Fractional shares, explained

How shares work

A fractional share is part ownership of a specific aircraft, sold in fractions such as a sixteenth or an eighth. Each fraction comes with a set number of flight hours a year. A sixteenth share commonly comes with about 50 hours. You do not usually fly the aircraft you own. You fly whichever aircraft of that type the program has available, with availability written into the contract at a stated notice, and peak days that need more.

The program employs the crew, maintains the aircraft and handles the scheduling. You call, you fly, and the hours come off your yearly allotment. Some programs let unused hours carry over within limits. Some let you borrow from next year. Both are terms to read, not assume.

What you really pay

A share has three prices, and the brochure leads with only one.

• The acquisition fee is the price of the share itself, paid up front. It buys the fraction of the aircraft and the right to the hours.
• The monthly management fee covers crew, hangar, insurance, training and the program's overhead. It arrives every month whether you fly or not.
• The occupied hourly fee covers fuel, maintenance and the direct cost of each flight, and it is billed on the hours you are on board. Ask how taxes and fuel charges are treated. For qualifying fractional program flights subject to the fuel surtax, the federal air transportation taxes do not apply. Other arrangements can be treated differently; confirm the treatment in the proposal. See IRS Publication 510.

The effective cost per hour is all of that, plus the value you lose on the share between buying it and selling it back, divided by the hours you actually fly. Two things push it up: flying fewer hours than your share allows, and a soft market when you exit. Ask the program to show you the number with your own hours and a realistic exit price, not the brochure's.

Term and exit

Shares run on a fixed term, commonly about five years. At the end, or after a minimum holding period if you leave early, the program buys the share back at a fair market value it sets, less a remarketing fee. Read how that value is determined and who determines it. That clause decides a large part of what the share really cost. Read also what happens if the program changes aircraft types, merges or closes during your term.

Share, card or charter

The right answer depends on hours flown, and on how you fly them. Rules of thumb, not rules:

• Charter fits up to about 25 hours a year, or any year where the trips vary a lot in size and distance. You pay per trip, choose the aircraft each time and carry no commitment.
• A jet card fits about 25 to 50 hours a year in one category, when you want one call, availability with notice and no quote to read. The CP Jets card is built for that range, and the fit check tells you if it fits.
• A share starts to make sense around 50 hours a year and up, when you want a consistent aircraft type, a longer commitment and the tax treatment of ownership, and you can live with the exit terms.
• Whole ownership comes into view when the hours run well past 200 a year, the mission is steady and you want control of the aircraft and the crew.

If your year sits in the card's range, start with the fit check. If it sits above it, the acquisition guide is the next read.

Related

• The CP Jets jet card
• How to judge any jet card
• Buying an aircraft, explained
• Buying private jet charter, explained