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Fractional Flying
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| Corridor Inc. Staff Writer Originally Published March 2007
The interior of Flight Options’ Legacy aircraft, which seats 13 passengers.
Alan Fabian doesn’t miss the hassle of airport security lines. The CEO of Baltimore-based consulting firm CMAT International Inc. and his staff now use that extra time to meet face to face with clients by way of a private plane, which Fabian is partial owner of through a fractional aircraft program. “It’s an extension of our work environment,” said Fabian. “We fly somewhere, meet with a client and then are back home by dinner. Without this form of travel, I’d have to take days off.”
Fractional aircraft ownership is a partial ownership in an airplane. The fractional costs, based on the size of the aircraft, are directly proportionate to the number of flight hours used within a year. Owners also pay additional fees to cover management and operating costs. In 2005, Fabian acquired a fractional share of a private plane for a five-year period from NetJets, one of the largest fractional aircraft firms. Fabian and his staff fly in and out of Baltimore/Washington International Thurgood Marshall Airport to conferences and meetings with investors on a regular basis. Fractional aircraft ownership is an alternative to owning an entire aircraft, chartering one or purchasing commercial airline tickets. “It gives you all the benefits without the hassles of flying,” said Ray Bennett, vice president of sales for Flight Options LLC, a Cleveland-based fractional aircraft provider with 140 airplanes in its fleet. “It more or less turns it into your turnkey aircraft because you have a backing of an entire fleet.” A fractional share is sold to multiple owners on the basis of 800 flight hours per year and sold in fractions as small as one-sixteenth. Sale prices vary according to the aircraft type, size and lease period.
The Hawker 800XP, which seats eight passengers, is part of Flight Options’ fleet of 140 aircraft.
Flight Options currently lists the sale of a one-sixteenth share of its most common aircraft for $203,750, leased for 50 hours a year over a five-year period. The company lists its luxury aircraft for $765,625 for the same period. NetJets, occupying 70 percent of the market, has over 650 aircraft in its fleet with 570 in its fractional program. The company adds 50 to 70 aircrafts a year with an average aircraft life span of 10 years. Richard Gaccione, senior vice president of NetJets Eastern division, said the company’s growth is due in large part to Warren Buffett’s Berkshire Hathaway Inc., which purchased the company in 1998 and advocated fractional programs. “The market and economy is creating more wealth and people don’t want to spend money to wait,” he said. “Convenience, time, safety and comfort is what it’s all about.” NetJets’ entry-level business jet starts at $412,500 for a one-sixteenth share, also equivalent to 50 flight hours a year, for a five-year period. “The less time in an airport the better,” Gaccione said. “If you fly more than 25 hours a year it’s worth it.” Bennett attributes fractional growth to accessibility and convenience. “It’s really the process of getting to the airplane,” he said. “In most cases, you have the ability to drive your car to your aircraft and you know who’s flying and managing it.” The Baltimore-Washington region is a strong attraction, Bennett said. “When we look at the market, the Eastern seaboard has always been a big pull,” he said. “It’s an area with national leaders of our country and the draw of corporate leadership has increased our business. With the age of mergers and acquisitions, we are seeing a lot more business travel.” Economically, fractional ownership makes sense, Gaccione said. “If you are only going to fly between 50 and 400 hours a year why buy a plane when you can buy a share?” he said. “With fractional, you go when you want to, not when an airline tells you.” Gaccione said it is important to focus on safety records, pilot training, maintenance, fleet and aircraft size and the financial backing of companies. “You buy only what you need but have access 365 days a year, 24-7. You are guaranteed availability,” Gaccione said. “The only downfall is if you want to customize the aircraft, we don’t do that. You buy into a fleet so people may buy one plane but get its twin sister.” Ultimately, fractional investment is another way of doing business, Fabian said. “It’s no different than paying rent on an office,” he said. “We pay $2,300 an hour and often that’s split between five people so it’s basically a pricey first-class ticket.” ::
