Frax Is Back!

A decade after some observers declared fractional ownership all but dead, the programs are onboarding new aircraft, rolling out new services, and enhancing ancillary benefits. 

It’s easy to see why cynics and skeptics have doubted fractionals’ staying power and appeal. Several airframers—early and seemingly natural program sponsors—gave up on their fractional offerings: Cessna’s CitationShares/CitationAir, Bombardier’s Flexjet, and Raytheon’s TravelAir. Then there was the seemingly Ponzi-like growth model: during the go-go years of this century’s first decade, buy-in capital from new owners funded the programs’ operations and budgetary excesses. 

Critics have also contended that, as owners pay retail for their piece of an aircraft, the programs bought less-popular models on which they could get bigger discounts to pad their bottom lines, saddling the fleets with unappealing platforms. Haters considered the overnight collapse of residual values wrought by the Great Recession, decimating owners’ investments, the coup de grâce. But by then a turnaround was in the works, and it arguably started at the bottom.

Flight Options, which initially offered shares in refurbished rather than new aircraft, realized that a low-cost offering in the jet ownership space had limited appeal; and in 2007 the company ordered 150 of Embraer’s in-development Phenom 300s, a light jet that appeared ready to dominate the category. Other fractionals began opening their checkbooks, following manufacturers’ commitments to develop next-generation aircraft for an eventual market rebound.

By the time Flight Options got its first Phenom 300 in 2010, Kansas-based Executive AirShare (now called simply “Airshare,” after a recent rebranding) had ordered six, taking its first that same year, while NetJets ordered 125 outfitted with its exclusive Platinum Edition/Signature Series interiors. (Flight Options, by then owned by Directional Aviation Capital, hadn’t gotten exclusive rights to the platform for the fractional market, but it did have a price-matching guarantee and received a substantial discount when NetJets negotiated a lower price in its contract with Embraer.)

A Bombardier Challenger operated by NetJets. (Photo: Barry Ambrose)

NetJets followed up the Phenom buy with orders for multiple Bombardier Global models in 2011; then, the next year, it placed orders and options for 425 Citation Latitudes and Bombardier Challengers valued at some $9.6 billion, said to be the largest order in business aviation history. 

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Such investments and deliveries have brought us to the current seemingly rejuvenated market. Skeptics remain, however, most notably among the asset-light crowd, which continues to present evidence that fractional ownership doesn’t make financial sense, as similar access is available at lower costs. 

The naysayers can also cite data that supports bearish views, such as the continuing decline in the number of fractional owners, which dropped from 4,402 in 2014 to 3,912 in 2018, according to JetNet, though fleet numbers have inched upward since 2016, from 832 to 853 aircraft last year. (Fractional penetration peaked at 5,179 owners and 1,094 aircraft in 2008.) Additionally, dyspeptic observers often discount touches like Flexjet’s exclusive Red Label interiors and NetJets' Signature Series cabins as wasteful frills rather than value-added features.

One might point to the ongoing fleet rejuvenation and program buildouts as countervailing proof of the access model’s soundness, but as fractional programs’ financials are opaque, such assumptions are unsupportable. Even publicly traded Berkshire Hathaway, the parent company of NetJets, bundles the division’s figures in with others, making its financial condition unclear.

These conflicting takes on fractional ownership can leave access shoppers confused. A few things to keep in mind: 

While ownership numbers haven’t gone up, the decline in recent years hasn’t been as dramatic as the explosive growth between 2000 and 2008, when the number of fractional shareholders increased by more than 84 percent; in the decade since then, their ranks have dropped by just 25 percent. 

Safety is the stated primary concern of every bizav access provider, and no provider does a better job of backing that up than the top fractional operators, as their policies, standards, and records show. Among recent news from the two big dogs, NetJets and Flexjet, were enhancements to their flight operational quality-assurance programs, which employ flight data recorders aboard all aircraft to record information for analysis. Flexjet’s Red Label interior program, meanwhile, incorporates dedicated flight crews for each aircraft, which yields safety and operational efficiency dividends.

Customers who want access to the latest aircraft, moreover, may have no choice but a fractional share, as program operators increasingly serve as platform launch customers, taking the first off the assembly lines. 

Whatever the underlying financials, the increased fractional program activity is irrefutable, with scheduled additions of new aircraft types and fleet expansions continuing through at least 2023. That’s the year Flexjet is due to receive the first of the 20 supersonic Aerion AS2 business jets it ordered in 2015. But the AS2s are to be outfitted with an exclusive Flexjet interior. By fractional critics’ standards, perhaps shoppers should wait until a supersonic jet access program that doesn’t waste money on frilly branded cabins comes to market.