Check your charter rates, by Sam Miller

The demand for aircraft charter has decreased with the economy. The number of aircraft owners seeking to obtain revenue through leaseback arrangements with charter operators has increased due to many owners seeking some income to cover their decrease in utilization. Historically, the charter market has always been priced at such low levels that no reasonable return on investment (ROI) could be achieved. The market included many operators of older aircraft that required a minimum investment of capital as well as cutting every corner to keep expenses down. The charter rates of these operators assure their failure as a viable business. Unfortunately, as soon as they fail, they are replaced by a similar operation with the same mindset. Most customers of these operators are driven by saving money with no regard for their safety or the values received by a professional operation. Like many things in life, the customer gets what they pay for. How long will this type operation continue in our industry? What can you do to eliminate these shoestring operations?
If you are a user of charter services, don't do business with the cheapest operator without thoroughly investigating the operation. This is just good common sense. What appears to be "too good to be true" usually is. What makes the lowest priced operator so smart that their services are offered at rates less than competitors? Do you want to do business with companies losing money and destined for failure? I continue to be amazed at the people that have prepaid for charter cards and lost a large sum of money due to the failure of the charter company.
If you are an aircraft owner seeking a charter leaseback arrangement, please evaluate the net revenue. Run the numbers. Determine the cash flow with and without the leaseback. What is the after-tax dollar difference? Pay particular attention to the decrease in resale value of the aircraft due to the additional utilization. Does the revenue received justify the leaseback arrangement?
Finally, if you are the charter operator, make sure your charter rate produces a profit so that your business will survive. Sell the features, benefits, services, safety, and discuss the shoestring operations with potential clients. If you offer leaseback arrangements, make sure the revenue returned to the aircraft owner is a financial benefit to the owner. You will benefit from a long-term business relationship. Determine the hourly charter rate that produces a ROI acceptable to your investment goals.
Now is the time to change our industry standards so that charter rates produce a profit for the professional operators. Calculating the profitable hourly rate requires a concentrated effort. AircraftCostAnalysis performs the analysis required to determine a profit as well as providing aircraft owners with leaseback cash flows. AircraftCostAnalysis will save you many hours of building and checking the math in your own spreadsheet. See
www.AircraftCostAnalysis.com for the details.