Frequently Asked Questions on Shared Ownership in executive private aircraft.

 

Here are some brief answers to the frequently asked question our about our shared ownership program to use executive private aircraft to solve a regional travel problem. For more information, please contact us.

01

 
What Problems are you solving?
  • Imagine that you live in Western Washington but need to travel frequently to Eastern Washington or Oregon? Your only real options are commercial airlines or to drive. Driving from Seattle to Walla Walla, Pullman, Spokane and other destinations requires long drives and overnight expenses. Flying on airlines is restricted by limited schedules to regional locations and widely varying prices at the whim of the “airlines gods”. Overall your options are not great for same day travel.

  • The answer to this problem is to use private executive aircraft to shuttle people between Puget Sound and Eastern Washington on a daily basis. A fleet of two or more aircraft transporting 8+ people at a time is able to make 4+ round trips per aircraft per day at reasonable rates and with much more frequently than airline schedules.

 

02

Why the Cessna Grand Caravan EX?

 

  • The Cessna Grand Caravan EX is the aircraft of choice for moving small groups of people - and virtually anything they might want to carry with them - across the Cascades in executive comfort. It is fast: at 180 knots, the EX can make a trip from Seattle to Walla Walla, Pullman, or Spokane in just over an hour – only a few minutes slower than airlines, but much faster overall after eliminating the hassles and delays of flying from large commercial airports.

  • With state-of-the-art avionics, continuous de-icing, a turbine engine and greater horsepower, the EX can safely get over the Cascades in almost any weather. It is flexible: the EX can make up to four trips per day, and with a 3000 pound useful load and removable seats that can be configured to accommodate many combinations of passengers and cargo, it can better service the needs of business and vacation travelers, and folks who have been poorly served by commercial airlines. And finally, it is a stylish workhorse: with the ability to transport up to ten passengers in executive comfort, a 1000-pound underbelly cargo pod to accommodate just about anything you want to carry (with no extra or hidden fees), and access to thousands of small airports much closer to where you live and want to go, the EX is quite literally the perfect Northwest Shuttle.

03

What is your regional travel solution?

 

  • Our goal is to partner businesses and organizations with synergistic business interests.  One example of this is connecting the Puget Sound cruise ship industry and its passengers with Walla Walla wine country where there is no practical way for cruise ship passengers to get to and back from Walla Walla (or other wine country destinations) on a single-day excursion, as the time constraints of a cruise schedule demands.  

04

How is your program unique, structured?
  • We have taken what we believe the best elements of past programs and combined them into a hybrid that shares risks and rewards. Shared ownership is less expensive to purchase into and to utilize than a fractional ownership program and the overhead is about half the cost.

  • Shared ownership allows us to sell interests in aircraft to literally hundreds of investors with like-minded individuals and organizations, such as to most of the 140+ wineries in Walla Walla. These wineries are the one who profit most from organizing trips with their wine club members and guests in order to make the trip much easier and faster, resulting in greater purchases and sales

  • The trip organizers are include the wineries and wine clubs that pull people in from the Puget Sound Basin, as well as cruise lines, resorts and other Seattle based operations that push groups to Eastern Washington and Oregon to enjoy all that the Northwest provides. All concerned may enjoy the opportunity to share in the aircraft that will transport their guests and group of partners of groups can provide differentiated services such as limos, dinners, special events, golf, skiing and other “add-ons” to enhance their revenues and make their trips unique.

05

What are the levels or participation?
  • There are six ways to participate in a non-ownership capacity and eight ways to participate as an owner. Owners sharing a level 3 or higher level are considered as full participants that are protected by shares in specific aircraft as well as receiving pro-rated depreciation tax credits.

  • Shared owners get annual ROI and discounts on travel as well as margins on trips that they organize. It is no exaggeration to say a “major owner” will earn over $500 per trip consisting of 8 or more people before they have even opened their first battle of wine for tasting. Coming home, their wine customers can bring over $5,000 dollars of wine home with them depending on weight limits and wine values; it could actually be many times that amount of wine!

  • Only shared ownerships are open during the capitalization phase, non-owner participation may be offered after launch.

06

What are you funding options?
  • Investors purchase shares at $1,000 per share (pre-launch), with a maximum of 3,000 shares sold per aircraft, at various levels numbered 1 through 8. Once 3,000 shares are sold that aircraft is “closed” and more shares may be sold in additional aircraft.

  • Investors buy in at various levels depending on how much they wish to spend and how much they wish to acquire in terms of ROI and depreciation, as well as how low they want their personal travel and wholesale seat costs for organizing trips, to be.

  • Investors may group with other like-minded investors to form a shared ownership group so that they may participate at a higher level. For example, a single $5k investor at level one (the minimum), may also pool with 20 other to become level 3 shared owners. Level 3 shared owners earn 70 times the ROI and depreciation that level 1 - investors earn because the higher the level, the more ROI and depreciation is ditributed.

07

How is every investor protected?
  • Although Shared Owners share profits in the venture as a whole, their investment is actually toward a particular plane and is secured by that plane.   A Grand Caravan EX is valued at $2,700,000 (and possibly more depending on what fixed cost may be capitalized for purposes of depreciation).  Using that figure, that Shared Owner’s $100,000 investment is immediately protected by $84,333 in aircraft value compared to a $70,000 loan balance should an investor choose to finance their ownership (30% down).  Grand Caravans have historically held their value very well – according to Cessna’s own liquidation data, even those sold during the Great Recession sold at an average resale percentage of 79% of their value new in the OLD Grand Caravan models. We fully expect, as does Cessna, that the new EX models will hold over 95% of their value in the first 5 years.

  • This means that a single $100,000 investor may expect to recapture at least $84,333 in aircraft security after 5 years, and may also expect to earn $160 per organized trip, and each trip can carry over $5,000 worth of typical wine on board; assuming at least 20 cases are carried home and average wine values are considered. If the same investors pool with other like-minded owners they may earn over $500 per trip and in either situation their investment is offset by 6 or more organized trips per year generating both trip margins and wine sales. This means that only 6 organized trips per year transporting at least $1,250 worth of wine (1/4 the average value of wines returned), the $100,000 investor can fully recapture their investment in less than 2 years. An aggressive trip organizer may accomplish that feat much faster because you are in control your own success!

08

What are your “scheduled” runs; how can I rely on the “schedule”?
  • Our trips are demand rather than schedule based as part 135 commercial operations (FAA governance), and are not real schedules. We may ask everyone to arrive at the airport for a “9 o’clock departure”, but the reality is that without at least 6 passengers ready to do, we don’t.

  • Same day service is not an issue because the plane may stand by all day until your group is ready to depart, or another plane will be the by the appointed time frame. Cruise ship customers who want the enjoy the experience AND spend the night can only be assured of making their cruise the next day if they book their return travel on the Alaska/Horizon 2 Pm flight to Sea-Tac, for example. We can help, of course, but you cannot totally rely on our “2-ish” departure because everyone in the group may not be on time and we have to wait (don’t worry; those folks pay a late fee that gets re-distributed back to you).

09

How far can the Caravan EX fly, and how fast?
  • The EX, as it will be configured and certified for use by AES Wine & Vacation Tours, will be able to fly anywhere in a range of about 800 nautical miles (about 920 statute miles), at a cruise speed of 180 knots (207 mph), and a top speed of 195 knots (224 mph), for less distances due to higher fuel consumption rates at top speed. Our optimal working range covers all of Washington, Oregon, Idaho and special operations and charters may include California, Nevada, Utah, and Montana as well as most of Arizona and Colorado and all but the northern-most reaches of the Canadian provinces of British Columbia, Alberta, and Saskatchewan.  

10

My needs for regional travel are primarily business and pleasure; I am not interested in organizing trips. How does your program benefit me?
  • The optimal return for shared owners is dependent upon organizing trips as a way to boost revenues and recapture your initial investment, faster.  As a shared owner that does not organize trips you still receive discounted travel costs for you and your guests, ROI, and depreciation tax credits. Based upon the discounts, ROI and depreciation may still profit by becoming a shared owner and cutting your travel budget ih half. You also have many more opportunities to fly with each aircraft capable of 4 round trips per day (depending on weather). 

  • This means that even without organizing trips you may travel more frequently, for less cost and still be home the same day!

11

How extensive is your research? What has been accomplished?
  • The idea to use private aircraft as an alternative to commercial airlines was the direct result of the tragedy of “911” and the subsequent deterioration of the airline industry that continues to present day. The idea of the using general aviation to solve some regional travel problems was first presented in 2003 by Mark Pembrooke who was enrolled in an MBA program at the time.

  • Major revisions to the initial business plan have been developed over the years and the Wine with Wings concept began to form when Pete Livengood and Mark formed a partnership in 2007. Since then, numerous trips to Eastern Washington, aircraft demonstrations and market research have resulted in the program you are looking at today.

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12

What is your “First 5 Year” strategy?
  • Phase 1 – Acquire the first 2-3 aircraft and begin organizing trips to drive sales for shared owners.

  • Phase 2 – Expand into other known regions that critically need regional travel solutions with at least one aircraft in each location.

  • Phase – 3 include amphibious aircraft for Eastern Washington and Oregon lakes, faster aircraft for longer travel and helicopters for localized travel within regions.

  • Phase - 4 looks to export the model to other regions with similar travel needs.

13

What is the market potential for this program?
  • We have identified 12+ markets that need our regional travel solution, many of which, like Seattle, that can operate multiple aircraft. Aircraft operating daily in Washington, Oregon, Idaho and lower British Columbia with long range capabilities can reach over 1,200 wineries, 700 golf resorts, 60 casinos, 70 ski resorts and 120 universities.

  • This program may have value in other markets such as California where there are almost 4,000 wineries! We also believe that where ever there are attractions such as Arizona spring training or Las Vegas, we believe there are opportunities in other areas as well.

14

What are the market threats to this program?
  • The barrier to entry is steep, so there are not many entities that could compete with us. If they did their price points would be much higher and would probably not share tip margins with trip organizers, so a commercial or regional airline is probably not a threat.

  • Like the early days of The Home Depot, we learned that competitors could only chase us and not emulate us because they didn’t share our culture or vision. The only “threats” were internal trying to out-perform our other stores.

  • Business environments are in continuous cycle such as the emergence from the Great Recession in 2008. Even during the recession, wine sales stayed strong compared to other foods, commodities and travel purchases. The threat of another such recession within the first 5 years is low, and the threat of diminished travel to wine country is even lower due to the popularity of wine and the need for regional travel. 

15

 

What is the difference between a charter and an optimized trip/tour?
  • The optimized trip or tour is a regular route such as Seattle to Walla Walla in our own aircraft. Each trip has been optimized to provide the maximum amount of service in terms of both people and cargo and rarely, if ever, has an empty leg to fill; or no one or no cargo to carry in one direction. It is also the most routine of trips referred to in aviation circles, as a “milk-run”.

  • A charter is the custom rental of the whole aircraft for a minimum of three hours and charge in half-hourly increments for longer flight times. The airplane and crew will stand by one hour waiting for guests to arrive and after that charge $100 per hour for wait time. Charters almost always empty legs since many charters are overnight, necessitating a guest drop-off and return a day or more later fort the return flight.

  •  The initial operations will ALL be charters since we are leasing someone else’s new Grand Caravan EX in August and will not be able to optimize operations and trips until we provide our own aircraft. Even to Walla Walla in August, for example, our initial trips will take people from Seattle, drop them off and pick them up the next day. We will also be flying under the terms of their operations requirements and will not be able to optimize such the number of guest we can take and as much wine to bring back, as with our own aircraft. The “empty legs” require that the rented aircraft carry much more fuel that our optimized runs so the “8-10 people and up to 4 cases of wine” in our optimized trips are reduced to  “7 to 9 people and up to two cases of wine “ in the chartered aircraft.

16

 

What is your "Exit Strategy"?
  • Unlike typical investments that begin with “Angels” and evolve into venture capital rounds and eventual IPO’s, ours is an investment with long-term benefits to the shared owners that use the aircraft to increase core businesses and events. That being said, there is always an exit strategy for shared owners who want to sell their shares and can basically sell their shares to the MP’s/other owners at any time (discounted for expedience), or to outside interests at a higher market-price.

  • Typical venture capital rounds and IPO’s allow previous investors exit points in later rounds. While conceivable that a large organization may want to “buy us out” after years of success, the continued needs for the shared owners who use the fleet of aircraft to drive their core business and events would need to be protected first, and then a supermajority of the shared owners would need to authorize any such sale.