A Slice of the Dream
‘Never mix business with pleasure’. Whoever made that statement obviously wasn’t into aviation, as any half intelligent aviator knows, the ultimate goal is to mix business and pleasure as much as possible. This business savvy entrepreneur will also tell you, ‘work smarter not harder’. And when you put the two together, there is only one sensible conclusion. Own your own business jet, or ‘bizjet’ if you’re up with the lingo.
A bizjet is the ultimate freedom. Freedom from departure lounges, schedules, from 300 smelly fellow travellers and lost baggage and freedom from that very scary attendant who refuses to bring you your fifth glass of scotch on the rocks.
The bizjet market has settled into a handful of loose categories, referred to as heavy, super mid-sized, mid-sized, light and very light. And the aircraft that fit these definitions are every aviator’s dream machines.
If you’re a small player just getting started, you might start in the very light category, also called microjets, personal jets or VLJ’s. Your weapon of choice will cost between $1 million and around $3 million and be great for operating from shorter strips, with lighter loads. You might be looking at an ATC Javelin or Eclipse 500: anything under 4,500 kgs. While this is the smallest category of bizjets, it’s also the newest and quickly expanding.
Small and mid size jets are the most common and best bang for your buck, plus there are plenty on the second hand market. These are great entry level or step up jets that are quite often owner flown or chartered. These super slippery, super stylish transporters include some rock stars of the jet world such as the Bombardier Learjet, Gulfstream G150, Raytheon Beechjet and Cessna Citation. Most aircraft around this category are looking at a cruise of Mach 0.75 to Mach 0.82 and a range around 2000 miles. Where they differ from each other is cabin space and range. It’s one of those scenarios where most operators start small then, as they discover more benefits of bizjet ownership, realize a need for greater range, comfort and carrying capacity. We’ll discuss how to do this in a minute.
Over 9,000 kgs and you’re in the super-mid to heavy categories and looking at anything from a Dassault Falcon, seating 10 people with a range over 4000 miles, through to a Boeing Business Jet seating 18 and stretching a comfortable 8000 miles. Of course, if you’re in this category, you’re probably ordering your next bottle of Moet somewhere over Europe at 35,000 feet and reading this article with a big grin on your face thinking to yourself, “I’ve made it!”
If you don’t quite make the rich list but you lie awake at night wondering how to make that 10am meeting on the other side of the country, fractional ownership could be your answer. This concept is big in Europe and America and now it’s taking off in Australia. Literally!
Fractional ownership is an idea that’s commonly applied to property, cars, yachts and yes, aircraft. High price tag items are often out of reach for even a well to do business operator, but fractional ownership can give you access to the ultimate business transport without the outlay and with added benefits over the option of syndication.
It works by allowing each owner to pay for their share of the aircraft, and associated upkeep. Ideally these owners have a common home airport and perhaps even similar favorite destinations. The aircraft is then available in equal share to each of the individuals, or business entities as they may be. Time share is allocated in flying hours, where a large fractional group might have a share cut 16 ways, equating to around 50 flying hours over the course of the contract. If, at any time, an owner wants to leave the agreement, the provider agrees to buy them out of their share at a fair market value, though there is usually a minimum commitment that must be paid before exiting the agreement.
All sounds like a lot of legal mumbo but, basically, a fractional ownership is a fair split, so long as the aircraft is available at the times you need it. The trick is deciding if it’s the right thing for you. There are some typical attributes of people or businesses suited to fractional ownership. For a start, you would presently fly at least those 50 hours a year to make it worth while. Why pay for something you’re not using! Additionally, you would find regular airline flights inconvenient as they don’t service your destinations, you tend to have multiple destinations, or you need to carry varying numbers of passengers and cargo. Most importantly, as a fractional owner, you would have a long term need for regular air travel.
If you make a lot of charter flights, this is where fractional ownership could save you some big bucks, as you are paying for flying hours you use, not necessarily the ferry charges or dead legs and so on, that a charter company would charge you for.
There are some benefits of fractional ownership that are the same as the benefits of aircraft charter. The most obvious is flexibility. You say when and where and, if you change your destination, it’s up to you. The only way that charter is potentially better is if you don’t fly often, or if you need drastically different sized or categorized aircraft each time you fly. For example, sometimes your business needs to take a team of 40 people and, other times, it simply needs to deliver a small package in a hurry.
Another financial reason for fractional ownership, or ownership in any capacity for that matter, is potential tax advantages. While every situation is different, in most cases a business operator can treat their share of costs as a business equipment expense. Better to be safe than sorry: make sure you check that one with your accountant before diving into an agreement in order to save tax.
Bragging rights can be all yours in a fractional ownership. A small stretch of the truth to your mates or enemies might translate, “I am the owner of a fractional part of an aircraft” into, “I own my own bizjet”. The latter sounds much more impressive and isn’t too much stretching of the truth.
If you do own and operate an aircraft but find it falling short of your requirements, you can go into a fractional arrangement in the interim to upgrading your aircraft. This may allow your business the time to grow and create the means for paying off your very own, wholly owned, jet or heavy transport.
Sharing ownership with others is a double edged sword. Fractional’s can be a slightly safer option that a syndicate, where private individuals generally make decisions collectively, because they are overseen by an independent managing party: the new Jet Group syndicate structure, however, goes a long way to addressing this issue. This means arguments between owners can be avoided: all the amenities such as hangarage, aircrew and upkeep are provided. In addition, you are free of worries such as wages, down time and paperwork. Should you want to leave the group, it’s much easier to do so without finding someone to buy into your share.
If it’s all sounding good then keep reading because there are a few downsides to consider as well. In some fractional agreements you can pay more highly for services such as fuel, general maintenance and aircraft care. Resale of shares isn’t always fair and reasonable, depending on the provider. So it’s a good idea to get to know the ins and outs of the agreement very well before you sign. If you would like more say in your share of ownership, then the other share type is a syndicate.
Syndication brings several financially interested parties into a group, where each member has a say, or a vote as to how the asset is managed, as opposed to fractional ownership where a provider does the managing for you. If the members get along well, have strong similar goals and are compromising, syndication can work well and be more flexible and affordable than a fractional arrangement. At the same time, usage still needs to be managed by a single source, usually leaving one member to be responsible for booking the aircraft. This is where a fractional ownership arrangement has its benefits.
Knowing which, if any, is right for you will depend on personal circumstances and it’s important to do plenty of research. That said, either a syndicate or fractional ownership might not have you on the rich list but perhaps a step closer to living the dream.