Donations of Private Flight Time Urgently Needed to Help Four Disabled Vets

Through its ShairGive program, Shaircraft Solutions, a private aviation law and consulting firm, working with the U.S. Veterans Administration and the Professional Golf Association’s First Tee Program, is seeking donations of flight time on private aircraft to help four visually impaired disabled veterans participate in the National Veterans TEE (Training, Exposure and Experience) Golf Tournament in Riverside Iowa, September 6 – 9, 2010.

The four veterans in need—David Zang (Navy), Michael Smith (Army), Ronald Cody (Marines) and Joseph Taylor (Marines), combined, have served our country for over 36 years, from Vietnam through the Gulf War. Each has been selected to participate, along with 200 other veterans, in the Tee Tournament because they have excelled in completing the Blind Rehabilitation Training Program offered by the Veterans Administration.

These wounded warriors suffer substantial visual impairment as well as other debilitating conditions that include prostate and bladder cancer and melanoma, severe arthritis and the effects of a stroke. Yet, they have persevered and continue to work toward regaining a full and active lifestyle.

Unfortunately, commercial air travel from Florida to the Tee Tournament in Iowa City, Iowa involves time consuming and arduous connections that, due to their respective disabilities, make the trip impossible for these heroes. Shaircraft is asking the private aviation community to step up and donate a flight on September 6, 2010 from West Palm Beach, Florida to Iowa City, Iowa and a return flight on September 10, 2010.

“We are honored to have this opportunity to demonstrate, if only in a small way, the respect we have for these fine servicemen,” says CEO, James D. Butler. Shaircraft works pro bono with donors and charities to help facilitate charitable contributions of flight time on private aircraft.

Time is short. If you are able to help, please contact James D. Butler at (301) 652-9885 or jbutler@shaircraft.com.

Quotes from the veterans themselves:

“My Blind Rehabilitation Center experience was a life changing event. Prior to…[it], I was embarrassed and reclusive regarding my vision impairment – attempted to hide…it. Being at the BRC gave me the confidence to know that regardless of how my condition may progress, I will be able to live a full and happy life…Now, just having my white cane with me at all times, provides me an incredible level of confidence, pride and comfort. No limitations – and it just keeps getting better and better every day. My attendance at the [Tee Tournament] will be yet another boost to…regain confidence and the ability to once again share with others how wonderful it is to excel regardless of our ‘bumps in the road.’”

“My visual disability is quite rare and a prognosis is not possible…With my wife not very mobile, and me not being able to drive, I have been too sedentary and not out and about as I use to be…I think this will be very positive for my psyche and a chance to shine in competitions and participations which are more often lost in my past.”

More information about the Tee Tournament is available at http://www1.va.gov/opa/pressrel/pressrelease.cfm?id=1940.

Survival Tips — What to Do if You’re Stranded

A major reason you fly privately is to avoid delays and other hassles. Yet, summer is a heavy travel season for all private jet providers--fractionals, jet card companies and charter operators. In such heavy demand periods, variables like weather and equipment problems, as well as pilot work rules, can wreak havoc on flight schedules—inevitably causing delays and even some flight cancellations. It makes sense to plan for this possibility. Here are five tips that will help you survive:

• Establish Your Rights Up Front — Make sure your contract spells out your rights to on-time departures, force majeure delays (like inclimate weather) for which the jet company is not responsible, and your rights in the event that an unexcused delay occurs.
• Negotiate, Negotiate, Negotiate! — Often times, contract provisions regarding your jet company’s performance obligations are negotiable. Get specifics regarding on-time departures and try to minimize excused delays.
• Get it in Writing — If your flight is delayed, maintain a paper trail establishing that fact and the reasons given so that later on you can prove that you’re entitled to compensation.
• The Squeaky Wheel… — If you’re not getting the response you need, ask to speak with senior management personnel.
• Follow Up and Insist Upon Compensation that is Valuable to You — Ask for compensation that’s most valuable to you, i.e., short leg waivers, guaranteed availability, ferry fee waivers, guaranteed upgrades, etc.

For more insight into how best to handle service problems, click here for the full text version of: “Survival Tips — What to Do if You’re Stranded"

Private Aviation Recovery--Encouraging News But Still a Bumpy Ride

Recent reports indicate a bit of an upswing, both in the market for private jets and in private jet operations. Quoting JP Morgan's monthly business jet report, AIN Alerts indicates that the pre-owned jet inventory of in-production models fell to 11.9 percent in June--the first time it has dipped below 12 percent since October 2008. This dip was due to mainly to tightening of midsize aircraft inventory, while the supply of light jets increased slightly. Pre-owned aircraft pricing inched up by a half percent last month, but only due to a firming up in the large-cabin jet segment. Prices for light and midsize jets decreased by around 2 percent.

JP Morgan reported that business jet flight operations in May grew year-over-year by 12.5 percent. Although this increase was less than the year-over-year increases in March and April, it nevertheless continues a positive trend. Nevertheless, ARGUS reported only a 4 percent year-over-year increase in business aircraft flights in June. Fractional flying led the way with a 6.7 percent increase. Mid-size jet charters increased by a whopping 18.9 percent and flights utilizing fractional turboprop flights, mainly Avatar, were up a solid 15.6 percent.

All in all, it appears that the good news continues to outshine the bad, although the industry recovery remains painfully slow. The growth in charter flights and fractional turboprop operations would seem to indicate that flyers are approaching the market gingerly and looking very hard at flying costs. That's just as I'd expect.

Private Air Travel Decisions: You’ve Got to Have an Attorney on Your Side

If you are considering an investment in private flying, should you seek the advice of an attorney? The answer, in no uncertain terms, is yes!

Most private air travel arrangements, such as buying a fractional jet share or buying into jet card or block charter programs, involve rather complicated legal, regulatory and liability issues, and substantial dollars, and so deserve careful legal review.

As a general rule of thumb, I’d recommend that anytime you’re parting with more than $25,000 in exchange for a promise by a jet company to fly you sometime in the future, you should have an experienced attorney review the paperwork. Indeed, even if you’re just booking a charter flight, which may cost less than $25,000,, issues like cancellation fees, aircraft and crew specifications, safety standards, etc. are likely to be covered in the fine print that comes with most standard charter contracts. When we broker a charter flight for our clients, we pay close attention to these details.

Jet companies, fractional ones in particular, have a subtle way of making their contracts seem simple (and so non-threatening). They print them in a way that makes them seem short and full of “boilerplate.” Some will even tell you that they don’t change their contracts and, “Everyone signs the same documents.” (We recently negotiated over 150 changes to one such company’s contracts.)

The more risk – financial, legal, etc. - you assume (and there is always risk, contrary to what a jet company may tell you), the more important it is that you have experienced legal counsel review and negotiate these contracts. (Even in the case of some jet card programs, the contracts reflect complicated legal structures and can run to more than 90 pages, notwithstanding the fact that in their ads, they make them look like simple credit cards!)

As with any capital asset purchase, you want to make sure that the asset is liquid and that you can get a fair price for it when you sell, even more so in the case where the fractional company knows much more about the jet market than you do and when you’re almost forced to sell back to them. We hear from fractional owners every week who wish they’d paid more attention to the details of how they’d liquidate their fractional share and how the value of that share would be determined.

When you are putting thousands, or millions, at risk, you also want to make sure that the jet company’s promises are ironclad and that you have real and workable recourse if it doesn’t live up to its end of the bargain. Again, as you’d expect, the fractional companies draft their contracts in a way that gives them a great deal of latitude with respect to these performance standards.

You may first think to call on your in-house or family attorney. Bad idea. Your average attorney understandably won’t have experience with how these contracts work and so won’t know which aspects are negotiable and which are not. Faced with these circumstances, you may be inclined to just go ahead and sign the “standard” contract, only to find out later that you’ve made a costly mistake.

In the end, it seems to me that anytime you contract for a private jet flight—putting your dollars and, more importantly, your safety and that of your family and business associates at risk, you should have an experienced attorney, who specializes in aviation transactions, review the contracts.

Fractional Ownership: Sometimes, ‘Fair Market Value’ Isn’t So Fair

In my debut contribution to Business Jet Traveler's "Inside Fractionals" column, I offered some advice to fractional jet owners looking to exit their contracts.

That advice is even more relevant now, at a time when the fractional jet industry has been rocked by the economic downturn. With fractional flying down, and some fractional companies apparently in distress, many fractional owners want out. Desperate for cash, providers are making it as difficult as possible for owners to exit their contracts, often delaying repurchases or offering valuations so low, it almost doesn’t make sense to sell. Owners wonder if their shares have gone down in value as the providers claim, in some cases as much as 70%. What owners may not know is that they have the right to contest these valuations through the appraisal process provided in their Purchase Agreements. Owners, who appreciate that they have this right, often don't have the market knowledge and other expertise necessary to exercise it successfully.

When is it worth it to contest your provider's low ball valuation? The larger the share and the bigger the aircraft, the more likely it is that it will be worth your while. Bringing to bear a unique blend of legal and aviation expertise, we've fought for and obtained significantly higher fractional share valuations for many owners.

You can put yourself in the best position by anticipating this contest and negotiating changes in the standard boilerplate Purchase Agreement with regard to how the process will work and, most importantly, how the value of your share will be determined.

Read the full article, “Sometimes, ‘Fair Market Value’ Isn’t So Fair” here.

Shaircraft Broadens Its Social Media Outreach

Bethesda, Maryland - May 2010

Attorney and CEO of the veteran private air travel consulting firm, Shaircraft Solutions, James Butler, Esq., is making a splash in the world of social media, with active profiles now on Twitter, Facebook and LinkedIn.

“Following the launch of our blog, Inside Private Air Travel, we decided to expand our outreach on social media applications. While not all of our clients are using them, many are, as are many of our industry colleagues. It’s turning out to be just one more venue for listening to and connecting with private air travelers, getting first-hand information from industry folks, and sharing our expertise with the exclusive private aviation community.”

Finding James Butler/Shaircraft online:

LinkedIn: www.linkedin.com/in/shaircraft

Facebook: www.facebook.com/shaircraft

Twitter: www.twitter.com/shaircraft

Blog: blog.shaircraft.com

Shaircraft Solutions is a Maryland based consulting firm advising businesses and individuals on a range of private air travel investments, including fractional ownership, jet card programs, air taxi services and charter, and also specializes in fractional share valuation disputes. CEO, James D. Butler, is an attorney and frequent commentator on the private air travel industry. He authors the “Inside Fractionals” column for Business Jet Traveler magazine, contributes regular pieces to Halogen Jets, and recently has served as an expert analyst for media outlets such as The Wall Street Journal, Robb Report, Forbes, Aviation International News, Halogen Jets, CNN and Fox News. He can be reached at jbutler@shaircraft.com.

The Future of Fractional Jet Ownership

As a private aviation advisor for more than a decade, I’ve seen the fractional jet industry go through plenty of ups and downs. Early on, fractional flying flourished as NetJets, the result of the creative genius of Rick Santulli and the capital of Warren Buffett, came to the fore, followed by new entrants developed by strong aviation companies like Bombardier, Cessna and Raytheon.

In the early part of this decade, the triple whammy of the 9/11 tragedy, the bursting of the internet bubble and the stock market plunge threw the industry for a loop. As the stock market recovered and the commercial air travel experience continued to deteriorate, fractional flying again began to flourish, along with some new private flying program models like fractional jet cards, block charter programs and the like.

In the past two years, however, the recession has hit the fractional jet industry hard. Fractional companies have seen many share redemptions and few share sales. The decline in the preowned jet market has hit fractional owners particularly hard, revealing the Achilles heel of the fractional flying model--the purchase price owners receive for their shares at the end of their contracts.

While recent headlines suggest that private aviation as a whole is rebounding, the future of the fractional industry is uncertain. Every fractional owner and potential fractional owner has the same basic question: Does it make sense for me to invest/stay invested in fractional or should I consider other private air travel options like charter or jet cards? While the fractional industry has both floundered and flourished in recent years, the answer to this question always is the same--it depends on your individual circumstances including your investment time horizon, your travel profile and budget, etc.

Your goal should be to purchase maximum flight time on aircraft that best fit your needs from reliable and financially stable companies at a minimum cost. Making the wrong choice can cost you hundreds of thousands, if not millions, of dollars. Making the right choice can free you from the horrible service offered by the airlines in a way that does nothing less than change your life for the better.

To read a more thorough discussion of the factors you should consider in making your decision, see my recent article in Business Jet Traveler magazine: "Flying Privately Without Buying a Jet"

NetJets Modifies Contract to Extract More $$$ From Owners

Recent losses apparently have spurred NetJets to seek increased profit margins on the backs of its customers. Case in point, NetJets used to increase hourly flying rates, international crew fees and ferry charges based solely on increases in the Consumer Price Index. Admittedly, the CPI bears little relation to any of these charges but, in a low inflation environment, NetJets has had to forego meaningful increases in these charges. Not any more. NetJets quietly has instituted a minimum annual increase of 2% in these fees, even if that exceeds the increase in CPI. Existing owners who expect to renew their contracts on essentially the same terms as their existing contracts may be surprised to find this change in their deal.

NetJets: You Know It's Bad When...

In a recent letter to shareholders, Warren Buffett said that were it not for Berkshire Hathaway's guarantee of their debt, "NetJets would have been out of business." This is unsettling news for existing NetJets owners who regularly contact me, concerned about the future of NetJets and how their investments will be impacted - particularly if they decide to sell.

With the industry down as a whole and many fractional companies struggling to stay afloat, owners have good reason to be concerned. As I've noted before, the attempt by some fractional companies to delay repurchases is a clear indicator that capital is tight. If you’re wary that financial problems may cause your provider to fail, you might seriously consider selling your share now. With few sales occurring, you’ll benefit from older comparable sales that reflect higher values. That said, many fractional companies have and continue to low ball their owners on repurchase valuations - a battle that I've been fighting against for years. (See this related client story.)

For those considering a new investment, it’s important to consider the length of your investment horizon. While the current economic downturn may provide an opportunity for you to take advantage of lower aircraft pricing (resulting from declines in the market value of aircraft), this decrease may continue for some time and so the value of your aircraft, and thus your share, may drop over the next couple of years. The private jet market tends to by cyclical, and so values likely will come back with the economy, but this will take time.

Whether you're an existing owner, concerned about your provider's reliability or getting out of your investment, or you are considering a new investment in hopes of striking a good deal, it’s crucial to have an expert sitting on your side of the table, ready to fight for you.

NetJets: Losses Run Deep

Aviation International News recently reported some staggering facts on NetJets’ performance over the last couple of years:

• NetJets lost $711 million in 2009.

• NetJets revenues dropped last year by $1.465 billion-or 32 percent-versus 2008 due to a 77-percent fall in aircraft sales and lower flight operations revenues.

• In the 11 years that Berkshire Hathaway has owned it, NetJets has recorded an aggregate pre-tax loss of $157 million.

Here's another factoid: Aircraft manufacturer, Hawker-Beechcraft, recently announced that NetJets has canceled its order for "a significant number" of aircraft that were to have been delivered over several years, starting in 2011. The cancellations represent 90% of NetJets' orders with Hawker Beechcraft. In an apparent response to these setbacks and a shake up of senior management, NetJets has been taking a much harder line with its customers in all areas--contract terms, customer service, share buybacks, etc.