March 5, 2012 BARRON’S P29
tional shares, today also
By Jeff Burger emphasizes “solutions.” Besides
shares, it sells jet cards and has a
NETJETS INTRODUCED THE FRAC- lease program. The only major
tional-aircraft concept in 1986. provider still focusing exclusively
Now, as then, the companies sell- on fractional shares is PlaneSense,
ing shares seek to offer a middle whose fleet consists entirely of rel-
ground between full jet ownership atively inexpensive turboprops.
and charter flying. For prices So should a fractional provider
starting at several hundred thou- serve as your one-stop shop? Or
sand dollars—much less than the are you better off buying non-frac-
millions typically required to pur- tional business-aviation services
chase an aircraft outright—you can from traditional charter companies
own a share of one. (A one-eighth and aircraft-management firms?
share typically equals 100 hours That depends. If you’re prima-
per year of flying.) You can enjoy rily interested in paying the low-
more reliable and consistent ser- est price, you’ll probably do better
vice than charter operators often with a traditional charter operator.
deliver. And you can resell your If you buy a charter flight from a
share to the provider at the end of fractional provider, expect to
a five-year term and reap tax-de- spend 10% to 25% more for air-
preciation deductions. time than you would pay to a tra-
This business model proved ditional charter company. A frac-
highly popular for more than two tional provider’s jet cards are
decades, but fractional providers likely to cost more, too.
took a particularly hard hit during But generally, the expanded of-
the recent economic downturn. ferings by fractional companies
Some customers abandoned frac- add up to good news for consum-
tionals after being disappointed ers. That’s because while many
with the amounts they received charter firms operate on a small
when it came time to sell their scale, the leading fractional pro-
shares back to the providers. Oth- viders employ large national fleets
To Fly Private
ers simply couldn’t afford to tie up and sophisticated quality-control
so much money in the current systems. So they’re apt to offer
economy. the best-equipped aircraft, best-
Flight Options, for example, trained crews and most consistent,
charges an upfront fee of any- reliable service. And if you taxi
where from $305,000 for a 1/16th into problems, a fractional pro-
share of a Nextant 400XT light jet, In today’s economy, the frac- prices ranging up to $680,900 for a membership program that it vider may be more likely than
to $1.5 million for a one-eighth tional-share firms have been 50-hour card on a 13-passenger claims offers “the benefits of frac- small charter operators to do what
share of a super-midsize Embraer forced to go after customers who Gulfstream GIV-SP. In November tional ownership without the up- it takes to make things right.
Legacy 600. (In both cases, prefer these relatively inexpensive 2010, NetJets bought Marquis, so front asset cost, management fees Moreover, if you seek an outfit
monthly maintenance and hourly options. So most of them now sell that firm’s jet cards became just an- and residual-value risk.” The pro- to manage and charter out your
fees also apply.) That’s more than jet cards and some even offer tra- other of the “solutions” it offers. gram starts at $145,000 for a 25- own aircraft, a fractional provider
you would pay for a jet card, ditional charters. They want to Cessna’s CitationAir, which like hour membership on an Embraer can probably utilize the aircraft
which typically lets you pre- grab as much NetJets began with a focus on sell- Phenom 300 light jet, then adds more heavily than a traditional
pay for 25 flight hours at a Looking for fliers in business as ing shares, suspended sales in $79,075 for the flight-time block, charter operator, which would put
time–a Marquis/NetJets card a depressed possible by January and also ended a program plus a $3,163 “base” hourly rate. more revenue in your pocket.
for a Hawker 400XP light economy, private- portraying called Jet Access, which incorpo- The firm’s JetPASS Select is a jet The losers? Possibly the frac-
jet starts at $119,900. jet firms are themselves as rated elements of the fractional- card that combines hourly rates tional-share owners. With the
It’s also much more than offering customers one-stop shops, share concept. The company now with what the company says is the firms making their fleets available
you would spend to charter a lot more options where custom- sells jet cards, jet-management “consistency” of jet ownership. to jet card and charter customers,
a jet. You’ll currently pay to buy flight time. ers can buy air services and “Corporate Solu- Bombardier’s Flexjet, too, is scheduling flights for shareowners
about $1,400 an hour to time any way tions,” which it bills as an out- talking these days more about “so- could become more difficult. In
charter a small twin turbo- they want. sourcing alternative to an in-house lutions” than shares. It will still addition, heavier use of the fleets
prop like a King Air 200 or $4,500 For nearly a decade, for exam- flight department. sell you a fraction of one of its air- could reduce the value of the air-
Courtesy of NetJets Inc.
an hour for a Gulfstream III, ple, the Berkshire Hathaway–owned Meanwhile, the independently craft, but it additionally offers jet craft, hurting the resale value of
which can carry 19 passengers. NetJets had an arm’s-length rela- owned Flight Options invites cus- cards, a debit-model charter card, shares at the end of a five-year
(All prices mentioned don’t include tionship with Marquis Jet, whose tomers to “choose a program that on-demand charter-brokerage term.
add-on fees like fuel surcharges, jet cards let travelers access Net- matches your private-jet travel services and whole-aircraft man-
aircraft positioning and federal ex- Jets’ fleet by paying for 25-hour needs.” Besides fractional shares, agement. Avantair, another com- JEFF BURGER is the editor of Business
cise tax.) blocks of flight time, with basic the company now advertises a pany that built its brand with frac- Jet Traveler magazine.