Anyone who has considered venturing into the private aviation industry knows to expect the steep capital requirements and operating costs that come with it. Still, even those who’ve done their research may still be blindsided when the invoices roll in and they start crunching the numbers.
Here are a few factors that may be resulting in slimmer profit margins than anticipated.
1. Fuel price fluctuations
With fuel taking up a large fraction of a jet charter company’s operating costs, it’s not surprising that price variations have a significant effect. After all, in many cases, short-term fuel price hikes aren’t passed on to the consumer – it might simply not be worth the risk of turning them off your service. And while longer-term trends in fuel prices are reflected in the fares, the possible hidden “cost” there is simply a revenue loss from fewer people willing to fly at those rates.
2. Cabin luxury
Especially when there is tough competition in your area, the drive to make your private jets the most impressive and luxurious ones can be strong. From plush, bespoke seating to a massive in-flight entertainment, the costs can skyrocket remarkably fast. It’s easy to justify the new acquisitions as something that will give you an edge over your competitors. While this may be true, proceed with discretion and be diligent about trying to find good deals for your cabin furnishings.
3. Hangar rental/airport tie-down
If you don’t own land large enough to keep your aircraft in, then you’d need to either rent a hangar or pay to have them tied down at an airport. Prices vary a great deal depending on your location as well as the size of your aircraft. Alternatively, if you do own a hangar, then you would have to instead factor in the recurring costs of having one, such as property taxes, insurance, and maintenance and utilities.
Ideally, your company should be working with a trusted firm or in-house legal counsel capable of dealing with litigation in the best way possible. That said, it’s still very hard to predict how much money legal disputes will cost your business in a year, owing to their varied and unpredictable nature. From flight mishaps to compensation claims for delays, and other issues related to your staff and operations, legal costs can go from being a non-issue to near insurmountable.
5. Engine restoration/parts replacements
Even when you allot the necessary budget to preventive maintenance, you will occasionally still run into the high costs of engine restoration and major parts replacement. There are, however, ways to cut some of the maintenance costs, such as finding and purchasing the parts yourself (rather than through the repair shop, which could inflate the prices), and buying consumables in bulk.