When you think of purchasing a jet, what comes to mind? Full ownership? Or purchasing through a corporation? While these are common and reliable ways to own a jet, there are other options available that come with fewer commitments. Though less popular, some of these options have additional benefits over the conventional avenues and are worth looking into. One of those beneficial avenues is fractional jet ownership.
How Does Fractional Jet Ownership Work?
If this is your first time coming across the concept of fractional jet ownership, not to worry. By the end of this article, that is sure to change. Just to set the foundation, think of fractional jet ownership as the co-ownership of a jet across different shareholders. This type of arrangement is common among individuals and companies who desire the convenience of owning a private jet without committing fully to the costs of sole ownership. The key thing to hold on to here is that the co-owners share the use and costs of the aircraft, but we’ll get deeper into that soon.
What is Fractional Jet Ownership?
Fractional jet ownership refers to the co-ownership of a professionally managed aircraft. It involves an expanded form of ownership where multiple shareholders purchase shares of the full aircraft being managed. These shares are then related to the time allotted to each owner and the commitments in terms of cost. Most of the available fractional jet shares are in multiples of 1/16th which can amount to between 50 and 400 hours of flying time each year.
Fractional jet ownership is not the only option to avoid the hassle of commercial travel and the commitment of full ownership. Other options such as jet chartering through a charter broker, jet cards, on-demand shared flights and jet leasing exist. However, these other options are quite different from jet sharing in terms of mode of operation and the feeling of being an aircraft owner.
Types of Fractional Ownership
A fractional jet ownership program is not limited only to individuals, as companies are known to maximize the benefits that come with it as well. Companies particularly favor this mode because it offers more depreciation deductions, multiple jet options, and reduced costs. Individuals benefit the same while also having access to their privacy, luxury, and convenience. This makes fractional jet ownership a viable option for both individuals and companies.
Companies You Can Work With For Partial Jet Ownership Agreements
Common examples of companies that you can work with for fractional ownership programs include:
Benefits of Fractional Jet Ownership
The benefits that come with fractional jet ownership are plain to see, yet there are still others attached that are less pronounced. Greater privacy and convenience certainly tops the list but there are a host of benefits that make this model more attractive. These attached benefits include:
- Reduction in flying costs
- Multiple jet options
- Investment opportunities using jet shares
- Flexible availability
- More depreciation tax deductions
How Fractional Jet Ownership Agreement Works
Before you can have fractional ownership of a jet, a fractional jet ownership agreement is to be signed. There are other smaller agreements within this fractional jet ownership agreement. This is how fractional jet ownership works and understanding how these smaller agreements work is pivotal. We will take a closer look into each of these smaller agreements to give a clearer picture.
Purchase Agreement
As the name suggests, this is the agreement that deals with the purchase of fractional shares from the provider. The agreement explains how ownership of the aircraft is shared with other shareholders. It also includes the warranties and representations provided by the provider with respect to the condition and title of the aircraft. Terms for repurchasing the shares after the agreement as well as terms and fees for opting out early are also in this agreement.
Master Dry Lease Exchange Agreement
This agreement deals with the relationship between the fractional jet share owners. Every owner under this agreement will be required to sign off on other owners making use of their aircraft. This agreement, therefore, ensures flexible availability as owners can use from the provider’s fleet when their aircraft is unavailable.
Binder or Deposit Agreement
A binder or deposit agreement is signed to secure the commitment of the buyer toward the shares. The provider requires the buyer to place a deposit before having access to the shares. The provider in turn guarantees through the agreement that pricing won’t change, firm delivery date, and the aircraft being purchased.
Management Agreement
This agreement between the buyer and provider grants the provider management rights. He also acts as the program’s administrator who calculates flight time and expected time for reservations. The agreement also includes flight hours per year for owners, costs, time for flight, rollover hours, destinations, and possible restrictions.
Fractional Jet Shares Costs
While it is true that fractional jet ownership comes with reduced costs, there are still some expenses to cater to. It is pivotal to understand what these share costs are, as every owner is responsible for them. A closer look into what these shared costs are will help you understand them better.
Acquisition Cost
This is known as the capital fee when you are about to purchase shares in a jet. The higher the number of shares you want, the higher the acquisition cost you will incur. The cost can also be dependent on the type of aircraft you are purchasing shares in. Shares in smaller jets should be expected to cost less than the same quantity of shares in larger jets.
Monthly Management Fees
This includes a summary of management costs that comes with owning a jet. These include aircraft subscriptions, insurance, pilot training, and administrative expenses. You also expect to incur hangar space for storage under these costs when the plane is not in use. As a share owner, your quota of the monthly management is proportional to your shares as established in signed agreements.
Occupied Hourly Fee
Maintenance costs follow after acquisition and management fees and it is summarized as an occupied hourly fee. This includes costs for fuel, maintenance, wages, in-flight catering, and engine reserves. Occupied hourly fees are costs incurred as a result of using the jets hence the term “occupied hours”. The quota of each share however varies depending on established agreements signed.
Fractional Jet Ownership; lucrative on both ends.
Once you’ve understood most of the requirements and conditions that come with being fractional owners of a jet, you’re good to go. In no time you will be cruising in the air while resting on your JetBed, enjoying all the luxury and convenience that flying has to offer. With fractional jet ownership, you fly as an owner all through the number of hours you spend in the air. This is a feeling you cannot get with other programs such as a private jet charter.