Another way to unload your fractional
By Matt Thurber - June 1, 2008
When the time comes to sell your timeshare in a luxury resort, you naturally consult the property’s operator to see what kind of deal it can offer. Chances are, however, that you also keep your options open in case someone wants to buy your share directly, which would save you any fees the resort might charge for the transaction. Selling an aircraft share is no different; while the fractional manager would obviously prefer that you pay its remarketing fee and accept whatever price it offers, you may have more attractive options.
Many fractional share owners don’t understand that they have alternatives when they need to sell a share before the contract is over or when their contract is complete. “Their fear is that they can’t [sell their shares privately],” said Dan Dugger, founder of fractional trading company Fractrade.
In fact, share owners are legally allowed to sell to anyone, he explained. However, fractional providers do try to limit that right in their contracts.
Dugger, a former southeast sales vice president for NetJets, estimates that about 25 percent of fractional share transactions involve used shares. He said he has sold shares managed by NetJets, CitationShares and Flight Options, but because fractional companies have carefully controlled the process, a robust secondary market hasn’t developed. Dugger claims he can save fractional owners substantial sums by charging half the providers’ contracted remarketing fee for the transaction.
Other independent consultants can help you with share sales to third parties, but the ones contacted for this article report that few jet shares are sold outside of the fractionals’ systems. “It’s turned out to be a smaller part of our business,” said Kevin O’Leary, president of Jet Advisors in Broomfield, Colo.
Fractional companies are reluctant to allow sales to third parties, according to O’Leary. “They don’t necessarily want a free marketplace where you can get what you can [for the share],” he said, noting that if a shareowner is leaving the program and will no longer be a customer, the provider has no incentive to try to maximize the share sale price. When a fractional provider buys back a share, he explained, the company resets the management fee to the current level instead of reselling the share as is and allowing the new owner to continue to pay at the original shareowner’s fee level. “If I sell the share, I can sell it within the framework of the existing contract.”
If the secondary sale is presented to the fractional company correctly, some program managers will accept third-party involvement, said Daniel Herr, a Murray Hill, N.J. attorney who specializes in the fractional jet market. “It depends on the program,” he noted, adding that while some fractional companies try to restrict secondary sales in their contract language, most recognize that gaining a new customer that way is better than no customer at all.
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