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Top 10 considerations when buying a fractional aircraft |
Nick Copley, president of SherpaReport, does the heavy lifting when it comes to defining what you need to know about access to business aviation, whether full ownership, fractional, jet cards or charters. This month he explores the most important considerations when purchasing a fraction of an aircraft.
As the demand for business aviation remains strong, fractional aircraft ownership has emerged as a compelling option for individuals and businesses seeking the benefits of private aviation without the full cost and responsibility of owning an entire aircraft.
Buying a fractional aircraft share means paying for part ownership of an aircraft. Depending on the size of your share, you will be allocated a fixed amount of flying time, usually ranging between 50 and 400 hours annually, on the specific aircraft type you choose.
“Fractional ownership is an excellent option if you fly privately at least 50 hours a year,” says Nick Copley, President of SherpaReport, a comprehensive, independent source for in-depth information about the private aviation market. “It is important to know that you may never fly in “your own” plane. You’re buying access to a type of aircraft. If the operator has 10 of them, you may fly in all 10 at some point,” Copley explains.
Making informed decisions about fractional ownership requires careful consideration of various factors. Here are the top 10 considerations when (considering) buying a fractional aircraft:
1. Is fractional ownership the right product for me?
Based on my flying profile, is a fractional ownership the right choice or should I charter, use a jet card or purchase a plane outright? You should do a full analysis of your current and expected flying wants and needs to know whether a fractional ownership is the right product type and how big of a fraction you need.
2. What kind of plane do I need?
Do I need a turbo prop, a light jet, a mid-size, etc.? You should analyze your flight patterns, the number of people who travel with you, your luggage, your business needs (if applicable), etc. You should aim to choose the aircraft that suits 90% of your needs. It is possible, however, that you may need multiple types of planes, for different types of trips.
3. Which fractional operator is best for me?
First, look at the operators that have the types of planes you want. Then, conduct a comparative analysis of those. Although you’re buying a share in the aircraft that fits most of your needs, in most cases with the large operators, you can upgrade or downgrade if you need a larger or smaller plane for a trip. Also consider the geographical coverage of the fractional program and ensure it meets your needs.
4. What are the real costs?
Understand the pricing model (different operators have different models), including acquisition costs, monthly management fees (which usually cover crew salaries, maintenance, insurance, etc.), hourly rates, and additional costs (fuel surcharges, de-icing, specific catering needs, etc.). Ask for quotes from different providers. If you’re smart about this, there are things you can ask for that are outside the norm of a standard contract.
Pilatus PC 12 and PC 24, courtesy of PlaneSense.
5. How old and well maintained are the operator’s planes?
When considering which operator to choose, look at the age of its planes and inquire about maintenance standards (although as a rule all providers do a good job on maintenance). Smaller providers may have older aircraft (but you may pay less). With bigger providers, you are likely to get newer planes.
6. What is the resale value of my share?
It’s always wise to prepare for divestment, if necessary. You should understand the potential resale value of your fractional share and any restrictions or conditions related to resale.
7. Do the aircraft I’m eyeing have enough connectivity?
Whether using the plane for business or pleasure, you may have significant connectivity needs. Do you need to have four people on separate Zoom calls or three teens streaming Netflix at the same time? Check that the connectivity solutions are enough for your needs.
8. Will the plane I want be available when I need it?
With some providers, you may have to wait to start your fractional contract on the plane you want. The provider may have a waitlist of prospective customers and/or is waiting for delivery of new planes. Many providers will offer a mechanism to get you flying while you wait e.g. by using their card programs, but if the delay in getting into your fractional agreement is an issue, then it's part of the consideration set. Once a fractional owner, most programs guarantee a plane if you book it within the time frame stated in your contract, but you should ensure that time frame will suit your needs.
9. What are the tax implications?
If you’re using the plane for business, you can use the capital costs as a business depreciation expense. The tax implications are very complex, so it is imperative to consult a good financial advisor to ensure you’re getting all the tax benefits you are eligible for.
10. What do you need to be conscious of . . . and are there added benefits?
It is very important to be aware of any terms that may affect your usage of the aircraft, such as longer notice periods during peak demand. As a plus, though, some providers may offer lifestyle benefits such as tickets and member parties at the Super Bowl, Masters Tournaments or Formula 1 races, and unique art or wine travel packages.
There is a plethora of considerations when looking to invest what is likely millions of dollars in fractional aircraft ownership. These 10 factors may be the most important, but there are others. If sustainability is important to you, for example, you may want to inquire about the fractional operator's sustainability initiatives and commitment to eco-friendly aviation practices. “Making an informed decision involves thorough research, consultations with aviation experts, and a clear understanding of your travel needs and preferences. By considering at least these 10 factors, individuals and businesses can navigate the complexities of fractional ownership and enjoy the benefits of private aviation,” says Copley.
For nearly 20 years, SherpaReport.com has been a comprehensive, independent source for in-depth information to help people and businesses make informed decisions about buying a private aircraft or investing in alternatives such as fractional ownership, jet cards and/or charters. News, analyses, and reports are constantly updated on the site, while more in-depth resources and one-on-one communication with President Nick Copley are available to site members.
