Fractional jet ownership is a popular option for those who frequently fly privately, but do not want the burden of owning and maintaining an entire aircraft themselves. However, as with any investment, it’s important to understand the costs associated with fractional jet ownership before committing to such an arrangement.
How Does Fractional Jet Ownership Work?
Fractional ownership of a jet allows multiple individuals or companies to share ownership of a single aircraft. Each owner is allocated a certain number of hours per year that they can use the aircraft, and they are responsible for paying a portion of the ongoing operating costs.
In most cases, fractional jet ownership is managed by a third-party provider, which is responsible for scheduling flights, arranging maintenance, and handling other administrative tasks. This provider may also offer other benefits, such as access to a fleet of different aircraft or discounted rates on certain services.
In general, fractional jet ownership agreements are structured as leases, with the owners holding a share of the lease rather than a direct stake in the aircraft itself. This can provide certain benefits, such as more flexibility in choosing different aircraft types or easier exit strategies if an owner decides to sell their share.
What Does Fractional Jet Ownership Cost?
Fractional jet ownership costs can vary depending on a number of factors. These may include the type of aircraft, the number of hours you plan to fly, the duration of your ownership, and the specific terms of the ownership agreement.
Typically, fractional jet ownership requires a minimum investment, which can range from $100,000 to over $1 million. In addition to the initial investment, fractional jet owners are also responsible for ongoing maintenance and operating costs, which can include everything from fuel and insurance to pilot salaries and aircraft storage fees.
To give you a better idea of what these costs may look like in practice, let’s consider an example. Imagine you’re interested in purchasing a 1/16th share of a midsize jet. The initial investment for this share is $350,000, and you plan to fly approximately 50 hours per year.
Assuming the total operating costs for the aircraft are around $2,000 per hour, your annual costs would look something like this:
- Initial investment: $350,000
- Annual operating costs: 50 hours x $2,000 per hour = $100,000
- Annual management fee: Typically around $10,000 per year for a midsize jet
- Additional fees: These may include things like fuel surcharges or de-icing fees, which can vary depending on the specific agreement.
So, in this scenario, your total costs for fractional jet ownership would be approximately $460,000 in the first year, and around $110,000 per year thereafter. (NetJets establishes this for a maximum of five years.)
How Much Is Jet Card Ownership Cost?
Jet card ownership is another popular option for those who frequently fly privately. Jet cards typically provide a certain number of hours of access to a specific type of aircraft, which can be used over a set period of time.
The cost of a jet card varies depending on the provider, the type of aircraft, and the number of hours included in the card. In general, however, jet cards tend to be more expensive on a per-hour basis than fractional ownership arrangements. This is because jet card providers need to cover the cost of maintaining and operating their own fleet of aircraft, rather than spreading these costs across multiple owners. The primary benefit of a jet card is there is no variable maintenance expense, crews to worry about or limitations of use when another owner is using the plane.
Jet cards can vary widely in price, anywhere from 25 hours of flight time for $150,000 to $350,000. Keep in mind that this cost does not include any additional fees or taxes that may be associated with using the card.
One advantage of jet card ownership is that it can provide more flexibility than fractional ownership. With a jet card, you can typically use your hours across multiple aircraft within a category, rather than being limited to a single type of aircraft for every flight. This can be useful if you have varying travel needs, or if you prefer to have access to different types of aircraft depending on the situation.
Is it Easy to Sell Fractional Ownership?
One of the potential downsides of fractional jet ownership is that it can be difficult to sell your fractional share if you no longer need it. Unlike a traditional aircraft ownership arrangement, where you have full control over the sale of the asset, fractional ownership arrangements are typically structured as leases, which can make it more complicated to transfer ownership. However, most agreements state that you can sell it back to the issuer at a surrender price after one year.
In most cases, when you put a fractional jet ownership for sale, the third-party provider that manages the fractional ownership program will handle the sale of your share. However, this can be a lengthy process, and you may not have full control over the price at which your share is sold.
Another factor to consider is that the value of your share may fluctuate over time. If demand for the type of aircraft you own declines, or if operating costs increase, the value of your share may decrease as well. This can make it more difficult to recoup your initial investment if you decide to sell your share.
What are the Downsides of Fractional Ownership?
While fractional jet ownership can be a convenient and cost-effective way to access private air travel, there are also some potential downsides to consider. Here are a few key factors to keep in mind:
- Limited control: As a fractional owner, you will not have full control over the aircraft or the operations of the ownership program. This means that you may not be able to make certain decisions about how the aircraft is used or maintained, and you may have to rely on the management company to handle many of the day-to-day details, unlike you would have with full ownership.
- Ongoing costs: While fractional ownership can be a more cost-effective option than owning a full aircraft, it still comes with significant ongoing costs. These can include maintenance and operating expenses, as well as annual or monthly management fees and other charges. You’ll need to factor these costs into your budget to determine whether fractional ownership makes sense for your travel needs.
- Limited flexibility: While fractional ownership can provide more flexibility than traditional aircraft ownership, it is still more limited than some other options, such as jet card ownership. You will typically be limited to a single type of aircraft, and may not have as much control over scheduling or other details.
- Potential resale issues: As we discussed earlier, it can be more difficult to sell your share of a fractional ownership program than it is to sell a traditional asset. This can make it more challenging to recoup your initial investment if you no longer need your share.
Takeaways
Fractional jet ownership can be a great option for those who frequently fly privately, but do not want the hassle and expense of owning and maintaining an entire aircraft. However, as with any investment, it’s important to understand the costs and risks associated with fractional ownership before making a commitment. By carefully considering your travel needs, budget, and preferences, you can determine whether fractional jet ownership is the right choice for you.
