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Are our top guns ready for timeshare in... |
Are our top guns ready for timeshare in the sky?Corporate jets cost a fortune, but there is a novel way of enjoying their benefits IF FIRST prize in the quest for corporate efficiency, not to mention corporate perks, is ownership of a shiny new jet, many a boardroom must be buzzing at the recent announcement that formalised corporate co-ownership of jet or jet-prop aircraft has been introduced in South Africa as a viable alternative to charter or full ownership. Big in the US, where it is termed fractional ownership, it has been launched here by JetTime, a subsidiary of National Airways Corporation (NAC), which in turn is wholly-owned by mining group Lonrho. It is the financial director, more than any other, who is likely to be the most taken with JetTime. This is because the scheme is calculated substantially to reduce the upfront and operating costs of - and to remove the headaches from - corporate jet ownership. The scheme is cleverly contrived - a sort of timeshare of the skies - and, on the face of it, presents no downside risk. In short, each client purchases a 25% share, or multiple thereof, in either a Hawker 800XP or a King Air B200, or in both of them. Each share entitles the client to 200 flying hours a year with a guarantee that flights will be available at six hours' notice. All costs are established from the word go, explains JetTime managing director Trevor Conlyn. "From then on, the client doesn't have to worry about insurance, maintenance, hangarage, training crews and keeping them occupied or back-room services." He points out that what can really turn a financial director white overnight, apart from the cost of full ownership, is "an out-of-the-blue maintenance bill of several hundred thousand rands. Interms of the scheme management of the service and maintenance are fixed costs to the co-owner and JetTime's responsibility." He adds that JetTime's name doesn't appear on the aircraft, but that "each client's logo, customised glassware, head-rest covers and so on will be in place before flights". The scheme is somewhat ambitiously targeted for take-off in May next year, by which time JetTime will have purchased - at a cost of some R300-million - four Hawker 800XPs and four King Air B200s. The first two are currently being used as lures for potential buyers. Conlyn explains that the mathematics of a maximum of 16 owners a jet for the six-hour turnaround, as well as the al- location of 200 hours a client a year, was based on similar schemes in the US. "It's the magic formula over there." Though the costs of participating are calculated to make the ordinary man's jaw drop, there is no doubt that in contrast to full ownership they are attractive. Indeed, the capital cost saving of JetTime over full ownership is estimated at 75% with the direct operating cost at 30%. "This roughly translates," says Conlyn, "as a total of up to R4-million a year per quarter share." So what is your company in for? And how does JetTime make its margin? The purchase price of a quarter share, which is a US dollar-based one of about R13,3-million for a Hawker 800XP and R4,6-million for a King Air B200; a monthly management fee of about R57 000 for the Hawker and R41 500 for the King Air; and an hourly flying rate of R5 200 for the Hawker and R2 800 for the King Air for a five-year period. JetTime, having negotiated a fixed maintenance contract with aircraft manufacturer Raytheon, makes its margin on the monthly management fee. The other attraction of JetTime is that after the five-year period is up, clients can do whatever they like with their aircraft - keep it, manage it themselves, sign a new agreement with JetTime or sell it. "What's more," says Conlyn, "since JetTime prefers them to be sold so that the fleet is always as good as new, we guarantee to buy back the aircraft at at least 55% of the original, dollar-based price." The costs - especially when compared with those of full ownership and operation of even a second-hand jet - certainly seem to make sound boardroom sense. But, of course, the real issue is whether your company is increasingly being driven by the need to reach destinations - especially off-the-beaten-track ones - in Africa. Conlyn explains that not only are the advantages of having an aircraft available at short notice obvious "but corporate aircraft reach an estimated 10 times as many destinations as ordinary airlines". And lest the entire notion of having partners puts you off, as it has none too few local businessmen who have already attempted to participate in air- craft-owning syndicates, Rand Merchant Bank, the financial structuring agent for JetTime, has come up with what it considers to be the perfect co- ownership vehicle: a trust. Now, of course, all that's left for NAC to do is to discover whether corporate South Africa is ready for JetTime.
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