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Thu, Jan 04, 2007

ANN Special Report: Fractional Ownership Programs, Part Three

Is It The Right Option For You?

By ANN Contributor Thomas P. Turner

Fractional ownership.

This aircraft ownership option has seemingly sprouted almost from nowhere in the last few years. Although fractional ownership of professionally flown turbine aircraft appeared a few years earlier, the rise of owner-flown fractional ownerships began concurrently with the introduction of what we now call Technically Advanced Aircraft (TAA)--airplanes with moving-map GPS and autopilot technology, more and more frequently with "glass cockpit" Primary Flight Display (PFD)/Multifunction Display (MFD) panels.

Does fractional ownership make sense to pilots who fly piston-powered airplanes? What are the deciding points on buying into a fractional? What are the unique benefits of fractionals that offset some of the costs? When are you ahead of the game to bypass fractionals and buy an airplane outright? What might you consider to decide whether fractional ownership makes sense for you?

To answer these questions ANN has spent several months researching fractional ownership of owner-flown, piston-powered airplanes. We've surveyed readers like you who are fractional owners, who are currently considering buying into a fractional program, or have been fractional owners but have left the program for one reason or another. We've also polled managers of fractionals. With this cross-section, we got a sense of each perspective toward fractional ownership of owner-flown piston airplanes-you'll see quotes from several ANN readers' responses as you read this report.

Maintenance

A huge advantage to fractional ownership is that the program managers take care of all maintenance. Managers gamble that nearly-new airplanes will have relatively few unscheduled maintenance expenses, so they build a small reserve into program fees but the owners will not have to worry about ponying up thousands without warning for unexpected repairs. Further, many fractionals manage several nearly identical airplanes. So if yours is in the shop, another just like it may be available. In fact, an owner may have equity in a specific airframe but day-to-day fly any from a pool of like aircraft. 

"I wouldn't bother to fly any more if I had to go back to renting dirty, 30-year-old 172s with intermittently working avionics, etc." -- Current fractional owner

Scheduling of routine maintenance, lack of lump-sum payments for annual inspections and other shop time, management of unforeseen mechanical problems and substitute aircraft in the event yours is down are some of the biggest pluses of fractional programs over partnerships or outright aircraft ownership.

Scheduling and Fees

Scheduling a fractional airplane is similar to traditional renting: call the managers and get on the schedule. Your level of ownership -- "right to use" or percentage of equity partnership-may determine your priority, but you are competing with fewer pilots than at the usual rental FBO, and if you've paid enough you might be able to get in line ahead of other fractional members. The corollary to this is that your level of investment in the program may mean others have priority over you, even though your investment is considerable.

"I gave up the freedom of going flying on a beautiful day. I have to carry everything with me for each flight instead of leaving it in the hangar or in the plane." -- Current fractional owner

One bugaboo of traditional renting is the minimum overnight fee. Usually and FBO will charge for a minimum number of flight hours for every 24-hour period you have possession of the airplane, even if you actually flew it less. As with outright ownership, in fractionals you only pay hour fees for the actual time you log on the airplane.

"Aircraft availability was not very good." -- Former fractional owner

Another advantage of the larger fractional programs is the ability to rent airplanes at other locations in your program's network. Are you a member of a program in New York and are vacationing in Florida? If your program has outlets there, you may be able to schedule just as if you were at your home field. With essentially identical aircraft and stringent, standardized training and currency requirements, it's safe for the fractional managers, and convenient for you, to step right into program airplanes in remote locations.

"I like the ability to fly multiple aircraft at multiple locations." -- Current fractional owner

Fractional owners have an expectation that, if they are not able to schedule an airplane because of prior claims on the desired time, that the airplane is actually being used. To prevent pilots from scheduling "on spec" and then being a no-show, most fractionals do assess a token fee of $3 for each flight hour scheduled but not actually flown. It's also assessed if the airplane was booked to fly a certain number of hours but was actually flown less. It's a very small fee in the scheme of fractional things, designed as a deterrent to increase scheduling availability to all program members.

"Occasionally (but not often) an airplane is not available when I want to use it due to another owner's use." -- Current fractional owner

Some equity ownerships may incur local property taxes. Some fractional programs have begun adding a fuel surcharge to the contracted hourly fee.

Costs per flight hour are set as a condition of the program contract-and may vary depending on the pilot's initial investment and level of membership. Generally the rate per flight hour increases after a pilot exceeds 100 flight hours per year, a scheme to keep individual use down and therefore make the airplane more frequently available to all fractional owners.

Coming Friday -- OK, So What Will It Cost Me?

FMI: Tell Us What You Think!

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