Supplemental Airlift: Fractional Ownership meets minority travel needs.
Are your business travel requirements starting to outgrow your current business aircraft- but not sufficiently or regularly enough to justify purchase of a larger or an additional company jet? Perhaps Fractional Ownership could provide a solution- suggests David Wyndham.
Afew years ago I had a client with a difficult set of air transportation requirements. They regularly flew up and down the East Coast of the US with three to four people. Rarely were they in the air for longer than three hours- yet several times each month they needed 10 to 12 seats on those trips. The client operated a single business jet that seated six- and was in a quandary as to whether a second jet of the same or a bigger jet with 12 seats should be purchased. Neither option was financially appealing to them.
Fractional ownership as supplemental lift can be a solution when you are faced with vastly different trip requirements. Imagine that shortrange trips with light passenger loads form 85% of your business trips. The other 15% may be international or require high passenger loads. A light jet or turboprop may be suitable for 85% of those missions- but the remaining 15% require something larger. A larger business jet is capable of flying 100% of those missions- but costs more to own and operate than the smaller aircraft – so adding a fractional share of a large jet would give you the needed capability for 100% of your missions- but at a lower cost.
GRADUAL ADAPTATION TO DEMAND
A second client utilized their business aircraft a lot (600 hours per year). They were seeing increasing numbers of refused trips because the aircraft was already booked. Demand was starting to exceed supply- and they estimated an 8-10% annual increase in their flying hours over the next five years.
If they got a second aircraft- their supply would be far greater than the short-term demand- but they felt confident that the demand would continue to increase. As with the first client mentioned above- the financial alternative of doubling their flight operation that particular year was not appealing to them.
Fractional ownership may be a good addition to an existing flight operation experiencing increased demand. At some point- utilization will increase to the point that the aircraft is flying as much as it can- given the schedule. A fractional share may be a way to bridge the inability to meet today’s flying schedule until demand increases sufficiently to justify a whole aircraft.
Both of the above clients needed additional air transportation- but both were only thinking in terms of whole aircraft ownership. By broadening their search for a possible solution to fractional ownership- a solution was found.
SUPPLEMENT- NOT REPLACEMENT
Note: In the case of both of the above clients- I suggested fractional ownership as supplemental airlift- not as a replacement for the wholly owned aircraft. The first client needed- and got- a bigger aircraft for the 25% of their flying that needed the 12 seats. The second client got a fractional share of an aircraft to meet their short-term growth needs while their travel needs expanded to a point that buying a second aircraft a few years down to road would make good financial sense. It is rare that a single aviation organization is able to meet 100% of the demand 100% of the time; especially those with a single aircraft. Fractional ownership may be a viable option to increase capacity- or add different capabilities. It also may cost less than a whole aircraft.
IDENTIFYING YOUR SOLUTION
Fractional ownership contracts are typically for a set number of annual hours for a fixed period- usually five years. While each case is different- the addition of a wholly-owned aircraft to your fleet can make sense where somewhere between 250 to 300 hours of additional travel is anticipated per year. If you anticipate approximately 100 additional hours- charter may not be the best financial alternative- whereas fractional could be. But- if you need approximately 50 hours in the near-term future only (while your wholly-owned aircraft is scheduled to be unavailable for heavy maintenance- for example) then charter or a jet card- as opposed to a five-year fractional contract is your best solution.
Look at the total costs to provide the service. Run the numbers. You have many options available and you need to consider all of them.
Fractional aircraft ownership may be a good supplement to your wholly owned aircraft. It can add new or expanded capability- and it may do it for less than the cost of adding another aircraft. Be prepared- however. It requires study and analysis- as do all good decisions.
Do you have any questions or opinions on the above topic? Get them answered/published in World Aircraft Sales Magazine. Email feedback to: Jack@avbuyer.com