Jones Jet Set To Soar
by June 18, 2007 12:00 am 133 views
For many worldly executives, the next best thing to owning an airplane may be to own part of one.
Flying Investments LLC of Fayetteville has tapped into a travel trend that some think balances the needs of today’s just-in-time business and the bottom line.
Gerald and Mike Jones, owners of Flying Investments, are selling 1/16th shares of a nine-passenger Dassault Falcon 20F — reportedly one of the safest and most spacious corporate planes in the air today. The minimum share on the jet costs $275,000 and that buys 50 hours of anytime in-the-air time per year, they said.
There’s also a monthly management fee for the plane’s upkeep and storage, which is $4,783 per 1/16th share (or $57,396 per year), and travelers have to pay for their fuel.
But all costs are fixed, the duo said, resulting in easier budgeting.
“It’s a tremendous value opportunity for someone,” Mike Jones said. “It’s less expensive than any fractional ownership program you’re going to find. It’s probably the best deal in the world.”
Its hard to keep up with the Joneses — a Falcon 20 costs about $5 million.
Additional shares can be purchased for $250,000 apiece, but owners will be limited to a total of 400 hours per year per aircraft to protect availability for each shareholder.
But there’s another benefit. Ownership can be a tax write off.
“The advantage to fractional ownership is that you actually own a depreciable asset,” Mike Jones said. “From the tax consequence side, you’re going to have something that depreciates and will shelter income for you.”
Dennis Sisson, a CPA with Sandlin & Parham Ltd. in Fayetteville, said the benefits of fractional ownership go far beyond taxes because the owner doesn’t have to purchase an entire plane and take on all the burden of its upkeep.
For tax reasons, the usage must be business-related in order to deduct expenses. If it’s used half for business and half for personal, then only 50 percent of expenses can be deducted.
“Let’s assume that it’s used 100 percent for business purposes,” Sisson said. “If that’s all you do with [your one share], then you can depreciate the $275,000 and deduct all the other expenses as well.”
Jones said more than $5 million has been invested in the company.
There’s only one Falcon in the fleet, but the Joneses are putting the finishing touches on a second plane and have purchased a third that will be brought on line when needed.
They also own a hanger at Fayetteville’s Drake Field that is stocked with every piece of equipment — including a brand-new engine — that may be needed for maintenance.
The Joneses owned Jones Motorcars Inc. in Fayetteville before selling the Mercedes-Benz dealership to Superior Automotive Group in May 2006.
That allowed the Joneses to focus on developing Flying Investments into a business. Flying has been Gerald Jones’ passion since he was a U.S. Air Force pilot in the 1950s.
The Joneses will remain the majority owner of each plane no matter how many shares are purchased. One share already has been sold to AirCell Inc., a Denver technology and research firm that has been working with Flying Investments’ planes.
Mike Jones, Gerald’s son, said he’s marketing Flying Investments locally in hopes of keeping most owners from the Northwest Arkansas region.
“We want to offer four-hour availability so in the event of an emergency, you can go right now,” Jones said. “With other companies that offer fractional ownership, they’re all over the country and have to make arrangements to get a plane here before it can be used.
“We are going to make every effort to get someone where they need to be, when they need to be there — and safely.”
By offering the only fractional ownership program that he’s aware of in Northwest Arkansas, Jones believes there will be a market to support the company.
Gaining Altitude
Saving money over the long haul is why fractional ownership has been gaining altitude since the concept was introduced in the mid 1990s.
According to JETNET LLC/AvData Inc., an independent research company based in Utica, N.Y., the total number of aircraft under fractional ownership worldwide has grown from 71 in 1995 to 983 in 2006 — a 1,384 percent increase.
The total number of shareholders in those planes has shot up even faster, with 242 in 1995 and 5,191 in 2006 — a whopping 2,145 percent increase.
Most (840 of 983) of the aircraft under fractional ownership are controlled by one of the “major players” such as NetJets Inc. or CitationShares Sales Inc. But even the lowest-cost entry-level fractional ownership program with those global companies doesn’t compare with Flying Investments.
The acquisition cost for a 1/16th share (50 hours per year) in NetJet is $430,000 while CitationShares comes in at $406,250, according to the Decision Guide to Private Jet Travel published in September 2006 by the Helium Report, an independent research firm in San Francisco.
Booking a commercial flight on Expedia.com from Northwest Arkansas to Atlanta even a day in advance can cost between $700 and $1,300. Multiply that by nine passengers, and the cost is between $6,300 and $11,700 to get staff where it needs to be on time.
Trying to find a flight the same day of departure is more expensive, if nine seats are even available on short notice.
Booking a flight to Atlanta for a full eight-hour day with the most popular charter service in Northwest Arkansas, Jetride of Springdale, costs $12,876 for an eight-passenger Lear 45, or $14,995 for nine passengers on a Falcon 50.
Flight Tools
The Falcon 20 used by Flying Investments offers a flying conference room of sorts with the largest cabin in its class.
There are leather seats, a galley, an airline style lavatory, phones that can dial directly and wireless Internet access.
It cruises at 470 mph and has a range of 1,450 nautical miles (equal to about 1,668 land miles).
“We can go any place in the United States that you want to and most of Mexico and Canada,” said David Hollman, director of aviation for Flying Investments.
Flying commercially means paying for parking and hauling luggage to the terminal, standing in lines, going through security, and frequently, bumps and delays.
With private ownership, just drive onto the runway and unload directly onto the plane (the Falcon has room for seven golf bags in its storage compartment). It also is more convenient because all that’s needed to book a flight is one phone call to a dispatcher, who can arrange everything from a flexible schedule to catering to ground transportation at the destination.
Perhaps the best benefit is in the number of destinations. There are 500 airports in the country generally reserved for commercial air travel while smaller private planes can land and take off from more than 5,000 airports — meaning one can get closer to a destination without hours of driving.
Most planes have a 20- to 30-year “life limit” which means the manufacturer will have it grounded once the limit is met. The Falcon is among the few with no life limit because it was constructed to the highest standards required by the FAA.
This spring, the Falcon owned by the Joneses passed a rigorous 12-year inspection and was recently outfitted with new wiring and aviation equipment. It also has the latest safety features and extra “redundant” systems throughout that provide fail-safes for things such as the landing gear.
“We’re certified to the same standards as a 747,” said Russell Smith, Flying Investment’s chief pilot.
Fractional owners don’t need to worry about their shares diminishing in value. Unlike cars, planes actually appreciate over time as refurbished interiors and exteriors can make an aircraft as good as new.
Before each flight, Flying Investments’ team of mechanics and technicians check the aircraft from top to bottom to ensure it’s as safe as possible. They’re looking for “squawks” — the usually minor problems on a plane.
Jones said the Falcon typically flies with only one squawk, if any.
“A [commercial] airliner will take off with anywhere from a dozen to 15 squawks,” Jones said. “My dad’s philosophy has always been if we’re going to fly, we’re going to be as safe as possible and that’s an important part we’ve taken into this business.”