Glossary of Aviation Terms | Fractional Ownership
Fractional Ownership | Paramount Business Jets
By definition, fractional ownership is a percentage share of an expensive asset. Shares of the particular asset are sold to individual owners, and fractional owners are able to enjoy the priorities and privileges associated with the asset. Typically, a management company will take care of the asset on behalf of the owners, who would pay a monthly or annual fee for the management plus variable costs for utilizing the asset, which can be based on per-hour or per-day use fees.
If, for any reason, the asset was rapidly depreciating in value, the management company would normally sell the asset and distribute the proceeds back to the owners, who could then claim a capital loss and optionally purchase a fraction of a new asset. There is a lot of debate over whether fractional ownership provides a financial advantage over renting, but generally, in the charter aviation world, on-demand charters (the equivalent of renting) are considered to be much cheaper than fractional ownership.
In the world of private air travel, fractional ownership is a popular investment. Fractional ownership in an aircraft is essentially a partial interest in an aircraft that is operated by an aviation company as part of its fleet. Owners have the right to use any comparable aircraft in the fleet, on demand, for a predetermined number of hours each year based on their investment in the aircraft. The fractional provider manages the aircraft and the rest of its fleet and is responsible for ensuring crew are available, maintenance, insurance, catering, and other services.
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