The difference between charter and fractional cards is that fractional program cards are run by a (usually large) fractional share provider and operator, and charter cards programs are run by independent charter providers. In addition to the financial and flexibility differences between fractional and charter jet cards and charter, there are also legal aspects to consider.
According to Alan M. Burnett of CenterPoint Aviation Law PLLC, the legal aspects of fractional and charter jet cards are fairly straightforward. They include:
Payment Amount and Terms
When purchasing a fractional jet card or charter jet card, you are pre-paying for a given amount of flight hours. Since you will be entrusting the fractional or charter card company with your money up front, make sure that your contract spells out how long you have to use the flight time for which you've paid.
"The key difference [between fractional and charter jet card agreements, and jet chartering agreements] is a provision that deals with the treatment of the amount paid up front for the jet card, and that provision usually includes a window in which you must use the flight hours purchased," says Burnett. "Unused hours can range from 'use it or lose it' programs to a full refund minus a transaction charge."
In addition, note that fractional and charter jet cards are generally limited to a specific type of aircraft, although it may be possible to switch to a different kind of aircraft if one is available by trading a disproportionate ratio of hours (for example, for a larger jet you may trade 1.5 of your available hours for each hour flown). Also, jet cards are often only available for specific "primary service areas," or there is an additional charge to fly outside of the "primary service areas." Before signing the contract, be sure the locations spelled out in the contract match with the locations to which you want to travel.
As with any air travel, things can go wrong when flying with a jet card. The plane or pilot may run late or not show up at all, there could be maintenance issues, and of course the trip may be canceled due to poor weather. Given that, as a fractional or charter jet card flier you are pre-paying for your flight hours, your contract should specify how much credit you are given due to delays or missed flights that are caused by problems on the fractional or charter company's end and how much you are debited for problems that are caused on your end – for example, if you need to re-schedule or cancel your flight inside of the required notice period.
In addition, says Burnett, payment terms should also list what charges are or are not included in the fractional or charter jet card fee – especially fuel surcharges.
The fractional or charter jet company is operating the plane, making it liable for any damage done to customers or customers' property as a result of issues on the company's end. This includes damage done by the aircraft. Companies also ask to be indemnified by the customer for breach of contract or for "intentional" or "grossly negligent" acts that lead to damage to the aircraft. Burnett strongly recommends that customers make sure that the fractional or charter jet operator has sufficient insurance limits and reputable providers. "Some contracts go further to make the customer an additional insured, and some contracts even have a breach of warranty provision and a waiver of subrogation clause," Burnett says.
Standards - yes
Fractional jet programs are audited by ARGUS, IS-BAO (International Standards for Business Aircraft Operators) and others.
As for Burnett, he says he would be concerned about flying with a company that wasn't ARGUS rated.
Since fractional and charter jet card purchasers aren't actually purchasing full or fractional ownership in an aircraft, fractional and charter jet card ownership does not have the same impact on personal or corporate taxes because they are not subject to depreciation and do not show up on a balance sheet. However, jet card owners are still charged 7.5% Federal Excise Tax on the cost of each flight. "The agreement should specify that the operator is obligated to collect the FET and remit it to the IRS, and that any other taxes must be collected and remitted by the operator," says Burnett.
According to Burnett, fractional and charter jet companies may have specific restrictions against the use of alcohol, tobacco, or drugs, or may ban taking pets on your flights.
"For the avoidance of any doubt," he says, "the company should be listed as having 'operational control' for FAA purposes and 'possession, command and control' for IRS purposes. Many times the company's FAA Part 135 Air Carrier Certificate number will be listed."
Finally, note that fractional and charter jet card agreements will often spell out the documentation necessary (passports or other ID) for passengers to board the flight.
Before making a final decision on your private travel options, you should also be aware of the legal aspects of fractional and charter jet cards.