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

Recognizing when a Deal is Too Good to be True

Posted on Fri, Apr 11,2014

Aircraft Discussion The old saying 'if it sounds too good to be true, it probably is' holds true in most instances. It can be especially costly to you in the field of aviation if you fly charter, use a fractional service or have a whole aircraft or share a whole aircraft.

Aircraft are rather unique vehicles for travel in that most others wear out and get retired, but with an aircraft, as long as they are inspected and maintained to their manufacturer’s and the governmental agency that oversees them requirements they don’t wear out, to a point. This is one area to be concerned with if you are looking to buy a whole aircraft or share a whole aircraft with partners. Older aircraft have lower acquisition costs as compared to newer like aircraft but as aircraft age the maintenance and inspections become progressively more intensive. So you pay less upfront but the costs to keep the aircraft airworthy are higher, much higher than a newer aircraft. Also with whole aircraft ownership your travel patterns can cost you more. If you fly somewhere and stay, do you ferry the aircraft back empty to its base or do you keep it with you. If you keep it with you what do you do with your crew? Do you pay for them to fly home or do you pay their hotel, meal and rental car costs while they stay. Keeping the aircraft with you may not be an option if you share the ownership with others.

If you share the aircraft with others, who gets first priority for its use? If you are second inline do you not travel or do you have to find alternative means at your expense? Keeping in mind even when you are not using your aircraft you still incur expenses for its upkeep, hangar, crew, insurance, etc. If you have lease financed the aircraft you own or share, what are the aircraft condition requirements (cosmetically and mechanically) at end of the lease term? These can be substantial.

With fractional programs and charter operators what is your real cost? Like todays pricing for airline travel there can be many “hidden” costs. When a fractional company provides a proposal to enter their program do they include the depreciation on your aircraft asset (50% or more over a five year term), fuel adjustment (usually over a thousand dollars per hour) to your advertised hourly rate, flight time minimums, or taxes in the proposal? With charter companies you can ask the same questions, is the quote all inclusive or are there hidden charges like crew overnight fees, hangar fees if the weather is bad at your destination and catering charges. With charter or fractional programs, what if you make last minute changes to your itinerary or cancel the flight? What if the air transportation provider is late or doesn’t show up at all, what is your recourse?

As stated above, if the deal being offered appears to be great (too good to be true) compared to your other options, you need to find out why.

Topics: jet card, charter, fractional, fractional ownership, charter flights, fractional share, private jets, jet lease, fractional program, fractional jet program, fractional co-owner, jet co-owner, private jet co-owner, fractional light jets, fractional consulting

Quelling Nervous Flying

Posted on Thu, Mar 27,2014

Safe LandingIt matters if you fly commercially, or privately, if you are a nervous, or fearful flyer, to some extent. Most flyers (if you are not a pilot or the pilot for the flight) have some misgivings each time they fly, but some of us just resign ourslves to the fact that you need to fly and have little control over the many factors that could impact the flight.

Some factors that cause concern regardless of flying commercially, or privately, are obvious like the weather, over water flights, mountainous terrain, airports in the mountains and small airports (usually short narrow landing strips). Some are not so obvious but due to past accidents and the subsequent news reports still cause some concern. Some not so obvious concerns include security, aircraft maintenance condition, pilot complacency (dependence on automation versus pilot skills), pilot training and experience and pilot fatigue.

Outside influences such as hijacking, terrorist activities and the growing incidents of lasers pointed at cockpits are also thought about prior to flight by some. In private aviation hijacking and terrorist activities are unlikely but the threat from laser light (accidental or on purpose) is growing in the US and in Europe. After 9/11 and other previous horrible events (Lockerbie Scotland) commercial travelers were on edge and the recent “disappearance” of the Malaysian airliner has done little to quell those fears.

So how do you overcome your fears and what can you do? If you fly commercially there is little you can do to change a flight plan, the point of origin of the flight and the destination, checking the experience and training of the crews or the quality of the aircraft maintenance. These are all controlled by the airline. US airlines have a very enviable safety history; however you are still at their mercy when it comes to security check in, crowded aircraft and the unavoidable delays and cancellations. If you fly privately, either on your own aircraft, through a fractional program or by charter, it is a different story.

If you own or co-own the aircraft then you have firsthand knowledge of the crews experience and training and the maintenance status of the aircraft.  In addition, you pick departure and arrival location, times for the flight, who you fly with and most importantly you have the ability to terminate or not start a flight if there are any factors that bother you. If you participate in a fractional program you have the comfort factor (if your provider is one of the larger ones) that pilots are highly skilled and routinely trained, the aircraft is maintained as it should be (with a large staff overseeing such maintenance) and you have the ability to cancel or terminate the flight if you have a weather or other concern, however, you might get charged for the cancelled flight. With most charter operators they can provide you with their past histories and audit reports from independent aviation professionals and, as with fractional programs, you have the ability to cancel or delay flights for any reason but once again you may be charged for any itinerary changes or cancelations.

So what should you do? Do your homework on the method of air transportation you use and if using commercial stay vigilant. If you have your own aircraft make sure your crew knows your preferences and if you fly fractional or charter these companies usually build a profile on your likes and dislikes, make sure the profile is accurate.

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Topics: jet card, charter, fractional, fractional ownership, private jets, jet lease, fractional program, fractional jet program, fractional co-owner, jet co-owner, private jet co-owner, fractional light jets, fractional consulting, airports, Nervous Flying, Malaysia

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