Wealth

Fractional jet ownership provides the perks of a private jet with fewer expenses and responsibilities.



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Fractional jet ownership works for Vic Flegler. A 1/16-share owner of a six-passenger Citation CJ-3 from CitationShares, Flegler travels often between his homes in Palm Desert and Tulsa, Okla. “It makes sense for me because there are no headaches to worry about,” says Flegler, a private pilot himself. “Premier programs offer newer airplanes and are tight on pilot experience, which makes me comfortable.”

Major fractional jet companies include Netjets, Flight Options, CitationShares, and Flexjet. Industry pioneer Netjets counts Tiger Woods, Andre Agassi, and Pete Sampras among its fractional owners.

A 1/16 share is the industry-wide minimum purchase; it equates to 50 hours of annual flying time. Owners also pay a one-time acquisition cost and monthly management fees. Additional hourly fees cover flight-specific operating costs such as fuel, maintenance, and catering. You purchase your share in a specific class of aircraft and each time you fly are guaranteed that class or better.

Penciling out fractional ownership can be complex. For example, Flight Options’ Fractional First program costs, depending on the aircraft, from $278,125 to $1,531,250 for a 1/16th share. Monthly management fees can add another $6,479 to $13,146. Hourly rates range from $1,517 to $2,094.

 “The real financial kicker is the residual value which comes at the end of the five- to seven-year ownership term,” Flegler says. “You don’t know until you sell what you’ll get.” Be cautious of sales people touting a 75 percent residual value. In reality, you may get only 40 percent back. “Don’t purchase more aircraft than needed figuring you’ll make out on the back end,” Flegler cautions.

Creating a “mission profile” detailing where you’ll fly, how often, and how many passengers you’ll carry narrows down aircraft choice and what size share you’ll need. If you aren’t a light traveler, pay attention to luggage capacity.

According to David Norton, a Dallas attorney specializing in business aviation at Shackelford, Melton & McKinley, the estimated annual number of flight hours is a determining factor in fractional ownership. “If you fly less than 50 hours annually, then economics point toward chartering,” he says. “Conversely, more than 200 hours flying time and full ownership may make sense.”   

Fleet size and age also count: The company must have enough planes to provide on-demand access, and newer aircraft typically offer better safety.

Most major fractional companies need only eight hours advance notice. Then you simply meet your aircraft at a general aviation facility such as Atlantic Aviation in Palm Springs or Million Air La Quinta in Thermal. Flight Options racked up 1,035 arrivals and departures out of Palm Springs in 2005 and 780 between January and September 2006.

In addition to safety records, pay attention to flight crew training. Do they use simulation exercises on a regular basis? And if your travel needs require landings and departures at smaller airports, check the type of aircraft that can be accommodated.

Before making the financial commitment, check with a CPA knowledgeable on fractional jet ownership, as IRS laws have recently changed. There are also FAA issues involving fractional jet operation that need to be considered. Your fractional provider should review them with you in detail. Transparency to the cost of fractional ownership is essential in determining actual costs. Consulting an attorney is well worth the legal fees.
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