Fractional ownership became popular in the 1990s and is now a staple on the menu of private air travel options. With fractional, you buy a partial interest in an aircraft that is operated by an aviation company. Along with other owners, you have the right to use any comparable aircraft in the company’s fleet, upon request, for a predetermined number of hours each year. (A typical deal might include 100 hours of flight time per year for every eighth of a share you buy.) Its operator manages the aircraft and the rest of the fleet, providing pilots, maintenance, hangar, insurance, catering and other services. You simply call a few hours in advance to schedule a flight, and the company will deliver a plane to where you want, when you want, to take you where you want to go.
The cost of the split flight includes a capital investment to buy the participation of the aircraft; ongoing management fees that cover the costs of maintaining, insurance, and operating the program; and a charge for each hour of flight. These costs vary depending on the type of aircraft and the size of your participation.
You’ll also pay fuel surcharges, which reflect price increases above a base fuel rate specified in your contract. Because most providers use unrealistically low base fares, the recent increase in fuel costs has increased these surcharges significantly, so much so that they now substantially affect the cost of split flights.
Fractional contracts usually last five years. However, if you want to get out of the deal after the minimum term (usually two years), your supplier is obligated to buy back your share at the fair market value of your plane at that time, less a remarketing fee (usually 5 to 12 percent). hundred) . Therefore, in addition to the costs you incur while owning the stock, you bear the risk of changes in the market value of your aircraft.
Thus, the “all-in” cost of your investment includes not only the management fees, hourly rates, and fuel surcharges you pay as you go, but also the difference between what you pay for the stock when you buy it and what you get back when you buy it. sell it back to your supplier.
The fleets of the major US fractional programs (NetJets, Flexjet, CitationShares and Flight Options) include aircraft of various sizes and capacities. If an aircraft other than the type you own will best suit your needs for a particular trip, you can upgrade or demote to the right size jet for that flight and your cost will be adjusted accordingly.
Is Fractional the Best Option for You? The general rule of thumb is that if you fly fewer than 50 hours a year, jet cards or charter flights may be better options; And if you fly more than 400 hours a year, buying an entire plane may be the way to go. If you’re in the middle, fraction may be your best bet, but the number of hours you fly is just the starting point of the analysis. From there, you need to take a hard look at your needs, travel patterns, and budget. Here are a few more factors to consider when doing so:
Your base of operations and destinations. If you’re not near a hub airport and not well served by a charter operator, fractional may be a good option. Similarly, if you’re traveling to out-of-the-way places that aren’t well-served by major airlines or charter companies, splitting up can be attractive. However, if you fly outside the main service areas of fractional carriers, you may incur additional charges.
when you fly If you fly primarily on busy days or “peak” travel days, such as around major holidays and events like the Super Bowl, you may not be guaranteed a flight or may often find yourself on a flight charter.
Duration of your flights. If you fly a lot of short hops, say 30 minutes each, you’ll lose about half your flight time because you’re charged a minimum of one hour for each flight.
Your passengers. Make sure the plane you choose will accommodate your passenger and baggage load on most trips.
Your budget. Carefully calculate the full cost of your investment, including anticipated fuel surcharges, expense increases, and a possible loss in stock value when you sell it to your supplier.
Fiscal depreciation. Depreciation benefits, if available to you, can significantly reduce the after-tax cost of your investment.
If you determine that fractionation is your best option, search for the provider that best suits your needs. Despite what your seller tells you, there is room for negotiation, but be sure to negotiate concessions that add value for you.
Once you reach an agreement, read the contracts carefully. Although they are made to look like standard boilerplate and are packed into relatively few pages, don’t be fooled. These documents, not the fancy brochures, govern your rights and obligations in what may well be a multi-million dollar investment. They cover when and where you can fly; responsibilities assumed by your provider; allocation of costs and other liabilities; and when and on what basis the supplier will repurchase its part.
Your goal should be to negotiate an investment that offers the right amount of flight time in the most appropriate and safest aircraft, at the best possible price. Remember, in the private air travel business, one mistake can cost you millions of thousands, if not millions, of dollars. On the other hand, however, the convenience, flexibility, and reliability of a well-founded fractional investment will do nothing less than dramatically improve your life.