Private Jets

Private Jets: Fractional Aircraft Ownership Guide

Fractional aircraft ownership 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 an aircraft from a company which owns, manages and operates the plane.

Fractional aircraft ownership programs usually last for periods between 2 and 5 years. However, it can sometimes be possible to terminate a contract early or sell it on the open market.

An important consideration for fractional ownership is choosing the type of aircraft – how many passenger seats are needed and where/how far will you travel.  Aircraft can range from a light jet of 4 passengers to a large cabin jet with global reach.

The size of the aircraft fraction or share depends on the number of hours you need to fly per year. In terms of annual flying hours this is:

1/16 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.

To purchase an aircraft 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 charged when you actually use the plane.

At the end of the share period you can either retain ownership by rolling-over the contract 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 as fractionally owned aircraft are heavily used – meaning they have greater depreciation than a standard owned private plane.

So what are the benefits of fractional aircraft 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 expenditure
• companies with large fleets provide good availability, flexibility and added value services
• no empty leg fees/positioning fees for one-way flights

What about the downsides of fractional aircraft ownership?

• large upfront fee, unlike ad-hoc charter where you pay-as-you-go
• heavier depreciation costs
• remarketing fee of around 7% often charged on selling back the fraction
• conflict of schedules possible for smaller fleet fractional companies
• cannot personalise aircraft interior

Netjets

The biggest fractional aircraft ownership company in the industry is Ohio-based Netjets owned by Warren Buffet’s Berkshire Hathaway – with around 750 aircraft and a 60% market share.

Netjets operates 13 different aircraft types – from a Cessna Citation Encore (light cabin) to a Bombardier Global 6000 (large cabin). It generally offers fractional aircraft contracts that run 2-3 years.

How much does a Netjets fractional plane cost?

Netjets no longer publishes the costs of its fractional program. However for an entry level light cabin expect to pay just over $500,000 for a 1/16 (50 hour) fraction. On top of this are the monthly management fee (around $9,500) and the hourly occupancy rate ($1,950) which is deemed as wheels up to wheels down plus 6 minutes taxi time at each end. Additional fees (fuel surcharges, airport taxes) can also be levied .

So on top of the upfront investment, annual running costs for a light cabin jet will be in the region of $230,000 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.

FlightOptions

Netjets main competitor in the US is FlightOptions which offers either a 1/16 (50 hours), 3/32 (75 hours) or 1/8 (100 hours) fractional aircraft ownership options. FlightOptions also owns fractional company Flexjet.

How much does a FlightOptions fractional plane cost?

For a Nextant 400XT aircraft (7 passengers) FlightOptions sell a 1/16 fraction for $250,000 plus $9,130 monthly management fee and an hourly rate of $2,209. For a large cabin Legacy 600 (13 passengers) FlightOptions sell a 1/16 fraction for $625,000 plus $15,562 monthly management fee and an hourly rate of $4,326. Note, FlightOptions prices exclude fuel and tax.

Fractional aircraft programs in Europe and elsewhere 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 130 aircraft. Netjets has also started a subsidiary with partners in China.

For those needing less flying hours than the standard fractional aircraft ownership, then consider either a block hours jet card program (generally 25 hours) or book and ad-hoc jet charter.

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. Company names mentioned are registered trademarks.