Relying on commercial airlines can be frustrating when you or your business have frequent aviation needs, but having your own private aircraft is often not the right choice. Purchasing an aircraft requires not only a considerable financial outlay but ongoing management duties and expenses. However, if you use 50 or more flight hours in a year, you should consider fractional ownership of an airplane.

In a typical fractional ownership situation, a jet management company sells shares in aircraft that they retain and manage as part of a fleet. Generally, aircraft ownership shares are divided into sixteenths for sale. An aircraft usually has 800 flight hours available per year, and one 1/16th share—the smallest possible purchase—includes the right to 50 flight hours. You can schedule these as needed, and if the specific airplane is unavailable when you want to fly, the company will provide an alternate. Fractional share purchases tend to have a minimum commitment of three to five years, after which you may decide to sell.

Is Fractional Ownership for You?

What kind of aviation do you want to invest in? If you are looking to:

  • fly with your friends or family for fun or leisure
  • reach remote job sites with one or two employees
  • fly yourself and a few passengers in the course of your business

—you may be interested in a single-engine, small turboprop, or very light jet (VLJ). These are less expensive, starting at $125,000 a share or less at present, and they can reach small airfields if necessary. However, they can only carry four to eight people, depending on the model, and they have lower travel ranges. They are also more likely to be too loud for work and to lack amenities.
If you want a larger aircraft in order to:

  • provide working travel to your colleagues, your employees, and/or your clients
  • transport VIPs, such as performers or high-net-worth (HNW) individuals, with their cargo and luggage

—you may be interested in a larger turboprop or a jet. These allow you to transport employees and clients in comfort and privacy that surpass what commercial business class can provide, even in a smaller plane. At this time, shares start at $250,000 to $500,000 for a light jet with a capacity of 8 to 12 people.

Advantages and Disadvantages

A fractional owner does not need to take on all the responsibilities that sole aircraft owners or partners in an aircraft have to handle.

The provider will manage many of the time-consuming administrative tasks, such as:

  • Scheduling
  • Repositioning
  • Fueling and maintenance
  • Staffing pilots and crews
  • Compliance with FAA regulations

Convenience, comfort, and certainty are the advantages of a fractional share purchase that works for you. You should be able to schedule a flight at short notice—outside of certain peak dates—and receive a guaranteed level of service, either in your shared plane or in an equivalent aircraft. Additionally, you may receive tax advantages from the yearly depreciation of the shares.

Some HNW individuals find fractional ownership convenient because it provides more travel privacy than a private plane. A plane’s tail number is registered with the FAA, and as such, it can be tracked online. In a fractionally owned plane, you will not be listed as a sole owner on the FAA registry, and you can fly without worrying that your movements are exposed to anyone who cares to search for the plane.

However, fractional ownership has its disadvantages. It is less expensive than owning an aircraft outright, but the expenses can still be considerable, and financing will not be as easy to secure as for a private purchase. Your flight hours may cost upwards of $2,500 to use, depending on the plane and the time of year for your flight. You will also have monthly management fees for the fuel and services that the provider company handles. And although share ownership can confer tax advantages, you may also be responsible for further taxes on your purchase and use.

To a great extent, you will have to trust the provider, as you must rely on it to service your plane correctly and provide timely flights at the level of service you bargained for. And if you work with a smaller company, you may also need to know the other owners. If the company fails, your asset may be in limbo, leaving you out of pocket for its maintenance while you are unable to use it as you intended. Of the dozens of fractional share companies that promise luxury experiences or convenient flights, how do you know which has the financial stability and management skill to handle your shares for you?

Taking the Next Steps

For impartial advice, you will need to consult an aircraft transaction attorney who can guide you through the purchase of your shares. Expert advice on an aircraft purchase is as crucial as it would be in any other significant acquisition. Attorneys in aviation law need a good deal of specific and timely knowledge about the aviation market as well as the federal and state administrative laws that apply to aircraft. An attorney can advise you about your particular share purchase, your possible tax exposure, and other concerns that may arise. They can conduct a title search, review or draft a purchase agreement, and protect your interests in this often confusing area of law.

At Aero Law Center, our Florida aviation lawyers are ready to help you with domestic or international aircraft transactions, whether you are a business traveler or simply want to enjoy flight on your own terms. To schedule a free consultation about your needs, contact us today at 954-869-8950.