In this interview, Steve Varsano walks through the various ways individuals can access private aircraft, ranging from on‑demand charter flights, prepaid jet cards, fractional ownership, to outright purchase. He explains how each model works, the typical cost structures (up‑front share price, hourly rates, management fees, relocation fees), and the operational guarantees (fleet consistency, short call‑out times, legal obligations to provide an equal or better aircraft). Varsano highlights the major players—FlexJet and NetJets—and discusses how market conditions (e.g., COVID‑driven charter price spikes) affect pricing and contract terms, such as notice‑period restrictions and “reverse surge pricing.” He outlines the usage‑hour thresholds where fractional ownership becomes financially sensible (generally above 150 hours per year) and describes the flexibility within fractional programs, including move‑up/down ratios that adjust hour consumption based on aircraft size. Practical concerns—relocation costs, wear‑and‑tear, owner‑approval for chartering out a privately owned jet, and potential tax benefits—are also covered, concluding that buying a whole jet is rarely justified unless the owner can generate significant charter revenue.
Chapters
If you fly under 150 hours a year, it just doesn't make sense. Not financially. You know, go get a fractional. That's the next best thing to owning an airplane.
Do you want to explain that a little bit?
So there's different ways to get an airplane. You could just charter by the hour. Every time you want to take a trip, you call the charter companies and see who can give you an airplane. You don't know anything about it, but they'll tell you the model. Nobody's going to tell you the history of the airplane, the pilots, the owners, nothing like that. Then there's a jet card. So you buy, let's say, 50 hours or 25 hours or 100 hours. It's really just buying a debit card with an operator so that you've got a relationship with somebody And you just call and say, I need an airplane to go from A to B. I want a small size or midsize or whatever. And then they just debit your account. And then the next level up is getting a fractional. So let's say an airplane, usually on a fractional basis, they sell 800 hours a year. So if you wanted to buy 100 hours a year, you will buy an eighth of that airplane. So if the airplane was $24 million, you pay $3 million, and then you pay an hourly, every hour you fly it, and you pay a monthly management fee. It usually comes out to less than chartering, but you have to put the $3 million up front. Of course, you could finance that as well. But what's good about that is that you get consistency. If that's in a fleet of other airplanes, you bought an eighth of that airplane. You might not get that airplane, but they have 10 or 50 or 100 of those airplanes in their fleet. So one of those airplanes will come and they're all done usually the same design. You know what you're going to get. You know the price, you know the level of service, you know the minimum requirements for pilots and things like that. And you have a short call-out time. So if in 24 hours or 48 hours before, you can always call and say, I need a plane, it comes. The next step is buying. And with the fractional, some people just don't want to have a flight department, so they'll buy half an airplane, which is 400 hours. That's really 100% of real use of an airplane. It's a little bit more expensive to do it, but you have no overhead, you have no flight department, you have none of that stuff.
So when you're saying half of a plane, is there a company that runs that and manages that and they find two owners?
There's basically FlexJet and NetJets, and those are the biggest guys who do it in the world. So when you buy that share, of course you still get your depreciation from that. You can finance it, all that kind of stuff, and you own that share of the airplane. So those two companies do it. And there's a whole variety of different airplanes that you can buy a share of. And what's really good about it was over the last couple of years during COVID when prices went crazy and the charter prices were doubling, tripling. I mean, if you want to go, let's say, to south of France during Formula 1 or something like that, I mean, they would just, you know, prices were crazy to go rent an airplane. But if you have a fractional, you have a fixed price. They have to give you an airplane. And even if they have to go rent from somebody else something better than what you have, not less, something better, it's on them to go get that airplane, rent it, and get you the flight.
Right. So in an example like that where a lot of people are going to Monaco for the F1, as you said, with the fractional setup, surely if a few of the people involved want to go there, if the jet isn't available, they then have to get you a separate jet to make up for it.
Yes. And it has to be better than the one you have. Can't get one less. And that's their legal obligation. These companies, even if they lose money doing it, they have to do it. It's sort of like reverse surge pricing. You know, when they try to— on Uber, it's raining or it's 6 o'clock and the traffic's terrible, you know, the prices go up double, triple. They have that. But the fractional companies don't have that surge pricing. But now what they're doing is they're saying, in the new contracts, there are certain days in the year that, you know, you can't give me 48 hours' notice. You have to give me 6 days' notice. There's limitations on Christmas, New Year's, on Thanksgiving in America. Any kind of special where they know the demand is so big, there's different limitations. They figured out that if not, they're going to have to start chartering every kind of airplane around the world and pay ridiculous prices. Because the companies know when they get a phone call from those guys, they need the plane. They're desperate for it. And they just jack the price up. And it's a shame. But, you know, people are opportunistic.
My line of thinking was once I return back to London, at the moment I probably only fly 50 hours a year private. When I move back to London and there's no more Emirates, I know that'll go up. Yeah, let's say, like, for example, even 100 hours. I guess now looking at this math, even at 100 hours, it seems like there's no reality where it makes sense to buy a jet.
Absolutely not. Really, for 100 hours, if you're buying a fractional, is the smarter thing to do. It really is. And by the way, if you buy a fractional for a certain airplane and you have a demand for a certain flight to have more people or less people, they will give you a move up or move down ratio. Ratio, so that instead of you using up 1 hour for every hour you use it, and you got the bigger airplane, you might use up 1.6 hours of your 100-hour allotment. They have different airplanes in the fleet, and they can adjust which airplane you need for that. You might need a smaller plane because you're going to go by yourself for a 1-hour flight. So you might say, I can use a smaller plane in the fleet. And then they give you, instead of using 1 to 1 hours, they use you 0.8 for every hour. So there's a flexibility of that. And at 100 hours, it might make more sense for you take a fractional or buy a jet card. But again, the jet card depends on where you're living. If you're living in a city that has a lot of airplanes available, you can get away with it because there's a big variety. But if you're living in a city where they have to fly the plane to you all the time to pick you up, they're going to charge you for that relocation. With a fractional airplane, you only pay for the time you're on the plane. Time it takes off till it lands. So no matter where it's coming from, it's not your cost.
Yeah, because I think that's probably been one of the frustrating things flying private is the relocation cost. Sometimes we've been in random places in Mexico, or one time in Zimbabwe, and then you get the charter fee and you're like, you know why, you understand they do need to relocate the plane, but it's just like part of you wants to fly there to be able to take both legs because you're paying for it anyways.
In that kind of a case, that's an exceptional case, they won't let you get away that easy. No, no. What they'll do is they'll say anywhere in this circle. If it's in this circle, you pay this extra fee or something like that, but it's not the full charter rate. It's more, if you want to call it, these direct operating costs. It's a negotiated fee to go in mission to get you. So they do take that into consideration. But if you're in Zimbabwe or if you're in Mexico and you're with one of those companies in the U.S. that has a base here in Europe, which they are, then you can use time. You can fly from Emirates to America and then take Flexjet your share over there. If that's what you want to do, it makes sense also. But again, you have the flexibility going up or down and you know the quality of the plane and they're not going to jack you up or down on the price if demand is higher or lower. But you're 100 hours, you shouldn't buy a plane. I hate to say those words, but it's true. You'll say, well, I can go rent it out 300 hours a year. You can, but every other day you're going to get a phone call. You to give owner approval and you're going to say, well, who is it? You know, I just did the interior. I don't want them to have red wine. I don't want them to smoke. I don't want them to have a dog. I don't want them to have a coffee because they're going to spit on the carpet and on a Gulfstream, replace the carpet, it's $70,000. Or if you have a kid who's chartering the plane, he has a Sharpie and he, oh, Mommy, Mommy, and right across the wall on the suede, you're not going to get it out. So you have to replace the panel. You know, these kind of things are inconvenient, but you can really reduce your cost of operation. And some people do this. They just want to own an airplane. They use it 100 hours and they'll rent it out 300 hours. I wouldn't do it if I was you, but some people just want to have an airplane and have the flexibility and what might be a tax benefit, just because they want to know the pilot's experience, they want to know the airplane exactly, the maintenance and things like that. There's a comfort level, and that is a justifiable reason for sure to do it.
Once you get to a certain level, these costs, whatever, it is what it is.
Yeah, and by the way, whatever you think you're going to use when you own a plane, you will do it 50 to 80% more when you have that airplane.
