Fractional Ownership - how does it normally work?

[headphones]

Hello all,
I'm a new PPL and thinking about diving into the wold of airplane ownership. For my current situation fractional ownership is really the only option, but I can't seem to find much info on how it works for the kind of planes I'm interested in. There are a few sites that are dedicated to fractional ownership of new/expensive planes, but if I were to set this up between three others and myself and purchase a $40k, high-time, mid-60's Piper Warrior, how would this type of thing typically be managed?

Specific questions are:
1) How are the $/hobbs normally figured?
2) How are monthly costs split (by fractional use that month, or a set %)?
3) How is large maintenance normally dealt with (buy-in time engine reserve, or part of the $/hobbs)?
4) How do you insure a fractional ownership plane?

I'm sure I will come up with more questions as I go, but any help or resources that you know of would be great.

I'm in Vancouver if this affects any of these answers.

Thanks!

[howard40]

Well I think the warrior came out in the 70's.
I think fixed costs are just that, fixed so split on %
I think like oil changes are pro rata as are brake pads , tires etc.
Annual inspections are fixed So %
Radios dont care about hours so %
Best partnerships work when partners fly about the same amont
or if 1 fella owns the plane and rents to a couple of trusted buddies..
Partnerships often have folks looking at the half MT part of the glass instead of the mostly full part... human nature..

[jump154]

COPA has a great gudie on their website, if you are a member. If not, become one - worth it just for this and other guides.
As far as I can see, it is really up to you how your partnership works - they give several different models. Main thing I walked away with is make sure everything is written down, even the bad stuff, so when it happens you all know what you agreed.

[headphones]

Great, thanks for the replies. I'll try to keep my eye on the full part of the glass...

[Grantmac]

Never buy into something you can rent, or rent with similar capabilities. Unless you want to treat it as a short-term time builder and you get exactly the right aircraft, you will find yourself behind in the long run.
If however you happen to anjoy aircraft which nobody will rent to you and you have (a lot) of extra income kicking around then there is nothing better than firing-up your own aircraft and flying "just 'cause".

-Grant

[headphones]

Hi Grant,
I have gotten this advice before and it makes a lot of sense (however, the last time I got it, it was a bit more uncouth: "If it floats, flys, or f**ks, you should rent it"). The problem that I have run into is rental daily minimums. The place I rent from has a 4 hr daily minimum on their aircraft and that comes to $600+ to have the plane on the tarmac at my destination (I may not want to return on the same day).

Is this typical? Maybe I Should be looking for a new rental agency.

[Grantmac]

I've usually seen 3 hours.
$150/hr isn't exactly cheap for a 4-place AC, where you located?
Fuel is the cheapest thing that goes into my plane, so I try to use a lot of it.

-Grant

[headphones]

I'm in Vancouver and fly with Canadian Flight Centre out of Boundary Bay (CZBB). I can't remember the exact amounts, but the plane come to around $135/hr and there is a (currently) $22.50/hr fuel surcharge.

I've always thought this seemed like a lot, but as a new pilot I don't have much to compare to.

Taking a quick look in my area, the Pacific Flying Club rents a Warrior II or 172 at $125/hr with a surcharge when fuel exceeds $1.25/L (which is always), and the places at Pitt Meadows go from $128-$150/hr for 4 seats.

[AirFrame]

I'm in Vancouver and fly with Canadian Flight Centre out of Boundary Bay (CZBB). I can't remember the exact amounts, but the plane come to around $135/hr and there is a (currently) $22.50/hr fuel surcharge.

I hope that's a typo. $22.50/hr surcharge? I'd buy an airplane, just to avoid getting screwed by a flying school that treats you like an idiot by surcharging for fuel. Next there will be a wheel chock surcharge, and a control column surcharge.

[Grantmac]

When I fly 10hrs/month my aircraft is about $100/hr.
20hr/month brings that down to $70/hr.

Of course that is with a no-squawk annual and no upgrades. I'm currently in a rebuilding phase of this planes life so I envision two large future costs which would put the per hour prices higher than you are paying. The only thing that makes it worth while is making my own schedule, getting to fly something which is much more interesting, pride of ownership and being able to operate where I please.
Cost is not one of the factors.

-Grant

[Beefitarian]

I hate to defend high rental costs but..

I envision two large future costs which would put the per hour prices higher than you are paying.

Does explain their side to a degree.

They need to upgrade their planes to stay marketable. Hopefully in addition to fixing extra wear from renters treating the planes like they are "rentals." they will maintain them to a high standard.

I don't care about a new paint job but many renter/students do. Some go as far as wanting the new planes even those silly glass panels and are willing to pay even more for them. Tough to believe I agree. But it's true, one place here had a "Fleet upgrade surcharge." I'm thinking, "Say what?"

If the hourly cost to operate and upgrade are high they have to add more to make money. They are in business to make a profit forthe owners not provide me with a plane to enjoy unfortunately.

[headphones]

Hi all,
This is a very interesting discussion and I'm learning a lot. I still don't see how fractional ownership would end up being so much more expensive. I posted with an open question, but there is actually a plane I'm interested in: a Piper Charokee 160, 1/6th share. I'm meeting one of the owners later this week and was hoping not to go in blind and to get an idea of what the cost burden would be... It sounds significant. There is also a possibility of a share in an Aeronca Champ, I'm not sure what the share ratio would be on that one, but I'm thinking 1/3 or 1/4.

Grant, I did the math on your numbers (x+10y = $100/hr*10hr = $1000, x+20y = $70/hr*20hr = $1400, x: fixed cost, y: hourly rate) and came up with $600/mo + $40/hr. I know these are just estimates, but they seem very reasonable. I'm not sure what you are flying, but the 1/6th share could be quite affordable for me if it's operated on a non-profit basis.

[Beefitarian]

To use your $600/ month fixed cost and $40/hour fuel and what have you. If you fly 3 hours in a month it costs $240 per hour.

Get partners and you split that fixed cost but also run the risk of, "Who broke this?" next time you fly the plane. Or, "I wanted to fly saturday but my partner has the plane in Antartica."

The benefits are, hopefully whoever broke something cares enough to want to fix it also, they may even do it right after it happens, and scheduling conflicts occur less often.

If you fly often it's less expensive to own. It used to be around 100 hours per year. So if that is correct still, and as long as you're flying more than 2 hours every week you should save money owning over a rental. If not you're spending more than you would to rent, however people are not abusing the plane as much. That is why if you're married renting is probably the way to go.

[Grantmac]

Beef:
Your figures are pretty close assuming no major work is required, but it will be. Conversely the value in well kept aircraft does go up, but not in porportion to the money spent on them.

Headphones:
Go for the Champ if its nicely kept in a hangar. Rent a 4-place if you need to haul anything. Dragging 3 empty seats around gets old in a hurry and the champ will teach you more about flying per dollar then just about any other aircraft.

Long story short: unless you can afford to light $1000 on fire just to watch it burn on a monthly basis, owning an aircraft probably isn't for you.

-Grant

[Beefitarian]

I left out the fact that, that is only the cost to operate the plane. If you needed a loan to buy it the interest cost will be extra.

[headphones]

Thanks guys, I guess I'll stick with the flight school for now...

[capt.pilot]

Don't rule out fractional ownership.

I was a part of a fractional group at ZBB in a Cherokee and my experience was fantastic. I basically bought a share in a corporation and the asset of the corporation was the aircraft. It cost me an up front capital payment then the monthly fees covered annual insurance /and hangar rent / hangar expenses. The hourly fees covered, fuel, engine reserve / hull damage, and maintenance fees. An AME was on call if we needed one, and it was billed to the corporation and then if there were any overages the partners had to come up with the money, but that was never the case while I was there. Not to say it couldn't happen but it didn't for me.

In a nut shell it cost approx $5000 for a 1/10 th share up front, $95.00 Per month, and $60.00 per hour.. So if you flew 2 hours a month minimum You are cheaper than renting from a School. Plus with the engine reserve and maintenance fund, you basically were getting a zero time engine aircraft, cause the fund always stays with the share if you decide to sell it.. For me it was cheaper than renting to acquire the hours, cause I managed to sell the share for what I paid for it.

Insurance for the plane is a bit of an issue, and you can go a couple of ways, buying all risk insurance can be costly because you have to insure to the lowest common denominator, so if you get a guy that wants to use it as a training aircraft to get his license, he's essentially a Zero time pilot and the insurance would be really expensive, then if you have multiple partners in our case 10, it also increases your costs. So our solution was to buy liability insurance, and then self insure the hull for collision or damage. That can only be done if everyone agrees to rules regarding damage and payment for damages should they occur. There was almost sufficient funds in the insurance fund when I was a partner to buy a used plane with an expired engine, and then use the engine fund to overhaul the engine. So in a nutshell I wasn't concerned. But then there always is the wild card, that something goes wrong and you are left holding the bag..

I think it comes down to what do you want to do with your license. If its simply a PPL and hobby flying, a school rental might be a better option, but if you intend on something longer term and travel for longer periods avoiding those 4 hour minimums going for the elusive $100 hamburger or pie, then the fractional option is something that shouldn't be ruled out.

Just my $.02 based on my experience.. Go meet the guy with the Cherokee or the Champ and see how its structured then do the math and work it out. You will figure it out..

[headphones]

Good morning Capt.
Thanks for the local perspective. It is nice to get the flip side of the coin. I am meeting with the "company" about the aircraft tomorrow. My contact happens to have shares in both the Charokee and the Champ, so I can kill two birds with one stone (figuratively speaking).

From what you say, it seems the just about the most important thing is to keep an eye on the cash reserves of the company. There should be enough money around to fix just about any issue and the members need to be stable enough to repair their own damage. Know your partners...

[Expat]

When I started flying, five of us students bought a 150 from a friend at the airport. We all used it to get our licenses. We basically hired an instructor to teach us on our plane.
Then, slowly, the others left the partnership. I ended up owning the plane. I sold it, and used the money to buy 50% of a C-172, which I used to get the CPL.
The partner eventually left, and I ended up owning the plane by myself. And 1000 hours, and no debt.
A partnership is the best way to get you into ownership. It gives you the freedom to fly when and where you want. I never had booking issues with the others, as it turned out they almost never flew.
Go for it. Do not rent if you do not have to.
The joy of driving to the airport at midnight with the gf, and going for a night spin cannot be beaten...