Fractional ownership - how has it worked out for you?

[wade.sam]

Recently licensed, about 60 hours. I'm considering fractional ownership of a small airplane down the road, but it's not very common in Europe where I'm based so there's little first-hand experience around me to learn from. For those who've done it how did it work in practice? What surprised you, good or bad? Would you do it again?

 

[Ashara Keliyn]

Worked for me, 50/50. My advice would be, don't do it with a friend or someone close. As they say, the cost of going into business (and it is a business) with a friend, is the friendship itself. I was introduced to my partner by a mutual friend, and he vouched for both of us. Find someone trustworthy, and make sure you have a solid operating agreement that covers everything. We split everything evenly, each buys our own fuel, and on top of a preset monthly payment into the reserve account, we also have hourly flat usage rate. Yes, sometimes we don't agree on certain things, but nothing substantial so far, never hit an impass yet. Other than finances, we both are contributing according to our skills. He's really good at administrative tasks and in general talking to people and making things move. I cover the technical aspects, ADs, industry connections etc.

 

[MountainDude]

Worked great for me. Allowed me to fly for 10 years at 1/3 fixed costs.
Potential drawbacks are scheduling conflicts (so set the rules) and upgrades (some members want them, others don't, so clarify that in the bylaws).
Enjoy

 

[schmookeeg]

Probably not an issue for what you have in mind, but stick to the most common basic plane with the broadest possible market, so a C172 or similar. Otherwise you end up trying to sell your share in (obscure plane) at (specific place) which makes your market nearly unaddressable and your equity near illiquid..

 

[Bell206]

I'm considering fractional ownership of a small airplane down the road, but it's not very common in Europe

FWIW: You may want to revise your terminology in this quest from "fractional ownership" as this term tends to apply to specific regulatory requirements like EASA Part NCC and FAA Part 91 K, which is well outside your requirement. Owner partnerships or group ownership is what I believe is used for private operation co-ownership under Part M or Part ML under EASA rules.

 

[wade.sam]

Thanks all, this is exactly what I was hoping for. Couple of follow ups if you don't mind.

on top of a preset monthly payment into the reserve account, we also have hourly flat usage rate

How did you come up with the numbers? Is the monthly only for engine/prop or does it cover hangar, insurance, annual too and the hourly is just for the engine? Also curious what your agreement says about one of you wanting out, how do you value the share?

Potential drawbacks are scheduling conflicts (so set the rules) and upgrades

What rules did you end up with? I was thinking a simple rotation (partners take turns getting first pick on weekends) would avoid most of the fighting, but I have zero experience so maybe that's naive. Also, are you still in it after 10 years?

which makes your market nearly unaddressable and your equity near illiquid

Hadn't thought about that at all, thanks.

Owner partnerships or group ownership is what I believe is used

Got it. Thanks!

Also for anyone: did any of you join as the low time partner (I'm at ~60h) and what did insurance say about it?

For reference, a 172 rents for ~€200/hr wet here, a decent used one is around €60-90k and I don't know of a single group within 200km. Looks too good on paper, which is why I'm asking

 

[ateamer]

It worked very well for me, up to a point. 10 of us owned a 172 together. We each paid 10% of the fixed expenses (hangar and insurance), 10% of maintenamce bills, and an hourly rate that covered gas, oil, and enough for the engine overhaul fund. I flew it more thsn the other nine combined. In the eight years I was on board, three never flew, two flew twice a year at most, a couple flew maybe once a month. I flew once or twice a week. They were subsidizing my flying.

The downside was the spending. One of the guys wanted an autopilot. He flew once a month or less, day VFR, never further than 40 or 50 miles, and wanted an autopilot. He was able to to convince six others to vote for it, so we all got stuck paying for it.

I sold my share after an annual was supposedly complete and the plane was ready for a post-maintenance flight. I drove to the airport and found the inspection plates on the belly open, 13 screws not even finger tight, and a wing root trim strip installed backward. The same deal with the inspection plates had happened the year before. Plus, the plane was flying less and the engine was past TBO. Running fine, not burning oil, but an overhaul sooner than later was inevitable and we didn’t have anywhere close to enough in the bank to cover it.

 

[TCABM]

For the past six or so years, I’ve been in a flavor of an equity partnership operating a 172 and a 182. Until the partners started operating in a business-like manner, it was sheer luck that kept the partnership afloat. Since that transition, it’s been much better from a fiscal perspective and from an operational and availability perspective.

We thoroughly vet potential partners when a share sales. We inform them of the minimum capital outlaw annually (equal share of fixed expenses), any capital campaigns underway, and we share our financials as well. Our hourly rate is dry and covers variable expenses + maintenance reserves. We maintain a proper set of books, we socialize more than just the annual business meeting, and we clearly communicate “you know may be able to fly cheaper elsewhere; if that’s your goal, we encourage you to pursue it.” We’ve had past owners “downsize” their partnership into a 3 or 4 person co-ownership path as well.

 

[midlifeflyer]

Recently licensed, about 60 hours. I'm considering fractional ownership of a small airplane down the road, but it's not very common in Europe where I'm based so there's little first-hand experience around me to learn from. For those who've done it how did it work in practice? What surprised you, good or bad? Would you do it again?

What do you mean by "fractional ownership"? There's an FAA-specific definition that applies to larger aircraft. Assuming you are talking about the more generic English meaning, are you saying private airplanes in Europe are rarely if ever owned by more than one person or in a small company (LTD, BV, GmbH, etc) made up of a group of pilots?

 

[vupilot]

The club model has worked great for us. 1/15 share in a 1965 Cherokee 180, bought in for about 4k in 2018. My share is now $8500. Monthly dues have gone from $90 to $140. Hourly is $30 per tach hour, plus your own fuel. With that since 2018 we have been able to do a full Garmin panel upgrade, a factory reman engine exchange and paint job. We have only ever assessed $500 per member (to bridge the gap on paint). Like any club about half the people are active, the other half are happy to pay dues and own an airplane they seldom fly, which is great for scheduling. I have since also bought my own airplane outright (Decathlon) but have kept my share in the club Cherokee. The Cherokee runs me about 5k/yr to fly 40 hours. The Decathlon runs about $12,500 to fly 80 hours/yr

 

[wade.sam]

What do you mean by "fractional ownership"? There's an FAA-specific definition that applies to larger aircraft. Assuming you are talking about the more generic English meaning, are you saying private airplanes in Europe are rarely if ever owned by more than one person or in a small company (LTD, BV, GmbH, etc) made up of a group of pilots?

Generic meaning - 2 to 4 pilots co-owning a light single. Bell206 already corrected me on the term, co-ownership from now on.
And no, I overstated it. In the UK, Germany or the Netherlands a group owning it through Ltd/GmbH/BV is normal. Where I am (Romania) it basically doesn't exist: people fly through aeroclubs/schools or own alone and I don't know of a single group within 200km. So the model exists in Europe, there's just nobody nearby I can ask over a coffee. That's why I'm asking here.

we didn’t have anywhere close to enough in the bank to cover it

How did the fund end up short? Was the hourly set too low from day one or did the money get used for other bills along the way?

Until the partners started operating in a business-like manner, it was sheer luck that kept the partnership afloat.

What actually changed and what triggered it?

 

[ateamer]

How did the fund end up short? Was the hourly set too low from day one or did the money get used for other bills along the way?

The hourly rate was too low. It had been set years earlier when the plane flew more often, and when prices were lower. I tried to get the rate increased but was a minority voice.

 

[TCABM]

… Where I am (Romania)…

Beautiful country. I’ve done some work in Costancia and the Black Sea resorts area.

 

[TCABM]

The hourly rate was too low. It had been set years earlier when the plane flew more often, and when prices were lower. I tried to get the rate increased but was a minority voice.

Not unusual. Our partnership/club operated that way for a while until faced with having to equip for ADSB. The ensuing capital campaign was dependent on/forced a change in financial model. The people funding the upgrade as a private loan unknowingly set in a place a 10-year journey to where we are now, which is well capitalized with two very well equipped & maintained aircraft along with a healthy reserve fund charges to the OPEX and builds OH reserves that are adjusted annually, based off a swap from Penn Yan. It would hurt to have two catastrophic failures on 500hr engines (today’s TSMOH), but the club would not go bankrupt.

 

[Flyhound]

I was involved in 3 co-ownership arrangements before finally buying a plane outright by myself. The 3 co-ownership arrangements were all fabulous, and if I had found the right partner, my current plane would have 1-2 other co-owners to share the cost of continued ownership. My first plane was a Grumman AA-5A, Traveler. A 4-seat, 150 Hp plane that was a blast to fly and relatively cheap to own. I had 1 partner in that plane and we got along well during our years of co-ownership. My partner was retired, so he got the plane during the week, and I got it on weekends. If either of us wanted to switch things up, a quick call to the other partner usually resolved potential conflicts quickly and easily. We even moved on to other interests at the same time, so we sold that plane and went our separate directions happily. My partner pursued a homebuilt amphibian and I bought into a new 10 way partnership in a Pitts S2A. The Pitts was NOT a cross country machine, so scheduling was never a problem. We would just go to the airport and if the plane was gone, it would be back within 30-40 minutes. Again the shared ownership was hugely valuable when inspection of the crankshaft found hairline cracks in the prop hub. Splitting those repair costs 10 ways was a godsend. My next plane was a 6 way partnership in a 182 with an IO 550 engine from a Texas Skyways STC. That plane was used for lots of XC flying, so we had a formal scheduling system managed by a local FBO. Co-Owners were only allowed to have 1 future flight on the schedule. Any of us could fly the plane as often as we wanted on a first come, first served basis for flights less than 4 hours long. And then, only if it wasn't scheduled to be out with another co-owner. That worked well. All 3 partnerships worked great, and all were very different. The arrangements for any co-ownership arrangement need to be tailored to the group sharing the plane and the type of flying that will be involved.

 

[flyingcheesehead]

I've been a part of both a 30-member, 3-airplane club and a 2-person shared ownership (via LLC). Both worked out very well... But that's because I was in the right club and I had the right co-owner. That's the most important part.

 

[pfarber]

It worked very well for me, up to a point. 10 of us owned a 172 together. We each paid 10% of the fixed expenses (hangar and insurance), 10% of maintenamce bills, and an hourly rate that covered gas, oil, and enough for the engine overhaul fund. I flew it more thsn the other nine combined. In the eight years I was on board, three never flew, two flew twice a year at most, a couple flew maybe once a month. I flew once or twice a week. They were subsidizing my flying.

The downside was the spending. One of the guys wanted an autopilot. He flew once a month or less, day VFR, never further than 40 or 50 miles, and wanted an autopilot. He was able to to convince six others to vote for it, so we all got stuck paying for it.

I sold my share after an annual was supposedly complete and the plane was ready for a post-maintenance flight. I drove to the airport and found the inspection plates on the belly open, 13 screws not even finger tight, and a wing root trim strip installed backward. The same deal with the inspection plates had happened the year before. Plus, the plane was flying less and the engine was past TBO. Running fine, not burning oil, but an overhaul sooner than later was inevitable and we didn’t have anywhere close to enough in the bank to cover it.

That doesn't sound very enticing. You were in a partnership, forced to spend money you didn't want to, their IA was sloppy and even though there was supposed to be an engine reserve fund it wasn't.

Seems like you had more luck than 'good planning with a well run partnership'. Your example is why I will never again join a club or partnership. Other people voting to take your money and having little say in operations. Yes you have a vote, but democracies are one step above mob rule.. as that's fine as long as you are part of the mob.

 

[k9medic]

I own a couple of planes outright but am a 1/7th owner in my C421C. I also happen to be the only pilot in the group so I coordinate the flying for the other partners with either myself or a contract pilot.

With the exception of one partner having a huge issue last year and us ultimately buying him out and replacing him with another partner, we have been pretty darn good. We charge by the flight hour dry and that covers all of the bills for the most part like the insurance, annual and hangaring. Last year we had to contribute some capital to put 2 new engines on, but we should be good for a few years now.

 

[WDD]

Recently licensed, about 60 hours. I'm considering fractional ownership of a small airplane down the road, but it's not very common in Europe where I'm based so there's little first-hand experience around me to learn from. For those who've done it how did it work in practice? What surprised you, good or bad? Would you do it again?

What are your goals? Don't put the cart in front of the horse. Figure out what kind of flying and how much before you settle on a solution (co owning a plane).

For example, as a new pilot you probably haven't really flown enough to know what kind of flying you like and will be doing. Thus, you don't know yet what kind of plane you should be committing to.

For now I'd suggest renting different planes, get more hours under your belt and then work on 1) finding out what plane you want to fly, then 2) getting the appropriate access to that plane (renting, co owning, owning outright, etc.). Jumping in to co own a plane that doesn't turn out to fit your flying is money spent poorly.

 

[wade.sam]

Beautiful country. I’ve done some work in Costancia and the Black Sea resorts area.

Small world! Constanta is great in summer

I was involved in 3 co-ownership arrangements before finally buying a plane outright by myself. The 3 co-ownership arrangements were all fabulous

Thanks for writing all this up. Sounds like picking the right people really is most of it.

I've been a part of both a 30-member, 3-airplane club and a 2-person shared ownership (via LLC). Both worked out very well... But that's because I was in the right club and I had the right co-owner

Good to hear both ends of the spectrum can work. Seems like the common thread in this whole topic is "its the people"

I also happen to be the only pilot in the group so I coordinate the flying for the other partners with either myself or a contract pilot.

Being the only pilot and coordinating flying for six partners sounds like a part time job on its own. How do you even manage that side? Spreadsheet? Some app? Or just calls and a shared calendar?

What are your goals? Don't put the cart in front of the horse. Figure out what kind of flying and how much before you settle on a solution (co owning a plane).

For example, as a new pilot you probably haven't really flown enough to know what kind of flying you like and will be doing. Thus, you don't know yet what kind of plane you should be committing to.

For now I'd suggest renting different planes, get more hours under your belt and then work on 1) finding out what plane you want to fly, then 2) getting the appropriate access to that plane (renting, co owning, owning outright, etc.). Jumping in to co own a plane that doesn't turn out to fit your flying is money spent poorly.

Good question and you might be surprised - I didn't get my license for any particular mission. I just love flying and want to keep doing it regularly to stay sharp, plus occasionally combine it with longer trips between European countries when needed (rare, but happens).

This thread is honestly part of my research. I just want to know different experience before trying anything. Renting would suit me fine too. But you're right about not rushing and trying different types first, solid advice. Thanks!

 

[Flyhound]

Another thought is that ownership (either outright, or with partners) of a plane doesn't make sense unless one (or both) of the following are true:

1. You fly more than 60 hours/year​

2. You want to fly something that is not available in your rental market (biplane, taildragger, aerobatic mount, etc)​

If you are content flying something that is available in your rental market and you only fly ~50 hours/year, continuing to rent makes more sense, both financially, and practically. The cost of hull insurance, maintenance and a hangar will eat up a significant stash of money. In my case, those fixed costs are a tad over $9,200/year. That will cover the cost of 51 hours of renting a C-172 at $180/hour wet. On top of the fixed costs, you'll have the risk of needing to replace something in the panel, or do a major repair on an engine. I had to replace the Lycoming O-360 in my Maule and that cost $62,000 all in (replacement engine, shipping costs and A&P labor). Continuing to rent allows you to try different planes with no long term commitment. I finally bought my Maule because I wanted to fly taildraggers again and I wanted to land off-airport for airplane camping. That isn't something you can do with rental aircraft in my area. If you're just flying because you like being in the sky and you only fly 5-10 hours a month in the summer - keep renting.