Choosing to fly privately generates several benefits, be it for personal or business reasons. Benefits include scheduling a flight on short notice, easing security and health exposure concerns, and providing greater privacy to work or relaxation during the flight.
Flying privately clearly has its advantages. But before you purchase or lease an aircraft, it is crucial to know and understand what options are available and how you can tailor them to you or your company’s specific needs and objectives. This article provides insight into the advantages and disadvantages of several common aircraft ownership structures.
The following table provides the most common options, including pros and cons of each, relating to true ownership of an aircraft:
| Options | Description | Advantages | Disadvantages |
| 1. Full Ownership (also known as “Whole Ownership”) | Full ownership is the customary aircraft ownership structure, whereby you or your company have direct 100% ownership of the aircraft. | • Complete control over all choices concerning the operation of the aircraft
• Schedule flexibility • Tax deductions, including depreciation benefits • Customization of the aircraft • Confidentiality • Cleanliness • Privacy
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• High commitment financially and administratively
• Full liability • Equipment wear and tear • Bear direct cost of repositioning the aircraft • One aircraft choice |
| 2. Co-Ownership | Co-Ownership is an ownership structure whereby multiple companies share ownership of an aircraft. Each co-owner is responsible for providing their flight crew. It is extremely important for the co-owners to specify their understanding of what shared use entails, as well as which owner has priority through their agreement. Additionally, the co-owners cannot charge other co-owners for operating the aircraft
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• Informal and simple
• Less expensive • Split ownership • Split liability • Most straightforward way for recreational pilots to reduce the cost of aircraft ownership |
• Cannot charge other co-owners for operating the aircraft
• No leadership with authority to resolve disputes between the co-owners • A written agreement is controlling for all matters |
| 3. Joint Ownership | Joint ownership is much like co-ownership, except the operating costs are shared among the owners, and only US registered aircraft that are eligible to operate under FAR 91 subpart F qualify for a joint ownership agreement. | • More cost-effective per hour than fractional ownership
• Tax deductions, including depreciation benefits • Allows more charging flexibility among co-owners that are also jointly registered owners • Split liability • Split ownership form
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• Less flexible
• Finding a responsible partner • Aircraft availability • Less anonymity (all joint owners’ names must be listed on the registration certificate) |
| 4. Fractional Ownership | Fractional ownership structure is when the aircraft is owned in fractions (typically 1/16 to 1/2 ). | • Lower up-front capital outlay
• Guaranteed aircraft availability • Depreciation benefits • Choice of aircraft size • Aircraft is professionally managed and maintained • Typically no costs/ charges for deadheading or repositioning • Potential option of aircraft buyback • Anonymity • Allocation of fixed costs among owners • A depreciable asset with lower capital outlay
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• Federal taxes on operation
• Can be relatively expensive to use per hour • Less schedule flexibility, especially during peak periods, with minimum notice requirements • Higher wear and tear • Liability could be high, depending on whether owner or operator is in operational control • Requires a contract term (typically 5 years, and at minimum, 3 years) • Higher management and infrastructure costs |
Depending on your needs, alternatives to true ownership of an aircraft exist. The following table provides the most common options, including advantages and disadvantages of each:
| Options | Description | Advantages | Disadvantages |
| 1. Lease | Leases are popularly used as an alternative to purchasing an aircraft. Possession of the aircraft (not title) is transferred under a lease. Two types of leases include: wet leases (such as timesharing agreements) and dry leases.
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• Fixed lease payments, with no significant debt burden
• Lease new aircraft types at a lower cost • No significant debt burden, maintaining cash and working capital for other business investments/activities
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• No flexibility in the type of aircraft available for flights
• Lessee is committed to the same aircraft type/size/range for all flights. |
| 2. Flight Card | A flight card allows the customer to prepay for a specified number or block of flight hours for use of a specific aircraft.
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• Price competitive with charters
• Multiple family members can fly to different destinations on separate aircraft
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• No depreciation benefits
• More expensive per flight hour than fractional ownership hours |
| 3. Charter | Charters are popular because they are simple. Essentially, the charterer contracts for services on a trip-by-trip basis and pays a quoted rate.
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• Highly flexible
• Cost-effective, with no long term commitment or large capital outlay • Less liability
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• Inconsistent service and costs
• Less schedule flexibility, especially during peak periods, with minimum notice requirements
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If you have any questions or would like to know which ownership option may be best for you or your company, please call us at the number below or email us at Counsel@BizjetLaw.com.