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What is Fractional Jet Ownership ? Fractional Jet Ownership is sometimes referred to as Fractional Jet Leasing or Jet Time Sharing. The concept is also referred to as fractional ownership because it is not limited to jet aircraft. It is not legally correct to say that Fractional Jet Ownership is like resort condominium time sharing, but the similarity can help explain the concepts involved: A company or individual buys, or leases, a fractional interest in one aircraft just as they might acquire a partial interest in one condo unit. They can use their own aircraft or another similar or identical aircraft a certain number of hours or days per year just as a condo owner can use the condo a specified number of days or weeks per year. In most programs, if your aircraft is not available when you want it, you can have access to a larger pool of identical or similar aircraft fractionally owned or leased by others. Although individual deals vary, there is room for negotiation. In general, a buyer or lessor normally buys or leases a 1/8th interest in an airplane, and can have up to 100 hours per year of usage as part of the purchase. The cost of the 1/8th share depends on the airplane you choose. You can sometimes buy or lease a 1/16th interest which would include 50 hours, or a 1/4th interest which would include 200 hours. A 1/16th interest in a Citation Ultra has been quoted at a cost of approximately $80,000, and a 1/4th interest in the new Boeing Business Jet at $11,000,000. Each deal is separately negotiated and some have buyback or cancellation provisions. The fractional interest buyer or lessor will get a "turnkey" operation of aircraft, crews, scheduling, and maintenance on demand. Naturally, the economics of each situation differs depending on the number of people who will use the aircraft, the value of their time to the company, and the dollars saved in airline tickets, hotels, etc. In general, the following guidelines are commonly used:
Ownership or leasing of a fractional ownership interest has many benefits and limitations which should be understood before buying or leasing. The Advantages of Fractional Jet OwnershipThe major advantages are sometimes considered to be convenience and cost. Statistical studies indicate that business jets generally are more cost effective than commercial services even when there are commercial services available between the cities involved. The studies indicate the following savings of time and money:
About 25% of corporate jets are owned by individuals who want or need a jet for personal and family travel as well. Why you need an aviation lawyer
25 Frequently Asked Legal Questions
Fractional Jet Ownership is generally acknowledged to have gotten its big push in 1964 with the involvement of well known and respected individuals prominent in aviation circles including General Curtis LeMay, General O.F. Lassiter, Arthur Godfrey and Jimmy Stewart. General Lassiter was the person who created a company which used U.S. Air Force principles in aircraft utilization and management. In 1965 William P. Lear Jr. and General Paul Tibbets Jr. joined the company then known as Executive Jet Aviation. In 1986, a subsidiary known as NetJets was created. Richard Santulli is considered the visionary who created the concept of selling fractional ownerships in business jets to companies and individuals who need some business jet transportation, but for whom neither charters nor ownership of a complete airplane fulfilled their needs. This program was begun in earnest in 1987 and the NetJets concept of fractional ownership was born. In 1998, Warren Buffet's Berkshire Hathway, Inc. bought the company for $725 million and is now a major backer of the company now known as Executive Jet. There are now other companies involved in various aspects of Fractional Jet Ownership using the concepts created by Mr. Santulli. It is predicted that Fractional Jet Ownership and leasing will be the dominant form of ownership of business jets by companies or individuals. What BAILEY & Partners can do for YouBailey & Partners is experienced in fractional jet ownership and leasing. We have assisted companies and individuals in their acquisition of fractional jet interests. Acquiring fractional jet interests requires familiarity with Federal Aircraft Regulations (FARs) as well as contract law. We advise and guide buyers and lessors as to what is and what is not being acquired, and we help the buyer or lessee negotiate the most favorable deal available, under the circumstances. There are typically four major agreements which are necessary to the buying or leasing of a fractional jet ownership. Each agreement requires a knowledge of applicable Federal and State laws and regulations and the specific buyer's or lessor's needs. These agreements are:
Each of the four agreements contain many provisions which affect the acquirer's rights and responsibilities. There is no standard "one size fits all" fill in the blanks, agreement. Each agreement must be tailor made to fit the buyer's or lessor's specific needs and situation. Whenever possible, Bailey & Partners tries to charge a fixed, flat fee so the fee can be budgeted and predicted in advance. We prefer to work with counsel and professionals who are familiar with the buyer. We can either advise the buyer's or lessee's law firm, corporate counsel, advisers, or work directly with the buyer-lessee, as the buyer-lessee or their advisers wish. The law governing Fractional Jet Ownership is essentially Federal, however, there are state peculiarities. Accordingly, unless the buyer is a California company, or individual, or the transaction occurs in California, we strongly recommend the buyer also have local counsel. We are available as counsel to your counsel, or to your professional advisers, or to the buyer, or lessee. Depending upon who will be doing what, our fee may vary, but, as mentioned above, we always try to give a flat, or a minimum/maximum figure in advance, depending on the amount of work expected to be necessary. We are available to work with corporate counsel, outside counsel, CPA's, personal and business managers, transportation managers, and other advisers and consultants to assist with the purchase or lease of a fractional jet interest. Our telephone number is (877) FOON-LAW, and you can speak with Patrick Bailey, Stephen Hofer, or Jay Foonberg.
CONTACT INFORMATION The Law Offices of Bailey & Partners Jay G Foonberg, Esq. Patrick E Bailey, Esq. Stephen R Hofer, Esq. Carla G Matta, Esq. Sacramento Office Stephen L Nelson, Esq. About BAILEY & Partners BAILEY & Partners is a law firm located in Santa Monica, California, on the Santa Monica Airport, in the same building as the Museum of Flying and the Executive Terminal. Our office is literally only a few feet away from where you would deplane your private plane. We also have an office in Sacramento, California located on Mather field. In addition to our trial, appeals and general business practice, we specialize in aviation law, including both transactions and litigation. Many of our attorneys and staff are licensed pilots and flight instructors. References are available for all of our areas of practice. If you wish, we can communicate with you as to whether we can be of service.
Disclaimer The information provided on this website is informational, only. The subject matter and applicable law is in a constant state of change. No legal advice is given and no attorney/client or other relationship is established or intended. The information provided is from general sources and although we believe it to be accurate, we cannot represent, guarantee or warrant that the information contained in this website is accurate or is appropriate for the usage of any reader. Bailey & Partners is located in California and complies with all ethical rules of the State Bar of California. Some States require the wording "This is an advertisement" or other words or information of this nature. The content of Fractional Jet Ownership is fact specific and dependent upon the special needs and purposes of the purchaser and the economics of the particular transaction. Each deal stands on its own. Bailey & Partners recommends that readers of this information consult with their own counsel prior to relying on any information on this website. Patrick E. Bailey and Stephen R. Hofer are partners in Bailey & Partners and Jay G. Foonberg is of counsel to Bailey & Partners. Bailey & Partners requires that all agreements for their professional services be in writing and signed by the Firm and the client. No professional relationship will be deemed to exist unless and until an agreement for professional services has been signed by both client and attorneys. |