F ractional ownership of an aircraft is a consideration for those who fly between 50 and 400 hours per year in private jets. It is essentially the purchase of a "fraction" of the aircraft itself via a company which manages and operates the aircraft...
Fractional aircraft ownership programs usually last for a 5 year period although it can be possible to terminate the contract earlier or sell it on the market. The size of the fraction will depend on the number of hours you need to fly per year.
The other very important consideration for fractional ownership is choosing the type of aircraft - how many passenger seats will you generally need and how far will you travel. You will also have to think about how to finance such an aircraft purchase.
Let's take a look at what a fraction looks like in terms of flying hours:
share = 50 hours (250 hours over 5 years)
1/8 share = 100 hours (500 hours over 5 years)
1/4 share = 200 hours (1,000 hours over 5 years)
1/2 share = 400 hours (2,000 hours over 5 years)
Full share = 800 hours (4,000 hours over 5 years)
A "full share" is considered to be 800 hours
per year and equal in cost to the full retail price of the plane.
For a fraction you will pay the up-front acquisition fee at the start of the term - which will vary by fraction size and aircraft type. On top of this will be a monthly management fee and an hourly occupancy fee when you actually use the plane. It is standard that termination of the contract is allowed after a set period - usually 2 to 3 years in. However, it may also be possible to sell your fractional share at any time on the open market (but check your contract first).
At the end of the 5 year period you can either retain ownership by agreeing to the current management and hourly fees or you can sell the fraction back to the management company at a "fair market value". Note, depreciation of aircraft can be a major cost consideration and fractionally owned aircraft are heavily used - meaning they have greater depreciation than a standard owned corporate plane.
The benefits of fractional ownership
- cheaper than purchasing an aircraft outright
- management and operational issues handled by the fractional company
- fixed costs means you can accurately budget for travel costs
- companies with large fleets provide good availability, flexibility and added value services
- no empty leg fees/positioning fees for one-way flights
Some downsides of
- large upfront fee, unlike ad-hoc charter where you pay-as-you-go
- heavier depreciation costs
- "remarketing" fee of around 7% charged on selling back the fraction
- conflict of schedules possible for smaller fleet fractional companies
- cannot personalise aircraft interior
The biggest fractional ownership company in the industry is Ohio-based Netjets - owned by Warren Buffet's Berkshire Hathaway - with over 800 aircraft and a 70% market share.
Netjets fractional ownership
costs* - For an entry level Raytheon Hawker 400XP (7 seats and a range of
~1,470 miles) a 1/16 share will cost $425,625. However on top of that you will
have to pay a monthly management fee (approximately $7,800) + an hourly occupancy
rate ($1,800) + hourly fuel surcharge ($550). The hourly occupancy rate is wheels
up to wheels down plus 6 minutes taxi time at each end. Additional airport taxes
So on top of the upfront investment, annual running costs will be in the region of $220,000 for 50 hours flying.
Netjets will either fly you on your own registered aircraft or you will be given a similar (or larger) plane from the Netjets fleet depending on logistics. Response times for booking an aircraft vary between 4 and 10 hours in advance. Note, designated peak period days (10 days across the whole year) must be booked with 48 hours notice.
Other North American companies offering fractional ownership: Bombardier's FlexJet ; Flight Options (offers 1/16, 3/32, 1/8 shares).
Fractional aircraft programs in Europe are not as common as found in the US, particularly due to the way depreciation of part-owned assets is handled in the US tax system.
Netjets has a European subsidiary company Netjets Europe which offers similar fractional ownership programs, with a fleet of 165 aircraft.
Blink is a very light jet operator in UK/Europe which has its Blink Club fractional program. It offers either a 1/4 share (150 hours), 1/2 share (300 hours) or full share (600 hours). A 1/4 share in a Mustang costs $606,250 (circa £385,000) with a monthly management fee of £6,667 and hourly rate of £850, giving an effective rate of £1,382 per hour.
Note: Always undertake a full financial analysis with a qualified professional before purchasing any form of private jet. * Price accuracy cannot be guaranteed and can change. Some company names/programs mentioned are registered trademarks.