Intensified Commercial Security Screenings Make Private Aviation Even More Appealing

The web is buzzing with discussion about the Transportation Security Administration's (TSA) ordering of significantly more intrusive and time consuming passenger screening measures following the attempted bombing on a US-bound Northwest Airlines flight on Christmas Day. (See this recent article in The Washington Post on the new security procedures at U.S. airports.) In addition to the use of full body scans at more US and international airports, TSA will begin randomly swabbing U.S. travelers' hands and baggage for explosives.

By contrast, TSA recently nixed plans to impose new intrusive security screenings on private jet travelers. Currently, about 15,000 private aircraft are subject to these unnecessary procedures. By reducing the size of aircraft subject to these regulations to exclude most private jets, TSA will significantly reduce that number. In addition, instead of mandating that all passengers aboard private planes be checked against terrorist watch lists, name checks could be left to the discretion of pilots. These actions are in recognition that such intrusive procedures simply don't increase security in the context of private jets.

Discretion and fewer security hassles have long been a draw of private aviation - particularly post-9/11. With pressure mounting to tighten security on commercial flights even further, and with more intrusive searches on the rise, commercial travelers (or travelers who might have left private air travel for financial reasons), are likely to turn (or return) to private aviation. (See this recent article in The Wall Street Journal - "When Security Takes Longer Than the Flight" by Scott McCartney.)

As I've said before, with private aviation, you know who’s on board the aircraft, what’s in the luggage and who’s in the pilot's seat. That sense of control provides peace of mind which, in today’s world, is priceless.

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What's Up With Flight Options?

Given the economic downturn, common sense tells you that the fractional jet business must be down. Unfortunately, common sense is largely all we have to go on because the major fractional companies don't publicly report their programs' results of operations.

Another clue to look at is how a fractional provider is handling the repurchase of shares from existing fractional owners. With share sales slow, these companies likely must utilize existing capital or lines of credit to fund many of these repurchases.

In this regard, Flight Options' recent business practices give one pause. To be sure, in the past Flight Options has consistently low balled its owners on the value of their shares. I know this because, for over ten years, I have been fighting on behalf of Flight Options' (and other jet company) share owners to get them fair value for their shares. It's no surprise to me that this practice of low balling owners on share valuations continues. What's new is that now Flight Options is trying to delay share repurchases in direct contravention of its contractual obligations. It's excuse? In a recent letter it claimed that, "[T]he current market for used general aviation aircraft is illiquid, with very few transactions taking place making it increasingly challenging to establish market value." This claim is disingenuous at best. A liquid market does exist and values can be reasonably determined.

One wonders how financially strong Flight Options is if it's trying to delay share repurchases and offering flight credits in its JetPass program in lieu of cash. As we continue to do battle with Flight Options, we'll let you know.