In a guest column for Private Jet Card Comparisons, Shaircraft CEO, James Butler, Esq., reveals how jet card buyers can escrow funds to minimize their financial risk.
"A common aspect of almost any jet card program is that you pay the jet card company up front for essentially all of your flight costs," writes Butler. "In return, you get a 'promise' of certain flight time, services, etc. In some cases, you’ll have one year, two years, or more to use the funds on account, but during that time, the jet card company enjoys use of those funds."
The problem with paying up front? What if the jet card company suffers financial reverses and/or goes out of business? (Think Avantair, FractionAir, etc.) In those cases, Butler warns, "Your funds are gone, never to return or, at best, you’ll see pennies on the dollar.
To mitigate that risk, Butler recommends that his clients' jet card funds be deposited into an escrow account. "In this arrangement, your funds are held by an independent third party, usually a financial institution, and are only paid over to the jet card company when you utilize your jet card, have a balance due for your flight, and approve the withdrawal and payment. The funds in escrow do not become the property of the jet card company until that time and, if the jet card company goes into bankruptcy, your funds do not become part of the bankruptcy estate. You lose nothing."
The bottom line? Jet companies leverage huge marketing budgets to over-simplify the jet card arrangement. They want you to liken the use of a jet card with the ease of calling for an Uber. Butler urges potential buyers to look beyond the fancy brochure. "In reality, you’re paying in advance, perhaps hundreds of thousands of dollars, in exchange for a mere promise of future services," he says. "Protecting those funds through use of an escrow account provides effective added protection. More generally, having an attorney sitting on your side of the table, who knows the industry, the pitfalls, and where there’s room to negotiate, can best protect your interests."
Read "Why Escrow Is An Important Option to Consider When Buying a Jet Card" here.