Aircraft Fractional Programs: A Solution During a Pandemic?
Aircraft Fractional Programs: A Solution During a Pandemic? — Originally published in BusinessAir Magazine, October 2020, Volume 30, No. 10.
Due to COVID-19 there has been a significant increase in the number of individuals who previously were comfortable flying commercially that are now exploring the idea of traveling on private aircraft. Over the past decade, the group of individuals who could afford to fly privately has increased but the number of people who fly privately has not increased at the same rate. The reasons that some individuals elected not to fly privately before are now outweighed by the health and safety concerns caused by COVID-19. Many people currently considering private aviation are looking for temporary solutions, believing that science will lead us through the pandemic eventually. Recently I have been asked if fractional ownership is a good solution.
By way of background, there are many ways to travel privately. Ad hoc charter requires no commitment and each flight is scheduled separately through a charter broker or a charter operator. A great option for those who only want to travel privately until health concerns go away and who think they will go back to flying commercially sooner rather than later. Next in the private travel hierarchy is block charter/membership programs where a single provider is used for a certain number of hours or days, often paid in advance. This is a good option for an individual who wants consistency, wants one person to call for private flight solutions and/or who is willing to make a small commitment in return for reduces rates or other benefits not available under the ad hoc option. Next comes fractional ownership or fractional leases where a single provider is selected and a minimum commitment is required, usually at least a couple of years. Finally, the option that requires the most commitment is whole aircraft ownership, which entails owning and operating an aircraft.
The fractional market has changed significantly over the past 20 years. The number of national fractional providers has decreased while the number regional providers have increased. Additionally, in 2020 we have seen many of the long-standing fractional providers offer new programs, products and aircraft types. As a result of the changing market, there is not a single best program for all individuals.
When exploring the various fractional providers and their various offerings, it is important to understand how the fractional share will be used. If you can generally predict the number of hours needed per year and the flights which will be flown, it will help determine the best program offering. Further, it is important to understand how long of a commitment you are willing to make to the ownership (or leasing) of a fractional share. The shorter the commitment period, the less it makes sense to own a fractional interest, and instead a lease (if available) of a fractional share may be more advantageous. As with any capital investment, the longer you plan to own something the more the capital investment makes sense. For example, if you really like a particular aircraft model and know with certainty that you want to use that type of aircraft for 5-10 years, then fractional ownership would be a far better solution than if you think your mission and thus aircraft type will change in the next couple of years. Furthermore if the aircraft will be used for personal use and there is no tax advantage to owning, then a lease may be a better option.
Things to think about when making a decision on fractional providers:
1. Number of hours needed per year
2. Expected flight patterns (some of the newer enhancements make longer flights more affordable)
3. Purchase and lease option available?
4. Guaranteed aircraft – Is the aircraft you are purchasing or leasing guaranteed (or can a lesser aircraft be provided) and what are the peak travel day restrictions
5. Other program restrictions or enhancements
With the right flight data, an estimate of the number of flight hours needed per year and the knowledge of commitment level, it is easy to determine the all-in cost per hour of the various programs. However, the analysis does not stop there. As with all service products, it is not solely a determination to be made purely on price. Intangible factors should also be considered such as appearance of aircraft, on-time performance, cultural fit between customer and prospective providers, and customer service.
When considering entering into a fractional program for the first time it is extremely important to take your time to make the right determination and try not to rush through the process in order to accommodate an upcoming flight. Take your time, get to know each provider and their offerings and select the program that best suits your individual flying needs, commitment level and who will provide the service level you expect. Fractional programs may be a good solution for first time private aviation flyers looking to avoid commercial airlines, but the particular program and product should be closely considered.
Please contact Amanda Applegate at email@example.com or at 310-392-5200.