Private Aviation – Fractional Ownership vs Charter considerations.

In this article, let’s compare what associated costs you should be aware of, if the temptation of part-owning a private jet is being considered.

1. Your commitment – annual usage and overall agreement. Fractional agreements can last years with seldom early termination clauses. Once you are in, you are committed. So, consider the true annual usage of the share you are purchasing, and if all the hours/trips you intend to fly are suitable for that aircraft or fleet. In a simpler analogy, take gym membership, the novelty of membership can wain over time and if you're flying fewer hours than intended in year 3, 4 or 5, it’s worth checking what may happen to these unused hours – namely, are they lost?

2. It’s not just about the hourly rate payable.This is a super important point to make, so triple check what costs are associated to your share.  In the classic sense of fractional ownership, you may be obligated to pay an acquisition price, monthly management charge, fuel surcharges (which can be significant) and airport ancillaries. Let’s not forget that these fees may escalate per year at a rate of the provider’s choosing, and which you may not necessarily have control over.When the eventual time arrives to part with your fractional share, also consider the loss of value of the asset and applicable remarketing fees. As a general note, private aircraft can lose significant value year on year, so the depreciation of the asset should never be overlooked. If you are leasing the aircraft, it may be a clearer representation of the monthly cost of the asset.

3. Can you make a return on your share?If you have hours remaining, can you sell them in the general market? Well, major fractional companies deter you from releasing your hours to other parties for hire and reward. Smaller operations may turn a blind eye, so do check. If you are considering any return of investment, you may want to consider full ownership, under management of a charter operator who will control the position on your behalf.  This may be more warranted for those looking to fly more than 200 hours a year themselves, making up the shortfall with chartering the aircraft out – legally, of course.

4. Your controlling stake – or perhaps, lack thereof.As a part owner, you don’t have overall control on the aircraft, so you may not be at liberty to control who uses the share, and importantly, how much the aircraft is flown. You may want to consider, when at the end of the agreement, the total amount of hours flown on the aircraft vs residual value – the higher the hours on the airframe, the lower the value of the aircraft, something which may not be compensated for if you’re restricted only to 50 hours each year for a 5 year agreement.

So, what can be the upsides to fractional ownership?

Fractional ownership is ideal for the operator because they don’t have to be burdened with the cost of capital to purchase/maintain the asset. Conversely, if you are moving away from full ownership (and don’t seek a return from charter business), your overall capital outlay and management fees will be reduced, and for some private owners who fly less than 400 hours, for example, this can seem attractive.

Operationally though, you are unlikely to have overriding control of the aircraft, when you should be unrestricted in your usage (no blackout days).

Lastly, a fractional scheme when compared to charter can provide safeguards against peak market demand, especially for short-leg or short-notice flights. For instance, if you were to consider a regular trip from London to Paris and needed a larger aircraft typically suited for much longer flight durations, the economics of running this operation may be more advantageous for those paying a nominal hourly rate, even with all the ancillary charges taken into consideration.

In conclusion, we wouldn’t say fractional ownership is bad for everyone, but it can be more expensive if you do not weigh up all the associated costs vs the expected charter prices available on your traditional routings.

If you’re looking at or coming away from fractional ownership, Jet Members can provide you with tailored charter options as a comparison tool. With our programs, we are clear with inclusive pricing, with no fees applicable for association, management or membership.

View Our Membership Options Here