Ownership 1.qxp_Finance 27/10/2021 11:09 Page 1
OWNERSHIP
How to Make Shared-Use Structures Work Shared-use structures are relatively common in Business Aviation. For all of the advantages they bring to the right type of aircraft owner, however, they’re not for everyone. Who does benefit most, and how can you make the most of one? René Armas Maes explores…
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or those who cannot afford to own and operate a business aircraft by themselves, a sharing agreement allows some users to operate a jet while sharing the ownership burden. But when should a shared-use structure ultimately be considered? What is the ideal number of annual flight hours to justify such an arrangement? Moreover, what types of shared-use structures are available, and how can multiple owners derive maximum value out of coownership, without compromising flight privileges and aircraft availability? These are all key questions that must be answered before an aircraft sharing agreement is entered into. First, a customer profile analysis will be necessary. This should examine the number of annual flight hours, along with operational, legal, tax, and liability issues, plus costs, among other needs, to determine how far the benefit of a shared-use structure would apply to multiple owners’ needs.
Establishing the Utilization Sweet-Spot
Typically designed to suit owners with the need for more than 75 hours of aircraft utilization per year, Business Aviation offers a number of shared-use structures and ownership options, from fractional ownership and joint ownership, plus more. Figure 1 (right) highlights the focus area for this article (i.e. aircraft owners with a requirement for between 75 and up to 200 hours per year) and depicts how a shared-use structure could work for them. As shown, there are two common shared-use structures available to owners typically flying between 75 and 200 hours per year. Discussion of these will form the basis for the remainder of the article. 60 Vol 25 Issue 11 2021 AVBUYER MAGAZINE
1) Shared-Used Structure (Supported by an Aircraft Management Company)
Owning a business aircraft can be logistically complex, thus most first-time buyers entering Business Aviation may prefer not to handle all of the operational details themselves. They may seek peace of mind in terms of record-keeping and regulatory oversight. Having an airplane registered on an aircraft management company’s certificate can bring operational flexibility, in terms of sourcing flight crews, aircraft maintenance, flight planning, hangarage, insurance, and even providing access to supplemental lift should an unexpected maintenance issue occur. Similarly, it can provide the use of additional aircraft if more than one is required at the same time. Ultimately, the shared-use structure supported by an aircraft management company can greatly relieve an aircraft owner of the burden of managing their business aircraft. The management company can also leverage bulk purchase discounts (including fuel, which typically accounts for 50% of a business jet’s direct operating cost), and they may pass those discounts on to you. For all of the advantages, however, an aircraft management solution will not suit every owner. An analysis needs to be made on a case-by-case basis to determine how far the benefits would apply to a specific owner’s needs. It will also be necessary to identify the best management company and solution that meets the owner’s mission needs. Perhaps enrolment of the aircraft in a Part 135 charter management program (run by the management company) will allow the owner(s) to maximize their return on investment, generating revenue when the aircraft is not being used, assuming the goal is to make the aircraft www.AVBUYER.com
