In 1986, Richard Santulli introduced the concept of "fractional ownership" of business jet. In simple terms, fractional ownership means one aircraft has several owners. The result is efficient use of the aircraft at the most efficient cost to the owners.
A mathematician by training, Santulli used those skills to develop a formula that would form the foundation for a successful fractional ownership enterprise. The formula computes how many aircraft EJ would need for a core fleet to guarantee year-round availability, 24 hours a day, on just a few hours' notice. Santulli discovered the answer and the principle applies to every jet in the EJ program.
Today, EJ's NetJets remains the largest "fractional ownership" plan by far with more than 800 share owners, 132 planes flying, and close to 200 on order. This year, the company expects to perform about 100,000 flights for its customers and plans to hire 200 pilots in 1999, bringing the pilot work force almost to the 600 mark. By far, Executive Jet is the largest employer of business aircraft flight crews and claims to be the world's biggest purchaser of business aircraft. It has spent more than $3.5 billion with manufacturers such as Boeing, Cessna, Gulfstream, Raytheon, and Dassault Falcon. Their airplane shopping sprees in the last three years represent close to one-third of all new bizjets sold worldwide.
Other similar ventures have blossomed since the introduction of "fractional ownership" to the business community such as Gulfstream Shares, Prime Fleet, and Executive AirShare. One of the largest competitors to Executive Jet is Dallas-based Business JetSolutions' FlexJet program. This company was originally launched as a partnership between the executive aviation affiliate of American Airlines and Bombardier, the Canadian bizjet manufacturer. American Airlines has since disengaged from the association. The company has been growing at 50 percent per year and now has more than 200 customers and 41 airplanes in its fleet.
So, just how does "fractional ownership" work, and why is it a good thing for business aviation and its pilots? Some perspective is in order.
only about 500 major airports in the U.S. have airline service, although general aviation landing sites number around 5,000. "The commercial airline hub and spoke system turns a one-day trip into a two-day obstacle course," Santulli says. "That's why a business jet makes sense - and, for certain companies and people, 'fractional jet ownership' makes the most sense of all."
Not all potential owners can justify investing mega-millions to acquire a business jet. Price tags for the smallest to largest jets available today range from $2.5 to $28 million and up. But, clients can have access to jet equipment on a scale and schedule that is tailored to their individual needs - and do so at a far reduced cost thanks to the "fractional ownership" plan.
Kevin Russell, Executive Jet's senior vice president, says, "Fractional ownership is ideal for companies and individuals that need a business jet more than 50 hours annually. If you fly more than 400 hours out of a specific location, you should investigate outright aircraft ownership."
Executive Jet guarantees availability of aircraft 24 hours a day, 365 days per year. Fractional owners can call for a jet and have it available with as little as four hours' notice at any major or general aviation airport. This means EJ clients no longer have to suffer the discomfort of airline terminals and the pain of timetables and cancelled flights. They also enjoy increased security and an environment where they can work or confer with customers.
Fractional shareholders purchase a share in a specific aircraft (and enjoy the tax benefits of such ownership), but they do not have to fly that one aircraft exclusively. They sign an interchange agreement that gives them access to aircraft identical to the serial-numbered one they purchased. Further, owners can move up or down the fleet choosing the aircraft best suited for a particular mission.
Owner costs for a one-eighth interest in a Cessna Citation V Ultra business jet, a seven seat aircraft with a 1,750 mile range, are pegged like this:
At JetSolutions, the cost of a one-eighth share of an airplane (100 hours) ranges from $773,000 for the smaller Learjet 31A to $2,738,000 for the Challenger 604 that can fly nonstop to Paris. Add to that a monthly management fee varying from $7,200 to $15,660 for such things as maintenance, pilot salaries, hangars and insurance and a sliding rate per hour ranging from $1,230 to $2,330 that pays for such things as fuel, airport taxes and tariffs.
Based on success and performance, fractional ownership will thrive far into the future. But, what does it take to "jump on the bandwagon" as a pilot? With fractional ownership proving itself a permanent fixture in business aviation, is choosing a full-time career with a fractional operator a wise decision?
Here are EJ's published minimum hiring criteria: airline transport pilot certificate; FAA first-class medical; 2,500 hour's total flight time; 500 hours of multiengine time; 250 hours' instrument.
Applicants submit their resumes to the company's pilot recruitment office in Columbus, Ohio, where EJ reviews them to ensure that each applicant meets the minimum qualifications. EJ then sends each potential employee a package containing an EJ application and information about the FlightSafety Airline Hiring program.
When EJ receives a completed application, the company schedules the applicant for an interview at FlightSafety's Citation Learning Center in Wichita, Kansas or SimuFlite Training International in Dallas, Texas. There he goes before a team of EJ staff members, including a line pilot. After a successful interview, the applicant takes a simulator check in a Citation S/II simulator.
If the interview team recommends an applicant for a position, EJ's program managers, chief pilot, and/or director of operations review the application and all pertinent documents
The employment offer states that following successful completion of the FlightSafety type rating course (presently, the applicant pays for the course, but it's fully reimbursable after three years) and new-hire training, EJ will hire the candidate as a first officer.
The new pilot will be assigned to one of several airplanes, depending on the company's needs at the time. They include the Citation S/II, Citation V Ultra, Citation VII, Citation X, Hawker 800 XP, Hawker 1000, and Gulfstream IV SP.
However even more aircraft are destined for Executive Jet's stables. Beginning in the first quarter of 1999, 26 Dassault Falcon 2000's are scheduled to arrive and 52 Cessna Citation XLs will start arriving in 2000. And, the Boeing 737 Business Jet (BBJ) is going on-line at Executive Jet in the not too distant future.
At this time seniority, not equipment flown, determines the size of a pilot's pay check. A first-year first officer on any airplane in the fleet earns a base pay of $2,259.00 a month, predicated on a 17-day schedule. A five-year captain earns $4,415 per month, rising to $6,982 per month after 14 years. However, overtime is possible.
Normally, pilots can plan on at least 17 days of flying each month with one guaranteed weekend at home. The routine is fairly random and may be six days on, five days off; five days on, three days off, etc. EJ projects the timetable 90 days in advance and firms it up 15 days prior to the start of the month. This schedule usually has very few changes. EJ will not allocate its pilots for more than a six-day outing on the traditional 17-day monthly itinerary.
Since Warren Buffett's Berkshire Hathaway Inc. purchased Executive Jet for $725 million in cash and stock this past July, Richard Santulli (retained as CEO) and his executives have been looking at ways to keep pilots happy.
Sources say the "pay-for-training" concept may very well be dismantled because there seems to be some truth to the long-touted pilot shortage.
Some EJ pilots are working within a new experimental schedule that calls for seven days on and seven days off. Although this routine requires a substantial amount of time away from home in one dose, the full week off following is attractive, and not unlike schedules kept by pilots who fly for the major jet cargo haulers.
Company policy requires all pilots to be within 100 miles of their dispatch city (Columbus, currently) at midnight before their first day on duty. Consequently, about half of EJ's flight personnel commute from distant locations. The company is establishing another domicile in Las Vegas, and possibly at Bradley Field in Connecticut.
Brian Hulteen is a two-year Cessna Citation Ultra captain and has nothing but praise for the company and his life. "We operate great equipment that's virtually all-new. Although we fly under FAR 91, we adhere to FAR 135 standards. This is good news for those who love to fly jets and do not want to be limited by the age-60 rule of the FAR 121 airlines. We have a number of retired airline and military pilots who are flying past 60. All they need is a first-class medical.
"Our clients are really the cream of the crop. We do interact with heads of Fortune 500 companies, TV personalities, recording stars, and sports jocks. It's really an interesting mix. We are encouraged to communicate with our passengers and do a little PR. About the only thing EJ frowns upon is asking for autographs.
"The flying is anything but boring. At the end of a day, I receive a fax that tells me where I'm headed the next day. It lists all of my legs, times, time en-route, passenger names, catering, ground transportation, hotels, and the whole nine yards. There have been instances where I've been dead-heading to a point, receive a phone call in flight, and right there I change course for a different destination.
"The flying is varied and challenging. I'm not going into and out of the same air carrier airports everyday. In the course of my schedule, I'll see both oceans, probably twice. I may zip into remote Kremmling, Colorado, and pick up a ranching magnate and drop him off in Dallas. Then, at DFW, there'll be a CEO who needs to meet a client in Jackson Hole for a business deal over a round of golf. From there, I may fly dead-head to Sacramento and fly a golf pro to a tournament in Florida. Unlike a true corporate pilot, I have very little down time waiting for the boss to wind up a two day meeting. I'm in the air at least 70 hours a month, if not more, and I fly about five legs daily.
"Flight planning is done the old-fashioned way. The first officer plans a flight just like the average general aviation pilot does. Company computers do most of the weight and balance data, but we do have 'quick sheet' weight and balance numbers on our manifests, along with other performance information. The company is beginning to equip each captain with a laptop computer so they can download the flight plans and other pertinent details either in flight or on the ground."
For most career-minded pilots, the obvious question would be "Is flying for a 'fractional ownership' company a stepping stone to the airlines?"
"I don't see it to any great extent here at Executive Jet," says Hulteen. "Sure, there are some that will bolt. But, this kind of flying is hard to beat. Lately, there's a thinking on the part of management that good people need to be taken care of. Dropping the pay-for-training requirement and experimenting with more accommodating, predictable schedules are examples that they are listening. There are just a lot of neat things happening here. I'll never make the kind of living that I could flying for the majors, but I'll be more than comfortable doing the kind of flying that is hard to beat. Flying for this company or one like us is a fantastic job. It never gets monotonous.
"Remember this, too. I think flying for an EJ is more stable than working for a traditional corporate flight department. If you're one of four pilots flying the company's only Falcon 20, and that company hits the skids - guess what's going to go? With a customer base of more than 800, I think there's a lot of stability in this job. And, there are going to be jobs, too. Executive Jet is looking at bringing its pilot force to 1,000 in time."
Although the "fractional ownership" idea is innovative and has introduced many companies and individuals to business aviation who would otherwise not even consider it, some critics fear that it's eroding traditional corporate flight departments. As more and more companies come to appreciate the benefits and cost effectiveness of fractional ownership, they may sell off their own airplanes and displace their pilots.
The National Business Aviation Association, representing the aviation interests of nearly 4,000 companies that own and operate general aviation aircraft, provides a hint of its sentiments in a 1996 press release. "NBAA considers 'fractional ownership' as a means of expanding the number of companies that will utilize business aircraft?. 'Fractional ownership' is one of the ways of filling the niche between chartering aircraft and full aircraft ownership. It is the Association's belief that, as utilization increases, the well-managed and progressive flight department operating company-owned aircraft provides the most cost-effective form of business transportation."
Still, fractional ownership is still in its infancy, and like all youngsters it probally will have some "growing pains." Currently, the FAA is reviewing the issue of whether fractional aircraft should fly under Part 135, or remain under Part 91. And, certain tax interpretations could affect its financial appeal to fractional owners. However, like GPS, the cell phone, and the laptop, companies such as Executive Jet and the others are here to stay...and that means new and exciting opportunities for those who see themselves "fractional flying."
