Air charter is still considered expensive luxury travel from public point of view, compare to first class air fare ticket. However to understand more details on why air charter rates is expensive, it is wise to review the Anatomy of air charter cost to own small jet.
The common term for aircraft or air charter aircraft leasing is ACMI which stand for Aircraft, Crew , maintenance and Insurance, where the calculation cost is based on ACMI per hour, or hourly airplane rental fee and not associated yet with other fees such as fuel and others
Aircraft cost
The cost of the aircraft is considered one of the primary part of the anatomy of air charter cost, based on the price of the purchase or lease depending on the agreement that is proportional to the Life Cycle as an example, the manufacture normally calculated 60000 cycle to the major component such as airframe with the cost of finance and depreciation, with a relatively long payment period. International standards practice of aircraft leasing has a risk calculation on establishing aircraft cost including its depreciation. Although common blue book is available to give market value which in turn will provide initial indication of low, average as well as high price, other risks factor such as how risky is the leasee and area operations will be, to ensure that the aircraft can continue to operate in terms of maintenance, insurance claims etc., and additionally, if there is bankruptcy due to non-flying aircraft or bankruptcy companies, it is not difficult to take back the ownership.
Lets take an example of the market price of Hawker 800/900 aircraft with an age between 10-15 years, cost about USD 3 million in 2017 ( with TCAS 7.1 and ADSB compliant).
Considering depreciation and leasing, at least for monthly fee need USD 50-70k as minimum payment. For airplane lease or lease purchase, must be added with reserve cost such as Engine and APU (Auxiliary power unit) which must be periodically replaced. Therefore the aircraft hourly cost will also be determine on how many hours air charter is utilising them, the more utilisation the lower the hourly cost. Average minimum that normally operator can sustained normal operations without corporate or owner subsidy is about 25 hours, in some airport where hangarage and apron cost is expensive will need more flying hours per month.
Another anatomy of air charter is Crew member cost
The calculation of Crew member cost for air charter operator is much simpler than the aircraft and maintenance cost, as there are fixed monthly and variable cost when the crew is flying. The most important element is how many crew set required per aircraft. The company may predict how much utilization per month, if it is just under 30 hours, enough with 3 pilots, and 2 cabin crew members if requires, as we are talking about 8-9 seater small jets. Now lets have a look at the major cost, in the US the average salary for a Hawker captain ia about USD 85,000 and USD 60,000 for copilot and additional cabin crew about USD 30000 per year. So air charter crew member may costs around USD 260000 a year, in Europe or middle east these cost may takes about 30% higher. This exclude the cost of maintenance personnel, ground staff and office administrators. Therefore the crewmember cost about USD 22500 / month/ aircraft excluding variable cost such as crew per diem, accommodation etc.
Aircraft Maintenance cost for air charter
The maintenance cost is also one element that has variable conditions. When we decide to purchase or scheme of a lease to purchase aircraft from a financial company, majority they try to protect the value as much as they can, as the lessor will also act as aircraft owner who assure that the value of the aircraft remain in high and also the safety level as it will reflect their credibility as a lessor besides the optimum value for money. The maintenance element for the purposes of calculation at ACMI, can be breakdown in to Maintenance reserve and periodic maintenance known as consumable such as engine oil, hydraulic oil, brakes, and part or components that have a scheduled age. The maintenance cost for an ageing aircraft will be more expensive, if the aircraft was purchased and the owner decide to do their own maintenance program it will be cheaper, however if it is not properly maintained with the right schedule, the risk of facing AOG (Grounding) will be higher and the aircraft charter may loose their potential client. So overall variable maintenance program for the small jet may take about USD 5-10000 / month, this is excluding manufacture maintenance program and maintenance reversed for Engine, APU and landing gear, also not to consider hangar rental, or maintenance location where the approved Maintenance Organisation availability in the home base location.
Insurance cost
Since Insurance is an international obligation where international standard may accept as minimum cost, for commercial air charter service providers, the operator will have to provide insurance to all occupant on the aircraft and outside the aircraft. The value or cost of insurance for mall aircraft is usually about 2-3% of the price of the aircraft or cheaper if the plane is larger. Premium costs depend on the coverage such as passenger, crew and third party passengers. In addition, there is also additional cost such as High risk or war risk (AVN52E) which may cost at least an extra USD 25000 per year depending on the risk factor.
So the basic of the ACMI cost per month for the above small jet within 30 hours utilisation is:
Aircraft: USD 40000
Crew: USD 20000
Maintenance: USD 5000
Insurance: USD 10000
Montly cost: USD 75000
Total Air Charter small jet monthly cost : USD75000 and therefore for 30 hours utilisation the air charter cost is USD 2500 / hour, wait, we still need fuel to fly.
Fuel cost for air charter fleet
The jet fuel of the turbine jet aircraft (JP1 or jet A Fuel) is one of the primary variable cost of air charter, in addition to the ACMI cost, However, since the downprice of the fuel price internationally, where in 2008 the price per USG was about USD4 / US Gallon, now in 2017 it is down to USD1.5 / gallon. For example a hawker aircraft that takes 320 gal / h, fuel costs around USD500 per hour.
Other Fees and Taxes
Other costs that are to calculate the cost of aircraft lease are landing fees, navigation fees, handling fees or additional services such as special order catering or alcoholic beverages. For Airport and navigation fees, it can be seen from the Airport charges of ICAO doc 7100. This airport-dependent varies from location to another location, it may cost USD500 for municipal airport or it may cost USD5000 to the destination airport where the location is pretty difficult, such as couple of destination in Saudi where the air charter have to use VIP lounge with VIP limousine and includes Visa, outside the airport transportation and many other services.
So What is the cost of renting a private aircraft or air charter cost?
From the above calculation, if the plane with a relatively low demand of about 30 hours per month then Cost structure roughly as describes below:
ACMI / hour = USD 2500
Fuel / hour = USD500
Total anatomy of air charter cost for small jet aircraft /hour + fuel = USD 3000
This price is basic cost, not to consider office rent, staff salaries etc.
So what are the anatomy of air charter cost to own small jet? If you want to consider buying an aeroplane or own small jet, be prepared with minimum budget of USD 75000 per month, not to mention major maintenance that may occurs more frequent once the aircraft gets older.