Lately there has been a lot of buzz around “fractional ownership”, with the concept frequently cropping up in the discussion circles of private aviation industry. Although the proponents claim fractional ownership to be a “cost-effective” solution that allows flyers to own a private jet without having to break the bank, there is more to it than most buyers presume. In fact, it may not be an advisable option if you look at the finer lines of the proposition and compare the average hourly flying cost with what you pay in whole ownership and charter flights. If you have been planning to invest in a fractional ownership, this blog post discusses some of the factors you must consider before signing on the dotted line.
When you go for fractional ownership, availability of the aircraft is always a concern. Let’s say, you share a plane with three more owners. There may be a scenario wherein all of you would want to have the plane at their disposal at the same time. Such scenarios usually occur during the peak seasons wherein all the fractional owners require the plane. Therefore, if you require a plane mostly during the peak seasons, it is advisable to charter a plane, or buy a charter for sale if you are a frequent flyer.
Unlike charter plane services where one has to pay as they fly, fractional ownership involves an upfront fee that is substantially higher compared to chartering a plane. Businessman or savvy investors who know how to grow their money would rather put the money in an investment that gives them a higher return, instead of buying a fractional ownership. They might even consider buying a jet plane for sale as it costs cheaper in the long run, and unlike in the case of fractional ownership, they have an asset they are always free to liquidate.
It’s nearly impossible to get a loan to buy a fractional ownership, and therefore, interested buyers must have ample cash to buy their stake. This is not the case, when you want to buy a private aircraft as a number of financing companies offer loans for buying an aircraft. As far as chartering a plane is concerned, you obviously don’t need to spend a fortune. In fact, when you opt for charter flights, you also have the option to enroll for loyalty programs and jet cards that bring down the cost of flying even further.
The fractional ownership share is for a specific plane. A fractional owner, however, may require different planes for different trips, depending upon the number of co-passengers, the distance to be covered, or the destination that they want to visit. Fractional ownership restricts them to a particular plane or class of plane, which is not the case when they hire a charter place. Depending on the dynamics at play, flyers can choose from a number of options, ranging from small cabin jets to business airliners.
In fractional ownership, the plane is always used extensively as more than a few people share the ownership. The annual utilization of a fractionally owned plane may vary between 1500-2000 hours, whereas the figure is usually between 400-500 hours for wholly-owned planes. As a result, the depreciation is much higher. Needless to elaborate, charter flights do not have any such downside, and if you go for a whole-ownership, the only depreciation you have to bear is what’s caused by your own usage.
The average flying costs of fractional ownership are usually much higher, compared to chartering a plane or even wholly owning a jet. Most flyers, however, do not realize this, as fractional ownership plans are extremely complex to understand and ingeniously packaged with exciting garnishments. The total cost of ownership often includes a number of unforeseen expenses related to maintenance, repositioning, licensing and operations, most of which do not occur to the buyers when they go for fractional ownership.
The Bottom Line
Given the light of the facts we have discussed, it goes without saying that chartering a plane or buying a jet plane for sale are better options compared to fractional ownership. If you wish to learn more about your options to experience the luxury, convenience, and safety of private flights, get in touch with one of the experts at the Leviate Air – one of the few aviation consulting firms with comprehensive expertise on both transactional and operational sides of the business. You can reach us at (877)-720-2770 , or fill out our contact form and we will get back to you, shortly.