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Private jet fliers increasingly turn to prepaid cards

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You're a well-heeled private jet frequent flier. Still, you hate haggling over charter fees every time you need to dash off to a business meeting or weekend retreat. So boring.

Good news: You may not be Warren Buffet, but starting at about $125,000 you can buy a debit card that makes it easy to book flights with his charter jet company. Buffet's Berkshire Hathaway owns NetJets, one of several vendors selling prepaid private jet cards that let customers budget ahead and guarantee last-minute access to luxury flights at a set price.While one-off charters still dominate the market, cards have become increasingly popular in recent years.

"You've got all the convenience of just picking up the phone and arranging a flight," says Nick Copley, president of the luxury property guide SherpaReport.com. "You've also locked in a price for a certain aircraft or group of aircraft. So you're not negotiating each time you fly or trying to find the best deal."

Just like us: Private jet fliers increasingly turn to prepaid cards

The Costco principle -- for the Cristal crowd
Customers -- primarily celebrities and C-suite members at multibillion-dollar corporations -- benefit from buying flight time in bulk. According to Copley, the cards are designed for people who travel 10 or more hours a year. You buy the cards from large aviation companies, smaller operators and charter brokers. The typical card covers 25 hours of flight time, which includes crew and catering. Some cards require you to use up the time within a certain period, while others have no expiration date.

"A 25-hour card on a light jet like, say, a Hawker 400XP, which carries six to seven passengers and has a range of about 1,400 miles, costs around $120,000 to $130,000," Copley says. While 25-hour cards are the industry default, according to Copley, you can also find debit cards with no pre-set number of hours. Instead of purchasing flight time on a specific aircraft, these flex-hours debit cards allow you to select from a variety of planes for each trip, each with a different hourly rate.

And if you lose your card? Don't worry, it's not like a gift card. "The company you buy the card from keeps track of how many hours you use or how much you spend," says Copley.

The prepaid packages have an extra benefit over standard pay-as-you-go jet chartering. When you charter, you pay a premium to cover what the industry calls "the empty leg." If you're planning to stay in your destination for more than a couple of days, the empty jet has to fly to another spot for its next mission, and your charter fee pays for that flight as well as your own. With a jet card, while you will generally pay a higher hourly rate than you would for an individually booked flight, you won't incur a separate charge for the empty leg, according to Copley.

Born with the baby boom
The private aviation market got started in the 1960s, with surplus World War II aircraft being sold to corporations and retrofitted for business travel, says Richard Zaher, CEO of Paramount Business Jets, a private jet charter brokerage company in Leesburg, Va. "The model of flying privately has changed over the years considerably," Zaher notes.

The 1980s brought fractional aircraft ownership, which follows a format similar to vacation time shares. You pay a lump sum upfront for a share of a plane, plus a monthly management fee and a fee for every hour you use. In return, you're guaranteed access to the plane on short notice.

Jet cards made their debut in the 1990s, with small operators entering the market first and NetJets in the vanguard among larger companies with its Marquis Jet Card, Zaher says. Some of the companies selling jet cards are fractional owners themselves. For many customers, the cards are a better deal.

That doesn't mean they're within reach of the regular Joe, even those used to first class. Magellan Jets, based in Quincy, Mass., offers a 25-hour jet card starting at $99,000 with hourly rates ranging from $3,960 to $14,500.

Private jet prepaid cards
Company Service area Type Deposit amount Features Fuel payment
Flight options Continental U.S., Canada, Bahamas, Bermuda and parts of the Caribbean and Mexico 25-hour 4 options depending on aircraft, from $110,000 to $232,500 Prices guaranteed for 12 mos., no expiration Additional fuel surcharge
Magellan U.S., Caribbean, Bermuda, Mexico and Europe 25-hour and 10-hour (limited to U.S. Northeast) Depends on choice of aircraft. 25-hour card starts at $99,000; 10-hour card starts at $34,950 Catering included, no repositioning fees, no daily minimum with 10-hour card Additional surcharge for 25-hour card; fuel cost included on 10-hour card
NetJets Worldwide 25-hour and 50-hour Depends on choice of aircraft. Starts at $124,900 25-hour card expires in 18 mos., 50-hour card in 24 mos. Optional extension to 36 mos. at higher hourly cost. Unused hours carry over with new card purchase Additional fuel surcharge
Paramount Business Jets Worldwide Flexible hours
4 levels, from $100,000 to $1,000,000 Fixed management fee of 10 percent to 15 percent, concierge service, personal adviser, price quotes show operator cost and commission Additional fuel surcharge
Starbase Aviation Continental U.S., Bermuda, Caribbean, Mexico Flexible hours $100,000 to open, $50,000 to replenish Concierge service, discount for 48-hour advance booking, refundable unused balance Fuel charge included in hourly rate

 

Keeping it fresh
As the market has matured, jet card issuers have started offering different features. Three years ago, Paramount upgraded its jet card to offer what it calls its "Trust and Transparency Model."

"We will show you what the operators are actually charging and add on a fixed, low management fee for each trip," Zaher says.

For high-stakes business execs who need to stay connected in flight, Magellan offers the WiFi Jet card for the G450 airplane, from $8,850 to $14,500 an hour.

The company also sells a regional 10-hour jet card for Northeast travel aboard Linear Air's Eclipse 500 jet. The card costs $34,950, with no daily minimum hours required, and users pay no federal excise tax or fuel surcharge. Sampling one-way trip prices on the Magellan website shows Boston to New York costs $3,495; New York to the Hamptons, $2,446; and Boston to Washington, D.C., $6,990.

The aircraft is a Very Light Jet (VLJ), a new category to emerge within the past five years -- also known as a personal jet. Built to hold three or four people, VLJs are less costly to operate than larger aircraft, says Magellan CEO Joshua Hebert. "It's a smaller plane -- and you don't want to be in the plane for more than an hour or an hour and a half -- but it's a great business tool for these short hops," Hebert says.

Milton Pedraza, CEO of the Luxury Institute, doesn't think there's a huge market for 10-hour jet cards. "The question is, will people who really can't afford to fly on private jets most of the time opt for a company like that?" he says. "People who fly on private jets tend to meet a certain threshold of wealth to be able to afford it."

Either way, the cards have transformed the way the business is run. For the rest of us, it's probably a good idea to hang onto that frequent flier card.

See related: For booking private jets, try the Gatsby app, A shocking development: Gold card made of real gold

Published: June 24, 2013



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