I am new to COPA, but I have been interested in the Cirrus aircraft since my wife obtained her private pilots license. She is on her way to getting an Instrument Rating and after that we hope to have some sort of personal aircraft to take trips in. Since I’m the finance guy in the family, I was wondering if any of you have had experience with fractional ownership programs for general aviation aircraft. There seem to be a few out there and, being new, I was not sure if the costs involved in fractional ownership outweigh the benefits versus starting a partnership. Any advice or personal experiences would be appreciated.
There’s a company based in the Atlanta area, Airshares Elite (www.airshareselite.com), which has something like 25 SR22’s on order which will be sold in fractions. They and others are looking to expand this concept to other areas.
With Airshares, the cost is something like: $50,000 for 1/8 ownership (75 hours/year), $500/mo for ALL hard costs (maintenance, insurance, etc. is paid by Airshares – the monthly you pay is fixed), and actual usage costs (maybe $55/hour for fuel/oil). They will keep a plane for four years, then sell it (so you can cash out if you want), and you can buy into a brand new airplane. Cool setup. Even cooler is you can reserve it online or by phone and when you get to their base a plane is ready (might be yours, or it might be another if yours is out on a trip), washed and stocked with your favorite snacks – just like if you fly on a fractional jet.
Wish they had a base in my backyard. I think this concept will spread in the single/twin piston market just like it has in turboprop/jet markets. If you put a pencil to it, and are honest about how much you use an airplane, this concept is much more attractive than owning the whole enchilada.
Interesting, about 2yrs ago I did a lot of research into fractional ownership. I was very close to starting my own co. But I realized that I would have had to give up my day job. I had worked out details including fixed and variable costs. At that time I had planned to sell 1/4 share of a SR 20 for 56K 260/mo and 55 dollars per hour. The 1/4 share would get you 125 hours per year. You had to pay the 55/hr time flown or not. At the time income per plane was about 40K per plane sold, up front and about 2500/mo/plane. Not bad, I thought, but in the end, the time just was not available. I would not be opposed to taking another look if someone else has an interest. Mike SR22 316
Thanks. Would you happen to know their URL? When I type Aviation Consumer in Yahoo it only brings back five entries, none of which are the correct one.
I checked out Airshares Elite on the Net and it does sound intriguing. They need to expand a little closer to home, but who knows, maybe they will take off and be the McDonalds of general aviation. One question, how does the transaction work at the end of the contract period? For instance, how much can I reasonably expect of my 50K equity share position to be left to invest in the next line of new Cirri?
Great question. I would assume if you bought 1/8, you would get 1/8 of the net proceeds of sale. I have talked to Airshares representatives, but haven’t asked to see their agreement to see what they will charge fractional owners as a “sales” fee when the planes are sold. But you are a 1/8 equity owner, so you should expect to get a decent chunk of your money back. Not sure about financing terms, but I do know fractional shares can be financed. So if you financed it, you might run the risk of owing more than you get back.
The key variable is what will an SR22 with about 2,400 hours (they will only sell 600 hours/plane/year), 400 SMOH, be worth four years from now? If there has been price inflation on new planes, you might actually get most of your money back.
It’s not a perfect world, but it sure seems like a good deal. Said another way, it’s absolutely no different from trying to decide whether you want to buy that condo in Hawaii for $500,000 or buy a two-week timeshare for much less. In other words, do you want to only pay for your actual use?
Let’s hope some of the fractional jet management companies diversify into piston planes.
One question, how does the transaction work at the end of the contract period? For instance, how much can I reasonably expect of my 50K equity share position to be left to invest in the next line of new Cirri?<
That’s a real good question. Expecially considering they sold the $300,000 plane to (8) people for $400,000. If I ran that business (which sounds more like an airplane dealership to me) I would be buying new aircraft and replacing the old as fast as my fractional owners would pay up. Don’t get me wrong, there is absolutely nothing wrong with the concept of fractional ownership, I just don’t think there is enough competition out there to get the cost in line with what you are getting. Personally, setting up your own ‘fractional ownership’ program with two or three people of your choosing is a much better option to me and doesn’t cost much more.
One man’s opinion.
Thanks to everyone for the information. It appears from your posts this industry is still in it’s infancy regarding the single engine piston market. However, it offers pilots an opportunity to fly newer aircraft without the significant capital outlay or ownership risks. When you remove the financial considerations, it truly boils down to personal preference. I still would like to see more competition in the market for fractionals in order to drive the supply up (and subsequently the price down), but only time will tell if the concept catches on. Like they say, you can’t have your cake and eat it to.
Thats exactly what my 3 partners and I did. Each kicked in 50k for an SR20, B model which covered all delivery expenses, training, tax, etc. We now pay 250 a month and 55 an hour wet which also covers mx. Been doing it for a year and a half and it has been working out great.
You make a great point. Airshares and OURPlane both are businesses which are profit incented. If they weren’t, I wouldn’t do a fractional deal with them. Are the profit margins higher now than they will be in 5 years? No doubt.
A fractional program will have economics that (at first blush) don’t make sense. Why would I want to be part of a group that pays $400,000 for a $300,000 airplane? I think part of the answer might be:
While I’m buying a fraction of my airplane, I get to use someone else’s airplane when one of my “partners” is using mine. A word to the wise – don’t do a fractional deal if there is only one airplane in the “fleet”. Fractional only makes sense if you have access to an airplane whenever you want to go flying.
I am paying a “professional” to manage my airplane. I don’t have to worry about whether the annual was done on time or AD’s complied with. I’m lazy – I don’t even want to wash the damn thing – I just want to arrive and fly.
I don’t know 2 or 3 (or 7) other folks I trust enough to go equal shares on a plane. It would be cheaper, but if I can’t find partners with equal motivation.
My flying expenses are fixed. “Fixed” expenses (acquisition cost, maintenance, insurance, etc.) are truly fixed in a fractional program. If an out-of-warranty repair is needed or other unplanned expense is incurred the fractional operator absorbs that expense. The only variable is a usage fee (hourly or actual out-of-pocket fuel/oil), which is direct relationship to my use of the plane.
Again, for me what it boils down to is that, while I could afford to buy a SR20 or SR22, I can’t afford to own one. Too big of an investment for the time I would actually use it. I know I will pay a “premium” if I do a fractional deal, but the real question is “is it worth it?” The answer to that one is very personal.