3. Program Characteristics 

 

 

 

Private Jet Travel: Understanding the Options  

October 2003 

 

3-2

other aircraft in the Fractional Ownership program.  This contract, by and 
between all Fractional owners in the program, allows an owner of one specific 
aircraft to use an aircraft owned by another group of individuals.   
 
As you will be taking legal ownership of an aircraft share, the documentation 
involved in Fractional Ownership is fairly substantial.  While outside advice is not 
necessary, it is common. 
 
Financial Considerations of Fractional 

The Fractional programs, whether new or used, generally follow the same 
financial model.  Payments fall under three categories: share acquisition cost, 
aircraft management fee, and an occupied hourly charge.  The acquisition cost 
reflects the shareowner's portion of the "sticker price" of the aircraft (i.e., a 
quarter share owner will pay 25 percent of the price of the aircraft).  The "sticker 
price", however, could be wholesale, retail, retail-plus, or anywhere in between. 
The program typically agrees to repurchase your share at the end of the term for 
"fair market value", less a remarketing fee.  You assume the risk or reward as the 
value of the aircraft changes during the ownership period. 
 
The  management fee is typically paid to the Fractional program on a monthly 
basis.  The amount differs by the type of aircraft involved and the size of share 
owned.  The fee is meant to cover fixed costs such as pilot salaries and 
expenses, insurance, and other miscellaneous costs.  As contract terms can 
often last five years or more, most programs include escalation clauses on the 
monthly management fee (often a derivative of CPI). 
 
The  occupied hourly rate is the amount paid for each flight hour used.  The 
bigger the aircraft the higher the rate. Fuel and maintenance are the biggest 
drivers of this fee.  You pay for the time from takeoff to landing, with most 
programs adding time (typically 1/10 hour) before takeoff and after landing to 
compensate for time spent on the ground (e.g., taxi time).  Most programs have 
set one hour as the minimum flight time charged.  The occupied hourly rate is 
often escalated based on a CPI derivative, with a separate adjustment for the 
price of fuel. 
 
The major Fractional programs do not directly charge you for any type of 
repositioning flights (i.e., flights required to move the aircraft to where it is 
needed, flights to maintenance bases, etc.).  Expenses associated with these 
flights are "built in" to the program rates and spread among all the shareowners.  
Of course, a large network of aircraft allows programs to more efficiently serve 
customers' trip requirements. 

 

If you live in a relatively remote area, Fractional (or Block-Frax - see next section) 
may be the most economically viable options.  The Fractional operating model 
does not penalize inefficient travel or levy a fee for positioning flights as others 
do. 
 
Fractional is usually a great value for users with high annual travel requirements 
or from a per-hour perspective over multiple years.  In addition, the highly 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fractional fee 
structure 

 

 

 

 

 

 

 

Unique Fractional 
benefits