Fractional Aircraft Industry

Florida Institute of Technology

Strategic Management – Bus 5480

Fractional Aircraft Ownership

Mini-Paper #1

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Professor Anthony Iaquinto

September 20, 2015

Submitted by:

Jeff Holder

ABSTRACT

Aircraft ownership is an appealing consideration to many travelers. In the past, privately traveling by air meant purchasing and managing your own aircraft (major capital outlay with corresponding time-consuming fees and maintenance costs) or chartering flights from someone else (expensive and erratic schedules). Individual ownership of an aircraft offers freedom from limited commercial airline travel schedules and the convenience and ability to travel when and where you want. During the 1980’s there emerged a new opportunity in private air travel. It was referred to as ‘shared-us’ or ‘fractional’ ownership. “Buying a share in a fractional jet follows the same basic principal as fractional real estate. You are paying for part ownership of a plane, and thus an allocated amount of time in the aircraft (Sherpa Report).” It made private air travel easier and more affordable. This mature but fragmented industry is constantly evolving and the choice of options, although smaller today, can vary as well. But one major provider, NetJets, stands out in this industry.

INTRODUCTION

An aircraft fractional ownership program is simply an expanded structure of co-ownership of managed private aircraft. What is expanded, compared to just a co-ownership of one aircraft by more than one person, is (1) the number of planes being managed, and (2) the right of a fractional owner of one airplane or jet to use another aircraft owned by others in the fractional group. Fractional programs cover payment, costs, specified areas of aviation capability to be provided such as aircraft maintenance and repair, scheduling, identifying flight crews, training, etc. The aircraft fractional ownership model is “Multiple aircraft available to multiple owners.” To meet that challenge of operating capably the fractional aircraft company could be given only a few hours’ notice to provide fully rested pilots and an aircraft fueled and ready to go at any airport of the owner’s choice so he or she can make a business meeting a thousand miles away. Not an easy task to accomplish economically and safely.  The ultimate goal is providing the highest level of service with an impeccable safety record. 

THE INDUSTRY COMPETITORS

There are many fractional aircraft industry competitors to consider with many different operational models and footprints. Some fractional programs are small with only a few aircraft and may only serve a regional market. They may only have aircraft based at only one or two airports. These smaller regional programs typically have more restrictions on where they will pick up or drop off and can charge extra if the trip does not begin/end at the home base of the aircraft. Other programs, serving national and international markets, are large businesses with abundant aircraft of various models and capabilities. Customers of some of these programs can have a pick up at any suitable airport in the U.S. and be transported to parts of the Caribbean, Canada, Mexico, Central America and Hawaii.