The cost of aircraft ownership is high, especially for the typical general aviation pilot. But there are ways to reduce the financial burden of buying an airplane, such as entering into an agreement with others to share the cost. There are different ways this type of deal can play out, including co-ownership agreements, partnerships, cooperative and fractional ownership. Here are the pros and cons of the common types of aircraft ownership situations.
As the simplest agreement of them all, co-ownership is as straightforward as owning an airplane along with someone else. The total cost is divided among the total number of co-owners, and each person is responsible for their share of the cost, including operating and maintenance costs.
In a co-ownership situation, each owner is listed as an owner on the bill of sale and aircraft registration certificate.
- Pros: Informal and simple. There is no need to go through a manager to use the airplane, and usually less restrictive, depending on the type of agreement.
- Cons: In co-ownership situations, there can be disagreements among owners with no leadership authority to make decisions. This can lead to animosity between owners. Depending on the written agreement, owners in a co-ownership situation may run into scheduling conflicts, maintenance disagreements, and financial disputes. Complications can also arise when someone wants to sell their share of the aircraft or if one owner decides not to pay their share.
Many people have entered into and survived co-ownership agreements with much success; others have failed and felt cheated. While co-ownership can save each owner a lot of money, it can also be a challenge to manage without a designated manager. Nevertheless, it’s the simplest way to go for casual pilots who would like to reduce the cost of aircraft ownership.
A partnership is similar to a co-ownership situation but is actually a business formed with the intention of creating a profit. Partnerships occur among flight instructors, flying clubs, and other commercial endeavors.
- Pros: Having multiple owners, or partners, means lower costs and increased profits for businesses.
- Cons: In a partnership, each person is legally liable for the actions of others, making this a riskier venture than a co-ownership.
A newer type of aircraft ownership category, a cooperative ownership agreement operates more like a time-share or condo investment. A cooperative owner buys the airplane and sells shares to one or more people. The burden of ownership lies with the single owner, who manages everything about the aircraft- hangar rental, insurance, maintenance compliance – and pays for all of it. The members pay a monthly fee to on top of an initial investment, and then just show up and fly.
- Pros: Cooperative members get a responsibility-free ownership experience. There are few scheduling conflicts, and they don’t have to worry about insurance, maintenance or any other costs besides their monthly fee, which is more than a co-ownership but less than a fractional ownership. The aircraft is managed by one person, eliminating the disputes that can be involved with co-ownership. The hourly operating rate is typically much lower than outside of a cooperative agreement.
- Cons: Cooperative members pay a fee for the management of the aircraft, and share the aircraft with up to four people. The aircraft cooperative manager has the final say in all decisions. If a member disagrees with him, the owner’s opinion trumps the member’s.
For an example of how a cooperative ownership works, check out Plane & Pilot.
Fractional ownership is one of the oldest methods of sharing aircraft ownership and is used commonly in the corporate environment and involving jet aircraft. Fractional ownership is basically a partnership with multiple buyers at the corporate level. Fractional ownership situations include an aircraft manager and management plan, and often the buyers enter into agreements for 1/6 or 1/8th of the aircraft.
- Pros: Jet aircraft are much cheaper when divided up into four, six or eight shares. Scheduling conflicts are rare, as most buyers enter into an interchange agreement that allows the manager to substitute a different aircraft for the buyer’s own aircraft, allowing the buyer to fly almost anytime they need to. The management company provides a flight crew, fuel, maintenance, and insurance.
- Cons: Fractional deals can become quite costly with the management obtaining a significant amount of money out of the deal in exchange for their management efforts.
More information on fractional ownership can be found at NBAA.