Fractional Aircraft Ownership
What Is Fractional Aircraft Ownership?
With fractional ownership, you purchase a share of a specific aircraft type, which provides you with an annual amount of allotted flight hours. Typically, fractional programs require a minimum share size of 50 hours of flight time per year to acquire a share. Fractional shares have various benefits like guaranteed availability, upgrade/downgrade flexibility, and no maintenance or staffing risks. However, there are nuances to every fractional program that need to be understood before you commit.
Key Considerations for Fractional Ownership
Any client considering fractional jet ownership should ask themselves a few questions before making a decision:
- How many hours per year do I fly?
- How frequently do my travel needs change?
- How long are my trips, usually?
- Do I predominately fly for personal or business reasons?
- How many people do I typically travel with?
- What is my budget?
The Cost of Fractional Ownership
There are three basic costs associated with fractional aircraft ownership:
The initial cost to purchase a share. This varies depending on the aircraft type and size of the share.
These fees cover your ownership’s portion of the fixed costs, including maintenance, pilot’s salary, crew salaries, insurance, hangar fees and other administrative costs.
This fee covers your hourly operational costs for each hour flown.
Fractional Share Options
There are limited options when purchasing a fractional share. Understanding the pros and cons of each model and how it fits into your travel needs is an essential part of any fractional program analysis.
The Traditional Hours-Per-Year Model
The hours-per-year model is based on annual flight hours per contract, per year. These shares typically total 800 occupied hours per year sold for each aircraft.
The Newer Days-Per-Year Model
The newer days-per-year model is based on annual days of utilization. This enables owners to fly as many hours as they need per day with the only limitation being standard crew duty times.
The Path to Fractional Aircraft Ownership
There are several key considerations that factor into fractional jet ownership. We assist clients through the entire fractional share purchase or lease process, starting with an initial evaluation and review of the available options. We represent our clients with the selected fractional provider during the analysis, negotiations, final contracting with the selected fractional provider, and delivery of the share.
Clients considering fractional aircraft ownership often have different expectations and varying needs. Our team assists clients in comparing options, starting with a technical and financial analysis to ensure that the right aircraft and aviation utilization models are considered.
Once the client has selected an aircraft type and assessments are complete, we assist them with understanding the differences between the various proposals to determine which will most effectively meet their defined needs and requirements.
Once the client has selected a provider, VanAllen will provide ongoing representation during the review, including the negotiation of terms, final contracting and closing on the share.
While the billing process for fractional providers is well-defined, with fixed monthly management fees, along with invoices for variable costs based on hours flown during the prior month, we often provide routine statement monitoring and review on an as-requested basis.
FAQs
-
What is fractional aircraft ownership?
With fractional aircraft ownership, you purchase a share of a specific aircraft type to be utilized for a defined number of annual allotted flight hours.
-
Is fractional jet ownership the same thing as a timeshare?
No. Fractional jet ownership does not meet the provisions outlined in FAR Part 91.501(c)(1). Instead, fractional jet ownership falls under FAR 91 Sub Part K.
-
What are the benefits of fractional aircraft ownership?
Fractional owners are not responsible for employing pilots, cabin crew and flight operations coordinators or administering maintenance. The program provider also handles the day-to-day responsibility of paying airport and hangar fees and insurance, although fractional owners contribute an agreed-to monthly and hourly fees toward these costs. Annual increases are based on Consumer Price Index increases, thereby eliminating any large expenses that a dedicated aircraft owner might face. Fractional owners also do not have to pay a “deadhead cost” — that is, any costs incurred from positioning the aircraft to their departure point.
As an added benefit, some fractional plane ownership programs offer owners the option to upgrade or downgrade the size of the aircraft depending on their trip requirements.
-
What are the key considerations for fractional jet ownership?
VanAllen recommends that prospective fractional jet ownership clients consider the following before making a decision:
- The number of hours they fly per year
- Whether a specific aircraft type meets the majority of their travel requirements
- How frequently their travel needs change
- The length of their trips
- Whether they fly for business or personal reasons
- How many people they typical travel with
- What their budget is
-
What types of fractional aircraft ownership shares are available?
There are two options when purchasing fractional shares: an hours-per-year model and a days-per-year model.
-
What is the length of commitment for fractional aircraft ownership?
Most fractional share contracts have a minimum ownership period, in which the first purchase of a share is three to five years.
-
What is the minimum fractional jet ownership share size?
Most fractional jet ownership programs require a minimum share size of 50 hours of flight time per year.
-
What is the maximum fractional jet ownership share size?
The maximum fractional jet ownership share size is 800 hours of flight time per year, which is roughly equivalent to ownership of the entire aircraft.
-
Am I able to fly over my allotted hours for the year?
Maybe. Although it is possible to exceed your yearly allocation by borrowing against the next year’s allotted hours, each fractional plane ownership company has different restrictions concerning this practice.
-
What are the costs associated with fractional plane ownership?
Fractional jet ownership costs include the initial acquisition cost, monthly management fees and an hourly operating fee.
-
If I purchase a share of a specific aircraft model, does that mean I’ll only fly on that specific model?
Not necessarily. Although fractional aircraft ownership companies will always try to have you fly on the specific aircraft model you own, on some occasions it may be necessary to utilize a different model, one that either meets or exceeds the aircraft model type you currently own. If the program provider utilizes a larger aircraft due to fleet availability or scheduling requirements, you will not be billed any additional costs for the upgraded aircraft.
-
Will I have the same crew for each flight?
No, it is unlikely that you will have the same crew for each flight. Most providers rotate their large fleet of aircraft and aircraft crews to meet the travel requirements of each fractional owner.
-
What documents do I need to sign when I purchase a fractional jet ownership share?
There is a significant amount of paperwork involved when purchasing a fractional jet ownership share but the primary documents you’ll sign are a purchase agreement, a management agreement, an ownership agreement and a dry lease exchange agreement.
-
Do fractional aircraft ownership shares have residual resale value?
Yes, however, fractional shares tend to depreciate more due to their high level of annual utilization, resulting in lower residual values.
-
If I purchase a fractional aircraft ownership share, am I considered an aircraft owner for tax purposes?
Yes, as a fractional owner, you are considered an aircraft owner for tax purposes. VanAllen recommends that all prospective clients consult an aviation tax advisor and tax attorney prior to purchase.
-
Will my fractional jet ownership share be subject to state sales tax and state use tax?
Potentially. Again, VanAllen encourages all prospective clients to seek tax counsel for more information.
-
Will my direct operating cost per hour increase as my hours purchased increases?
No, your direct operating cost per hour will remain the same even if you increase your size of share purchased.
-
Will my management fee increase as my hours purchased increases?
Yes, your management fee will increase if you increase your size of share purchased.
For more information on these services, please contact a member of the VanAllen team.
Clients Served
Projects Completed
Lee and Tom are the dynamic duo you’ve been looking for. Their collective skills provide exacting coverage on every detail needed when considering an airplane purchase or refurbishment.
I worked with them on a lengthy process, from identification of plane, purchase, full refurbishment, staff assignments thru delivery. I was never once disappointed. Perfect personalities for even the pickiest of clients!