. While they weren’t happy, virtually all those I spoke with ended up joining another card program. Warren Buffett says he’s never seen anyone die broke from the cost of fractional ownership in NetJets (fractional programs fail too – recently Jet It grounded its fleet).

You shouldn’t be using your kids’ college funds to fly privately. That said, you are more likely to lose money on cancelation fees, re-quotes and deicing than on your card program going under. Follow me on Twitter or LinkedIn .

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