Net/Net
Net/Net
Also known as a wholesale quote, it describes the format that applies to wholesale rates. It does not include taxes or other end-user assessed fees. Net can refer to a number of things in the financial world, but when talking about private jet charters, Net can often refer to the total cost of the goods. Wholesale rates are most frequently given to preferred customers. In order to determine the wholesale rate for a product, you must take the Net Worth and compare it to the Net Use. The Net worth would be the total worth of the good, such as a charter jet. Its total worth would be determined by how much the charter jet was used. This is where Net Use comes into play. The Net use of the jet is not only how much the jet has been flown, but how much damage and wear and tear is has incurred.
When comparing the Net Use and Net worth, a wholesaler must also take into account how much the jet will be worth on the wholesale market. This is determined by comparing it to other aircraft that are similar and have similar use.
Net/Net not only describes a format, but it also gives the charter jet industry a foundation to work with then determining their prices for customers. A company not looking to sell its aircraft and just rent them out for charters might what to know what the wholesale rate is for a particular flight. They would determine this rate by comparing the net travel of that route with the net cost to fly that route, as well as with the net income the charter jet company would gain by flying that route.
However, most often Net/Net will refer to the resale of a charter jet. In this case, a wholesale rate would be given to the potential buyer, not including taxes or end-of-user fees. Since the aircraft have been used and is now up for resale, it is the interest of the seller to make sure a deal is made. This is why wholesale items tend to be cheaper than even used retail items. Charter jet customers then think that a resold jet is not as dependable as a new one, and this lowers the price. If the jet cannot be sold in the retail market, it would be sent to a wholesaler, where a wholesale quote would be created and given to buyers. Another factor lowering the net worth of a charter jet, causing it to be wholesaled, is the constantly increasing production of new, better technologies. It some cases, it is cheaper to go out and buy a bran new charter jet than it is to rebuilt an old one, so wholesalers will lower the net price of the charter jet and try to make a sale. This does not mean the jet is not good. It just means that the jet is not worth as much as a bran new one, which anyone who’s bought a car can surly understand.
