Jet Advisors Blog

Why Buy or Lease a Fractional Share?

Posted on Thu, Sep 11,2014

Comfortable flyingIf you fly privately there are many options to choose from, ranging from ones with little commitment (meaning relatively low cost and no long term contract) to ones with greater commitment (meaning higher cost and long term contract or ownership).

Charter is great for the occasional flyer but are you paying only for the time you are on the aircraft. In most cases the answer is no unless you get on the aircraft at its home base to fly to your destination and return in a relatively short time, usually 24 hours. If your trip starts anyplace other than the aircraft home base your charge will include positioning the aircraft to pick you up, flying you to your destination and then repositioning the aircraft back to its base. Another thing about charter is the supply of aircraft is mostly random, you make your request by asking for a class of aircraft (light, medium, super medium or large) not by the type of aircraft (such as a Cessna Citation Excel). Snacks stocked on the aircraft are normally included but not catering if you want more or the length of trip dictates it.

If you are a frequent flyer (200 plus hours a year) then you might consider the purchase of a whole aircraft. With whole aircraft operations, the more you fly reduces your per flight hour cost. Whole aircraft ownership guarantees consistency of the aircraft you fly but will it be right for each trip you want to take (too much or too little but it is all you have). Also if you are flying your own aircraft or it is parked in the hanger you incur costs like insurance, maintenance (maintenance is required if you fly it or not), hanger fees, crew salaries, crew training, depreciation, stocking and catering.  While charter has no commitment ownership does and depending on the aircraft market it may be hard to dispose of your aircraft (at least for the price you want).

Fractional aircraft ownership programs fall somewhere in between charter and whole aircraft ownership. There are several programs to choose from and range from turbo prop light models to large long range aircraft. However, today there are only two major fractional aircraft providers. While it is no secret that fractional programs are expensive (if you fly out and back trips on charter, fractional programs cannot match the charter cost) they do offer many attributes that program participates enjoy over charter and whole aircraft ownership.  The cost might be high but they are fixed and thus predictable. The larger fractional programs offer the ability to interchange to smaller or larger aircraft (normally on an as available basis) to match the seating capacity and range that is best for your trip but are priced at a premium. Catering that is reasonable for length of trip and passenger load is included as well as aircraft stocking. Maintenance, crew training, crew salaries, hanger fees are covered by your monthly or hourly fees. Should you elect to leave the fractional program after a contractual minimum term of ownership the fractional program guarantees to repurchase your fractional share in as little as 90 days. One other attribute most fractional users appreciate is the consistency in the type aircraft supplied and services provided (you know exactly where that bag of salted nuts or candy bars are).

Top Issues When Buying Fractional

Topics: fractional, fractional ownership, fractional share, fractional program, fractional jet program, fractional co-owner, fractional light jets, fractional consulting, fractional travel

Fractional Programs: Do You Really Own a Piece of the Aircraft?

Posted on Wed, Aug 20,2014

describe the imageWhen the fractional ownership of aircraft concept was introduced over 30 years ago no one knew what it was or how it worked. I think the hardest concept of fractional aircraft ownership to grasp was the outright ownership or leasehold of a portion of a very expensive piece of equipment (whole values range from $5 Million for a used small cabin aircraft to $60 Million plus for a large cabin new aircraft). I know when I was new in the fractional aircraft business coming from an original equipment manufacturer it was a concept that took me awhile to master and then explain to prospects. Some describe fractional aircraft ownership as be similar to vacation timeshares and while there are similarities the two concepts/businesses are worlds apart.

Vacation timeshares do provide you with ownership of a tangible asset and most give you title to a specific unit that is recorded in a local government office (such as the County Recorder or Assessor) along with an agreement to share the cost of maintenance and upkeep of the property. The asset is divided normally by a unit of time such as a week so you have rights to the (your) property once a year for that specific week. Also your period of ownership of the property is determined by you and you can dispose of it to anyone you desire and some timeshare operators/managers provide the option to sell your property back to them.

However, with fractional aircraft ownership or leasehold you acquire an undivided percentage interest in a specific aircraft (not a wing or an engine) and the size of the interest determines how much use of the aircraft (flight hours) you have during a 12 month period. If you purchase an interest this is documented by a Federal Aviation Administration (FAA) bill of sale and a FAA application for registration, both of which are filed with the FAA in Oklahoma City and specify that you own an undivided interest in a specific whole aircraft. If you have a leasehold interest in an aircraft, this is evidenced by the filing of the lease with the local FAA Flight Standards District Office (FSDO) and is supposed to be carried on the aircraft that it is associated with during all flights. Unlike vacation timeshares, your term of ownership of the interest in the aircraft or your leasehold of an aircraft is for a preset period of time, normally five (5) years, and you are limited to who you can sell your aircraft share to and limited to who you can assign your leasehold to by the fractional aircraft program providers terms and conditions. Even though you own your undivided interest in the aircraft, if you sell it to a third party or sell it back to the fractional aircraft program manager there are fees and potential penalties.

So, yes you do own a piece of an aircraft (not just a wing or an engine) but you are limited to what you can do with your share when it comes time to dispose of it.

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Topics: fractional, fractional ownership, private jet, fractional share, private jets, fractional program, fractional jet program, fractional co-owner, fractional light jets, fractional consulting, fractional travel

What Size Share is Right for You?

Posted on Mon, Jun 09,2014

Aircraft on RunwayIf you have ever flown on a private aircraft for business, fun, with friends or family you know how hassle free and downright great it can be. No metal detectors, TSA, taking your shoes off, long lines, delayed or canceled flights and you determine what airports to start and end your trip and what time you depart. There are so many great aspects of private aircraft travel (they are hard to list them all), no wonder it can be so addictive.

One way to get all the benefits of private aircraft travel without the inherent hassles of full aircraft ownership is through a fractional aircraft program. Fractional aircraft programs, just as the name suggests, provide the benefits of aircraft use without buying a whole aircraft, employing a crew and maintenance personnel, renting a hanger, etc. Most fractional aircraft programs offer shares as small as a 6.25% undivided interest of a specific aircraft in their fleet and this usually equates to 50 occupied flight hours (before a deduction for taxi time) per year and since the agreements with the provider normally have 5-year terms, 250 occupied flight hours over the term. If you need or feel you need more flight hours you can add on 3.125% incremental shares (25 flight hours per year) with no cap on how many shares you can acquire other than your bank account limits.

Now the big question is what size share do you buy or lease? Several of us at Jet Advisors® have seen on numerous occasions a new entrant into the fractional ownership program field buy or lease more than they really need. This usually results from underestimating how flying privately is so much more efficient than traveling by commercial means and unfortunately fractional sales people are not always motivated to make sure the share size fits the new share owner’s needs. Add to this the structure of fractional programs that lock you in for a certain minimum period that prevents you from reducing your share without significant penalties. The economics of fractional programs get skewed quickly in a very negative way if you leave unused (un-flown) hours in your bank at the end of each year.

What can you do to prevent acquiring a larger share than you need? My advice is start with acquiring the smallest share available in the aircraft type you desire or buy a jet card, which most fractional programs provide. Since, as I stated above, you can add onto your share in 25 hour per year increments as your usage grows or you determine your exact need, start off small. Going into a larger share than needed will cost you money, and not just a little money. Trying a 25 hour card has per hour costs higher than acquiring a share but it will give you a good idea on how efficient private aircraft travel is and how many hours you need to cover your annual travel without a long term commitment.

Topics: fractional, fractional ownership, fractional share, fractional program, fractional jet program, fractional co-owner, fractional light jets, fractional consulting, fractional travel

Private Jet Travel, Where do you Fly?

Posted on Thu, Feb 27,2014

Plane preparing for passengersOf the many benefits of private jet travel (setting your own schedule, choosing your fellow passengers, traveling with pets, selecting your desired departure location and arrival location, amongst others) one of the most critical ones to consider is your departure and/or arrival airport.

There are usually many options when it comes to airport selection, unless you are in a remote area of the United States or in areas that prevent exclude airport construction such as mountainous areas. While you may be traveling to or from an area with many options are they really viable options (meaning, are they safe and reasonable for your planned trip)?

Determining if an airport is safe may seem to be easily determined but there are many factors to consider. These factors include but are not limited to: runway length, runway width, the weight bearing capacity of the runway, runway condition (is it paved, gravel, dirt or grass and well maintained), altitude of the airport (the higher the altitude the greater the impact on the aircraft’s performance), obstructions around or close to the airport, weather conditions (unpredictable winds, down drafts, snow, ice and their impact on visibility), is it controlled or not (meaning are there onsite personnel to advise field condition, winds and to perform air traffic control) and are there any airport facilities such as a fixed base operator (FBO) for fuel and other services. In addition to the condition and location of the airport you have to consider the operational performance (or lack thereof) of your aircraft or your selected aircraft and the capabilities of the aircraft crew.

One example of a potentially challenging airport is the recent accident at Aspen/Pitkin County Airport in Colorado. This airport handles hundreds if not thousands of flights safely on an annual basis but presents a challenge for those flying into and out of there. The airport is located at a high altitude, has numerous obstructions, requires a steep approach and steep departure and crews are required to be certified for its use prior to flying there. There are others such as Yeager Airport in Charleston West Virginia, while it is controlled have large well maintained runways and good FBOs it was built on a mountain top with a cliff at either end of the runway, a small mistake could be catastrophic.

Even airports that meet all of the safety requirements might not be a good choice for your travel plans. If you use one of the large international airports, you can get stuck in the traffic when departing or arriving and they normally charge much higher fees for usage. Also some of the large international airports are not structured to accommodate the private flyer, so once on the ground or positioning for takeoff, you may have to taxi long distances to or from the FBO.

So when choosing an airport to use, safety should be the number one consideration, but you fly privately for convenience and efficiency and these have to also be factored into your decision process.

Topics: fractional, fractional ownership, fractional share, fractional program, fractional jet program, fractional light jets, fractional consulting, fractional travel, airports