Aircraft

Fractional Jet Ownership vs. Whole Aircraft Ownership

Dipesh Dhital

May 9, 2021 — 8 min read

Private jet travel has become increasingly popular among high net worth individuals and businesses looking for luxury, convenience, and flexibility. When it comes to acquiring a private jet, the two main options are fractional jet ownership and whole aircraft ownership. There are pros and cons to each that warrant careful consideration depending on your needs and finances. Below is an in-depth look at how fractional and whole ownership models compare.

What is Fractional Jet Ownership?

Fractional jet ownership allows individuals or businesses to purchase a share or fraction of a private jet. The most common fractions available are 1/16, 1/8, 1/4 and 1/2, which translate to 50, 100, 200 and 400 flight hours per year respectively.

Some key features of fractional ownership include:

Fractional owners pay a monthly management fee and an occupied hourly operating fee based on the size of their share. This covers maintenance, crew, insurance, catering and all operational costs.
The aircraft is professionally managed and maintained by the fractional company.
Fractional owners have guaranteed access to their jet with as little as 4 hours notice, even on peak demand days like holidays.
The fractional company handles all the details of each flight for a truly hassle-free experience.
Owners have access to a network of jets, so they can fly point-to-point across North America and beyond.
Unused hours can be rolled over or sold back, providing flexibility.
Fractional ownership provides simplified tax and accounting compared to whole ownership.

The two major benefits of fractional ownership are convenience and cost efficiency. You can enjoy private aviation with lower acquisition costs and shared operating expenses. Fractional ownership also avoids depreciation worries, as the aircraft are rotated out of the program after 5-7 years.

On the downside, fractional ownership offers less flexibility compared to full ownership. While you aren’t locked into strict flight hours, you can only fly your fraction’s allocation and may pay a premium for excess hours. Fractional owners also don’t have full control over selecting and customizing their aircraft.

Overall, fractional ownership reduces the risks and headaches of whole ownership, while still offering on-demand private jet travel. It’s best suited for individuals or businesses wanting simplicity, guaranteed availability and a high-end flight experience.

What is Whole Aircraft Ownership?

Whole aircraft ownership is when an individual or entity purchases an entire private jet. They have full control and exclusive access to that specific aircraft. Some key aspects of whole ownership include:

The owner pays the full purchase price for the private jet, which can range from $3 million for a light jet up to $70 million for a long-range heavy jet.
The owner is responsible for all monthly fixed costs like crew salaries, insurance, hangar fees and maintenance reserves.
There are also variable costs that must be paid on top of fixed costs, including fuel, maintenance, catering, ground services and pilot overnight expenses.
The owner has complete scheduling flexibility and control over their aircraft.
The jet can be customized with interior designs, entertainment systems, connectivity equipment and other options to meet the owner’s preferences.
The aircraft’s residual value worries fall upon the owner.
Whole ownership provides tax benefits, as the jet qualifies as a depreciable asset.

The primary advantage of whole ownership is complete customization and control over your aircraft. You can outfit the interior, avionics and amenities exactly to your liking. There are also no restrictions on flight hours or days. The jet is dedicated exclusively to you.

The major downsides revolve around the acquisition cost, operating expenses and administrative hassles. You take on all the risks of depreciation, maintenance and rising fuel and labor costs. Without professional management, the aircraft, crew, records, etc. must be handled in-house. Whole ownership is only feasible with the means to acquire the jet and absorb ongoing expenditures.

Whole jet ownership works best for those valuing privacy, flexibility, customization and tax benefits. But it requires financial resources and expertise. Fractional ownership offers an attractive alternative for those wanting simplified private jet travel.

Key Differences Between Fractional and Whole Ownership

Here is a summary of how fractional and whole jet ownership differ:

Upfront Costs

Fractional: Lower initial buy-in, starting at $500,000 for a 1/16 share
Whole: Full purchase price of $3 million to $70+ million

Fixed Costs

Fractional: Monthly management and service fees
Whole: Insurance, crew, hangar, maintenance reserves, etc.

Variable Costs

Fractional: Only pay occupied hourly rate
Whole: Fuel, catering, maintenance, pilot expenses, etc.

Aircraft Access

Fractional: Guaranteed availability with as little as 4 hours notice
Whole: Unrestricted scheduling and use of your specific jet

Flight Hours

Fractional: Locked into set hours based on share size, pay premium for excess
Whole: Unlimited use and hours

Aircraft Control

Fractional: Professionally managed by fractional company
Whole: Full owner control over crew, records, maintenance, etc.

Customization

Fractional: Little input on jet selection and amenities
Whole: Full custom interior designs, specs and options

Expenses & Maintenance

Fractional: Handled and coordinated by fractional provider
Whole: Owner responsibility and out of pocket expense

Depreciation & Residual Value

Fractional: Fractional company absorbs depreciation impact
Whole: Owner bears risk of jet devaluing over time

Tax Implications

Fractional: Limited depreciation benefits
Whole: Qualifies for tax deductions as an asset

Ideal User

Fractional: Those valuing simplicity and cost efficiency
Whole: Those with the means to acquire and operate their own jet

As shown above, fractional ownership sacrifices some customization, hours and aircraft control for lower costs and simplified management. Whole ownership provides total flexibility and customization if you have the financial means.

Should You Consider Fractional or Whole Private Jet Ownership?

Deciding between fractional and whole ownership depends chiefly on your budget, needs and preferences. Here are some key questions to help determine which model is right for you:

What are your expected annual flight hours? Fractional limits hours while whole ownership provides unlimited use.
How much input do you want over aircraft selection and customization? Fractional offers less control than whole ownership.
Do you prefer handling all details or want turnkey professional management? Fractional ownership simplifies private jet travel.
Does guaranteed availability suit your needs, or do you prize scheduling flexibility? Fractional has restrictions that whole ownership does not.
Are you willing and able to pay the full purchase cost of a jet? If not, fractional reduces acquisition costs substantially.
Can you afford the ongoing fixed and variable costs of private jet operation? Fractional shares these, lowering your expenses.
Are tax benefits from aircraft depreciation important? Fractional offers fewer tax deductions compared to whole ownership.
Do you travel solo or in larger groups? Fractional aircraft may lack capacity for big parties.
How risk averse are you regarding maintenance, costs and residual value? Fractional offsets major risks associated with ownership.

The choice often comes down to your finances and how involved you want to be operationally. Fractional ownership reduces risks and costs while providing professional management. Whole aircraft ownership requires more capital but gives you complete control over your jet. Analyze your budget, needs and preferences thoughtfully when deciding.

Finding the Right Fractional or Whole Ownership Program

Once you’ve determined the best model for your situation, it’s essential to find a reputable provider. For fractional ownership, NetJets pioneered the concept and remains the industry giant. Flexjet is another top provider with flight hour share plans.

On the whole ownership side, experienced management companies like Executive Jet Management, Solairus Aviation and Jet Aviation can handle turnkey operation of your aircraft. They offer flight crews, maintenance, hangar, records handling and more on a contracted basis.

It’s wise to have a knowledgeable aviation attorney review any fractional or whole ownership agreements before signing. An accountant can also advise you on the tax implications of each model. Don’t rush into fractional or whole jet ownership until structuring the optimal deal.

Other Private Jet Options

Beyond fractional and whole ownership, other ways to fly privately include:

Charter: You rent an aircraft as needed for individual flights rather than owning it. No upfront acquisition costs, but hourly rates are highest of all options.
Jet cards: Pre-purchase flight hours on light jets for set hourly rates. Flexible and guaranteed availability, but limited to one aircraft category.
Joint ownership: Share full ownership and operating costs with a small group rather than owning 100% of the jet.
Leasing: Long term leasing of a jet through a management company. May require shorter minimum commitment than fractional ownership.
Interchange: A reciprocity agreement allowing you to access a network of wholly owned jets from other participants.

Your private aviation advisor can help match the best option to your flying needs and budget. Fractional and whole ownership are the two major paths to jet ownership, each with pros and cons.

Conclusion: Key Points When Considering Fractional vs Whole Private Jet Ownership

Fractional shares lower acquisition costs but limit use and customization compared to whole ownership.
Whole ownership requires higher upfront capital and ongoing expenses but offers full aircraft control.
Fractional programs provide professional management, reducing owner time and hassles.
Carefully weigh your budget, hours needs, and preferences for control and customization.
Seek advice from aviation attorneys and accountants for optimal structuring.
Work with reputable, experienced fractional providers and jet management companies.
Don’t rush into fractional or whole ownership until the model suits your situation.

Private aviation is an exciting opportunity to elevate travel, but choosing fractional or whole aircraft ownership deserves prudence and expert guidance. By analyzing your needs versus the pros and cons of each model, you can make the savviest jet ownership decision.

Frequently Asked Questions

What are the biggest pros of fractional jet ownership?

The biggest advantages of fractional ownership are lower entry costs, shared ongoing operating expenses, professional management and guaranteed availability. You enjoy private jet benefits without the full price tag or administrative hassles.

What are the biggest cons of fractional ownership?

The major downsides of fractional ownership are less flexibility on hours and days compared to full ownership. You also have little input on selecting and customizing your jet. Fractional owners sacrifice some control in exchange for simplicity and lower costs.

What are the minimum costs for fractional ownership?

The minimum buy-in for fractional ownership is typically a 1/16 share, starting around $500,000. This includes monthly management fees and occupied hourly rates. Budget around $3,000 per occupied flight hour.

How much are the monthly costs of fractional ownership?

Monthly management and service fees vary by program and share size, but range from around $10,000 – $20,000 for a 1/16 share. This covers items like crew salaries, training,insurance and scheduling.

Can fractional owners upgrade to a bigger aircraft?

Yes, most programs allow fractional owners to upgrade their share to a larger aircraft. You may pay an incremental buy-in cost in addition to higher monthly management fees at the upgraded level.

What are the biggest pros of whole private jet ownership?

The biggest pros of whole ownership are full customization of the aircraft, no limits on flight hours and days, and tax benefits from depreciation. You have total control and access.

What are the biggest cons of whole ownership?

The biggest downsides of whole ownership are the substantial upfront acquisition cost, ongoing operating expenses, accepting all the risk, and time needed to manage the aircraft if outsourcing those duties.

What is the minimum cost for whole private jet ownership?

The buy-in cost for the smallest new light jet starts around $3 million. Pre-owned jets can lower acquisition costs. But ongoing costs like crew, fuel and maintenance easily exceed $1 million yearly.

Can I afford the costs associated with whole ownership?

Whole ownership is only realistic if you can pay cash for the jet, absorb around $1 million+ in annual operating costs, plus any unexpected maintenance or repairs. Deep pockets are needed.

How can I handle the management burden with whole ownership?

Most owners outsource management by contracting a company to supply the pilots, manage maintenance, coordinate trip details, comply with regulations, etc. This simplifies ownership.

What are the tax benefits of whole ownership?

One of the biggest advantages of whole jet ownership are the tax deductions available. The jet qualifies as a depreciable asset. You can deduct interest costs, maintenance, hangar fees and other expenses.