Advantages and Costs of Fractional Ownership in Business Aviation

Fractional private jet ownership is a form of shared ownership where multiple individuals purchase a fraction of an aircraft and have exclusive use of it for a certain number of flight hours per year. This option can provide many advantages for business aviation operators who need frequent and flexible access to private air travel, but do not want to bear the full costs and responsibilities of owning an aircraft. Let’s explore the costs and benefits of fractional private jet ownership, and how it compares to other business aviation solutions.

What Are The Fractional Private Jet Ownership Costs?

The costs of fractional private jet ownership depend on several factors, such as the type and size of the aircraft, the size of the fraction being purchased, and the terms of the ownership agreement. The average costs of fractional private jet ownership can be broken down into four main components:

Capital Cost

This is the initial investment required to purchase a fraction of an aircraft, which can range from $100,000 to over $1 million, depending on the aircraft type and the fraction size. For example, a one-sixteenth fraction of a mid-size private jet can cost anywhere from $100,000 to $400,000, while a one-eighth fraction can cost upwards of $800,000.

Monthly Management Fee

This covers the indirect expenses associated with operating the aircraft, such as pilot staffing and training, insurance, cabin support, trip management, crew provisions, and other administrative costs. The monthly management fee can vary from $5,000 to $20,000 or more, depending on the aircraft type and the fraction size.

Occupied Hourly Rate

This is charged for each hour the owner is in flight, plus a fraction of an hour for taxi time. The occupied hourly rate covers the direct expenses related to the flight, such as maintenance, fuel, standard catering, and engine operation. The occupied hourly rate can range from $1,000 to $5,000 or more, depending on the aircraft type and the fuel price.

Fuel Component Adjustment

This is added to the base hourly rate to account for fluctuations in the cost of fuel, which varies monthly. The fuel component adjustment can increase or decrease the occupied hourly rate by a certain percentage, depending on the fuel price. In addition to these costs, fractional private jet owners may also incur some additional fees, such as:

• Federal Excise Tax: This is a 7.5% tax applied to the occupied hourly rate and the fuel component adjustment for flights within the U.S. or between the U.S. and Canada or Mexico.
• International Fees: These are fees charged for flights outside the U.S. or between the U.S. and other countries, such as landing fees, overflight fees, customs fees, and value-added tax.
• Upgrade or Downgrade Fees: These are fees charged when the owner requests a different aircraft type than the one they own, either larger or smaller, depending on the availability and the demand.
• Peak Day Surcharges: These are surcharges applied to the occupied hourly rate and the fuel component adjustment for flights on certain high-demand days, such as holidays or major events.
• Permit Fees: Fees of permits are part of the international fees that fractional private jet owners may have to pay for flights outside their home country or between different countries. These fees include landing fees, overflight fees, customs fees, and value-added tax. The amount of these fees may vary depending on the destination, the duration, and the frequency of the flights. Some fractional jet ownership providers may include these fees in their monthly management fee, while others may charge them separately.

What Are The Benefits of Fractional Private Jet Ownership?

Compared to full aircraft ownership, fractional private jet ownership offers several benefits for business aviation operators, such as:

Cost Savings

Sharing the expenses of aircraft ownership with other owners reduces the financial burden of full ownership. Fractional private jet ownership can also provide tax benefits, such as depreciation deductions applicable to a capital asset.

Increased Flexibility

Fractional private jet ownership provides access to private air travel for a specified number of hours each year, giving owners more flexibility to travel when and where they want. Fractional private jet owners can also exchange their fraction for a different aircraft type, either larger or smaller, depending on their needs and preferences.

Guaranteed Availability

Fractional private jet owners can book their flights with a short notice, usually between 4 and 24 hours, depending on the provider and the aircraft type. Fractional private jet owners also have priority access to their aircraft type over other customers, such as jet card or charter clients.

Consistent Quality

Fractional private jet owners can enjoy a consistent and high-quality service from their provider, including safety standards, operational excellence, crew professionalism, cabin comfort, and onboard amenities. Fractional private jet owners can also customize their travel experience with their personal preferences, such as catering, entertainment, and ground transportation.

Hassle-Free Ownership

Fractional private jet owners do not have to worry about the maintenance, management, or storage of their aircraft, as these are handled by the provider. Fractional private jet owners also do not have to deal with the resale of their aircraft, as they can sell their fraction back to the provider at the end of the contract.

Fractional private jet ownership is a cost-effective and flexible option for business aviation operators who need frequent and reliable access to private air travel, but do not want to incur the full costs and hassles of owning an aircraft. Fractional private jet ownership can provide many benefits, such as cost savings, increased flexibility, guaranteed availability, consistent quality, and hassle-free ownership. However, fractional private jet ownership is not the only option, and it may not be the best option for everyone. Business aviation operators should consider their travel needs, preferences, and budget, and compare fractional private jet ownership to other private aviation solutions, such as full aircraft ownership, jet card membership, and on-demand charter, before making a decision.

Explore the nuanced world of fractional ownership in business aviation with Just Aviation. Our comprehensive analysis delves into the financial intricacies and strategic advantages of this ownership model. Gain insights into cost-effectiveness, asset utilization, and the flexibility it offers for your aviation needs. Stay informed and make well-informed decisions for your business aviation ventures with our expert guidance.