June 2014 Jet Advisors’ Newsletter

June 2014 Jet Advisors’ Newsletter

Buying the Fractional Share that Fits Your Needs

If you have ever flown on a private aircraft for business, fun, with friends or family you know how hassle free and downright great it can be. No metal detectors, TSA, taking your shoes off, long lines, delayed or canceled flights and you determine what airports to start and end your trip and what time you depart. There are so many great aspects of private aircraft travel (they are hard to list them all), no wonder it can be so addictive.

One way to get all the benefits of private aircraft travel without the inherent hassles of full aircraft ownership is through a fractional aircraft program. Fractional aircraft programs, just as the name suggests, provide the benefits of aircraft use without buying a whole aircraft, employing a crew and maintenance personnel, renting a hanger, etc. Most fractional aircraft programs offer shares as small as a 6.25% undivided interest of a specific aircraft in their fleet and this usually equates to 50 occupied flight hours (before a deduction for taxi time) per year and since the agreements with the provider normally have 5-year terms, 250 occupied flight hours over the term. If you need or feel you need more flight hours you can add on 3.125% incremental shares (25 flight hours per year) with no cap on how many shares you can acquire other than your bank account limits.

Now the big question is what size share do you buy or lease? Several of us at Jet Advisors® have seen on numerous occasions a new entrant into the fractional ownership program field buy or lease more than they really need. This usually results from underestimating how flying privately is so much more efficient than traveling by commercial means and unfortunately fractional sales people are not always motivated to make sure the share size fits the new share owner’s needs. Add to this the structure of fractional programs that lock you in for a certain minimum period that prevents you from reducing your share without significant penalties. The economics of fractional programs get skewed quickly in a very negative way if you leave unused (un-flown) hours in your bank at the end of each year.

What can you do to prevent acquiring a larger share than you need? My advice is start with acquiring the smallest share available in the aircraft type you desire or buy a jet card, which most fractional programs provide. Since, as I stated above, you can add onto your share in 25 hour per year increments as your usage grows or you determine your exact need, start off small. Going into a larger share than needed will cost you money, and not just a little money. Trying a 25 hour card has per hour costs higher than acquiring a share but it will give you a good idea on how efficient private aircraft travel is and how many hours you need to cover your annual travel without a long term commitment.

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