Fractional Share

For the more frequent user possibly unable to justify full ownership, there are several established multi-user, fractional ownership and other shared-use schemes.

Key requirements for such programmes are sound logistics and operations management, and in many cases a critical mass of new aircraft on order so as to meet sales promises. 

Fractional ownership permits the shareowner to utilise one or more of a pool of similar machines (some of which may be the advertised new aircraft and others older aircraft purchased preowned) for an agreed number of hours each year. Fractional operators typically also offer a block-hours Jet-Card type arrangement as an alternative for those regular user, concept or prospect customers not buying into an aircraft share.

An annual block of hours is bought. Availability is guaranteed and a maximum response time is assured, though may be longer than desirable, e.g. normally at least 6-8 hours and in some cases 24 hours or more. The fractional operator may, however, also charter from other commercial operators to meet its contractual obligations or to minimise its own positioning costs.

In addition to the cost of purchasing a share at the prevailing market rate, the shareholder pays a fixed monthly management fee together with pre-set hourly usage charges, normally simply for the occupied time only. Budgets are quoted to be easier to establish and surprises are said to be minimised. On exit from the plan, the share can be sold at the then-prevailing market rate.

The fractional operator primarily acts as a manager for its members, in some countries operating aircraft under quasi-private rather than commercial rules with, in particular, lesser restrictions on maintenance regime, required runway lengths, weather reporting and pilot duty periods. In Europe, most such operations are conducted under full commercial rules. The service provided is a fairly standardised, arguably lowest common denominator product, with unknown faces in the cockpit.

Fractional operators in general arguably generate most of their profits from trading their aircraft and associated shares, creating the market and unilaterally determining prices at time of purchase (often high relative price for share in a used fleet aircraft which customer often perceives to be new or nearly new) and buy-back (low price based on then-market value of ‘tired’ high time aircraft). It is noted that the effect of this strategy, and the sheer numbers of aircraft involved, have an increasing bearing on the wider used aircraft market, though the aircraft involved can perhaps realistically only enter the bottom end of the preowned market (much like used rental cars or former taxis). 

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