Fractional Ownership or On-Demand Charter?

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Fractional Ownership or On-Demand Charter?

Over the past 5 years there has been a steady decline in fractional ownership programs. For one, the major tax benefits that came along with fractional ownership no longer exist. People are also just more hesitant these days to fork over such a huge up-front capital commitment on one specific type of aircraft.

To help you we compared fractional jet ownership with on-demand charter. This should help you identify a program that not only works with your personal schedule but also makes sense financially.

Fractional Ownership

The fractional ownership of an aircraft occurs when several owners share the private jet timeshare cost. This includes purchasing, leasing, and operating the vessel. Essentially, the owners purchase a share of the aircraft instead of having to fully pay for it on their own. Oftentimes the owners will have a certain amount of guaranteed hours of use available to them per year for their paid share.

On Demand Charter

You book an individual aircraft as you need it. You have the freedom to pay as you travel, enabling you to maintain maximum financial and scheduling flexibility. Aircraft availability is guaranteed and you will have the freedom to choose the aircraft that best suits your trip. Another major advantage of an on-demand jet charter service over fractional is, that you are not responsible for ongoing aircraft maintenance or acquisition fees.

Long term commitment and Costs

Fractional ownership requires a long-term commitment to your usage levels. Most agreements are for two – five years in duration, with very costly fees associated with early termination. If you or your business needs change, if you move, or any number of other potential situations arise over that five year period that will change your travel preferences, your fractional ownership remains in place.

With fractional ownership you are making a large upfront capital investment. With On Demand charter, it would take years of frequent flying to even reach that same amount of money. And with On-Demand jet charter, there is no long-term contract. Each individual contract applies only to the specific trip at hand.

Aircraft Flexibility

Many fractional providers have limited the number of aircraft they hold in their fleets to minimize their costs. If the aircraft they offer don’t truly suit your needs, fractional ownership may not be right for you. Too few fractional owners focus their attention on whether they are well-served by the capabilities of their aircraft. While you may focus on seating capacity, you should also consider range, speed, fuel usage, luggage capacity, Wi-Fi capability and more.

On-Demand charter offers you the ability to charter anything from small turboprops to heavy jets and everything in between.

Cost certainty

If you require cost certainty, fractional ownership may not be the way to go. Unlike private jet charter, with fractional you bear the risk that the value of your aircraft (and thus your share) may change significantly over time, so that it’s impossible to project with any certainty what your actual cost will be over the life of your investment.

When a fractional share is purchased through a business, most likely it will have to be disclosed on your books as a financial asset. This can be a touchy subject for shareholders, especially during tougher economic times. Charter flights on the other hand can be reflected as part of your company’s overall travel expenditures.

Conclusion

The goal of any private air travel investment should be to purchase maximum flight time on appropriate aircraft with a reputable and safe operator at minimum cost. Making the wrong choice can cost you hundreds of thousands of dollars in unnecessary expense. This doesn’t mean that a fractional share can’t be a wise investment. Just that there’s a lot more to consider than just the number of hours you fly each year.

Privaira

Our clients use private aviation because it saves time and money and you won’t find any contracts or indifferent treatment when you are a client of Privaira. We offer the flexibility of ‘on-demand’ service with no monthly maintenance or long-term commitment fees, plus a personal service to manage all the details of your flight.

Call us to speak with one of our experienced service agents to provide you with a quote for your next trip.

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