““Last year, complaints about airlines increased 22%. There were probably more complaints, but the airlines lost them.” ”
Considering a fractional share? Ask yourself six questions
Largely because of the recession, the past few years have not been kind to the fractional-jet-share business. Many customers have opted for other forms of lift after having been disappointed by the residual valuations they received for shares when their contracts ended. Others have simply decided that this is no time to tie up a large sum in a capital purchase. So they’ve turned to charter or jet cards, instead.
You might want to do the same–but not before you’ve taken a careful look at fractional flying. For some people, it remains the best solution out there.
Given the amount of money involved, you’d be wise to hire a consultant to help you determine whether you’re one of those people. But to decide whether to even bother doing that, ask yourself these questions:
1. Can I afford it? Remember, purchasing a fractional share means buying part of an aircraft, so it should come as no surprise that the price of even the least expensive business-jet shares typically runs well into six figures and that one-eighth and larger shares of many jets cost upwards of $1 million. True, you’ll likely get about half the purchase price back when you resell the share to the provider at the end of your five-year term, but your money will be tied up until then and the exact amount you ultimately recoup will depend on how much the aircraft depreciates.
You’ll also face monthly management fees, which can themselves add up to hundreds of thousands of dollars over the course of a year, depending on the aircraft and share size. In addition, you’ll be responsible for hourly operational expenses and a variety of smaller charges and surcharges. If all this would bust the budget, you’d be better off with a jet card (despite higher costs per flight hour) or with charter.
2. Can I benefit from a tax deduction for depreciation? As a part owner of the aircraft, you may be able to take advantage of substantial depreciation deductions when you unload your share. If you can use those deductions, that fact will likely weigh heavily in favor of fractionals. But if you can’t, this benefit is meaningless.
3. How much do I fly and what do my missions require? You may have read that fractional shares can make sense if you fly more than 50 but less than 300 hours per year. That’s a good rule of thumb, but exceptions apply.
For example, someone who flies 500 hours a year would normally be better suited to full ownership. But what if some of your missions involve short trips with two colleagues while others are transatlantic jaunts with a dozen passengers? In that case, you might be better suited for a fractional share, which would let you pick the appropriate aircraft for each flight. (You’d simply be assessed more or less than an hour of flight time for each hour aloft, depending on whether you’re using a larger or smaller model than the one you partly own.) And what if your company wanted to use two airplanes at the same time? You could do that, too, with a fractional share.
But keep in mind that you’ll pay a price for this flexibility–it’s one of the reasons fractional shares cost as much as they do. If you fly more than 300 hours a year and your needs don’t change much from flight to flight, fractional shares might not be the most cost-effective solution for you.
4. Do I need to fly on short notice? Fractional providers require advance notification–usually eight to 24 hours–to provide you with an airplane. And they demand more notice for flights on days they designate as peak travel times. If you often need to take off on the spur of the moment, you might be wise to opt for full ownership.
5. How much do I value consistency of service? Fractional shares don’t give you quite the consistency you enjoy when you own your own airplane: though your share buys you a fraction of a specific aircraft, you fly on any airplane of its type that happens to be available in the provider’s fleet. Still, you may barely notice that you’re not in “your” airplane, because all aircraft in the fractional fleet are outfitted the same way and the service and safety standards don’t change. Using charter costs less, but the experience is much more likely to differ from operator to operator and even from flight to flight with the same operator.
6. Do I want to avoid ownership responsibilities? If you don’t want to be concerned with overseeing a flight department, buying fuel, hiring pilots or maintaining an aircraft, you can opt for charter, jet cards or a fractional share. But if you want to avoid those responsibilities and enjoy many of the benefits of full ownership, fractional is the only real choice. It gives you a slice of the aircraft but puts everything related to operations in somebody else’s hands. All you have to do, aside from paying for the privilege, is walk up the airstair, take a seat and enjoy the flight.