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commission on flights generated. Mr. Rabinowitz developed a
marketing campaign including brochures and flyers to solicit
charter business. Petitioners also advertised in The Air Charter
Guide, a trade publication.
Setting the Charter Price
Mr. Rabinowitz carefully assessed the aircraft charter
market to determine the price petitioners should charge for
third-party charters of the Falcon. He ascertained what other
owners of similar jets charged and charged a similar rate, which
was between $1,950 and $2,250 per hour. Mr. Rabinowitz also
ascertained rates other charter businesses charged for a large
number of hours per year and decided to charge CFI a type of bulk
discount of $1,800 per hour. Prices in the industry stayed
fairly stagnant during the relevant years. Petitioners therefore
did not change the price they charged CFI during this period.
Employees of the Jet Charter Activity
Petitioners hired several full-time employees for BHJ. The
employees included a chief pilot, a co-captain, and an FAA
certified aircraft and power mechanic. Also, two bookkeepers
together worked approximately full time for BHJ from 1989, when
petitioners acquired the Falcon. Mr. Rabinowitz himself spent
approximately 30 hours per week on his BHJ activities. Mr.
Rabinowitz assisted in preparing books and records, approving
flight logs and generating invoices, managing the staff, payroll
and compensation policies, engaging in marketing activities,
serving as liaison with the FAA, and generally managing the
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