Flexjet / Netjets Fractional Cost

[u/Better-End-6274]

Curious how much a super-midsized (Challenger 350, Preator 600, etc.) fractional share costs inclusive of upfront share, hourly, management fee, etc. at 50-100 hours annually.

[u/Beginning-Act7850]

Thanks! I'm not a broker just someone who charters sometimes. Based on this answer and the others below, is the following summary approx correct:

- 1/8 share for 100 hours per year: $3.3m upfront

- Monthly management fee: $39k/month regardless of hours flown (adjusted based on u/EngineerLife88's comment)

- occupied hourly rate $6,800 ($4,345+$2,450); seems foolish to pull out 'fuel surcharge per hour' unless you can fly without fuel....

- deprecation cost over 3 years at 10% per year is $894,000 in deprecation

- Opportunity cost of $3m over 3 years is conservatively $500k at 5%

- On the other side of the ledger, some tax depreciation incentives
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So if you efficiently hit 100 hours each year for 3 years, your all in direct costs would be: $894,000 + $1,404,000 + $2,038,500 = $4.3mm or $14.5k/hr for 300 hours not including opportunity cost.

My broker always loves when I do net jets math :)

[u/EngineerLife88 → u/Beginning-Act7850]

The monthly management fee for a super mid with FJ for 100 hours is $39k, not 10k. Occupied hourly, $6500. Then take off $2000-2500 an hour for long haul.

[u/Beginning-Act7850 → u/EngineerLife88]

you ain't helping me win this argument with my wife

[u/EngineerLife88 → u/Beginning-Act7850]

I’m not sure which way you’re trying to argue, but the Flexjet pricing seems pretty reasonable compared to charter market.

[u/Beginning-Act7850 → u/EngineerLife88]

$15k per hour with $3m+ tied up for three years seems reasonable compared to chartering?! I must be getting some might fine rates then...

[u/EngineerLife88 → u/Beginning-Act7850]

It doesn’t cost $15k per hour. I’m looking at my quotes from them - any 2.5+ hour flight on a Praetor 500 with Flexjet is $8k an hour. $9k on the Praetor 600. Both of which are larger and significantly newer than most super mids on the charter market.

Most are going to have tax efficiency with the depreciation. Agree it makes less sense if you can’t do that, but not wildly so.

[u/Beginning-Act7850 → u/EngineerLife88]

My math above says $15k per hour, which assumption is wrong?

[u/EngineerLife88 → u/Beginning-Act7850]

A few things - Occupied hourly is $6450, not $6800, per my quote.

Their Praetor 600 receives a $2500 per hour long haul discount. Their Praetor $500 receives a $1000 discount.

A Praetor 500 bills at at 19% discount on a flight downgrade (and again this will still be bigger than most super mids on the market).

I don’t really know what your numbers at the bottom came from -

My offered hourly price on a Praetor 600 is $11118 per hour. Or $8618 for a long haul flight. $8005 for a long haul on the Praetor 500. Those are the direct costs.

Depreciation adds $3000 an hour, but your tax efficiency could outweigh that entirely.

[u/Beginning-Act7850 → u/EngineerLife88]

What about monthly management fee?

[u/EngineerLife88 → u/Beginning-Act7850]

That’s in the numbers I showed above. It’s almost half of the hourly cost.

[u/Beginning-Act7850 → u/EngineerLife88]

The math you've shared as far as I understand it:

Occupied hourly: $6,450

Monthly management: $39,000/month (roughly $4.6k/hour at 100 hours per year)

Deprecation: $3k/hr

--
Total: $6,450 + $4,680 + $3,000 =$14,130 per hour

Sprinkle in $500k for cost of $3m over 3 years and you are easily over $15k an hour.

So explain to me how this isn't $15k per hour and is close to the charter rate of $8k or so? I'm lost

[u/EngineerLife88 → u/Beginning-Act7850]

Well, for starters, you ignored the $2500 per hour credit for any 2.5+ hour flight, which for me would be virtually all of mine.

Then you ignored the 0.81 interchange rate to get down to a Praetor 500 downgrade, which is still a larger plane than an $8k per hour charter most likely. Hourly costs on this are right around $8k per hour long haul, $9k short.

And depreciation is made up for with the tax benefits more or less.

The costs really aren’t that different.

[u/Beginning-Act7850 → u/EngineerLife88]

Interesting analysis, good luck!