Aircraft Co-Ownerships
Aircraft Co-Ownership Defined
The concept for shared aircraft ownership, also known as fractional ownership, is simple – it’s several individuals or organizations getting together to cooperatively own an aircraft. The model has attracted thousands of pilots. Aircraft co-ownership is often an alternative to individual ownership or traditional chartering because it offers numerous benefits.
Owning an aircraft includes a significant initial and ongoing investment. A mutual way to lower your cost is by sharing the expense. Aircraft co-owners divide acquisition cost and ongoing fixed expenses such as maintenance, insurance, subscriptions, hangar, accounting, and preferably exchange dry leases. Variable hourly flight costs are agreed to in advance and paid by the member using the aircraft along with their associated fuel cost.
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Key Benefits of Aircraft Co-Ownerships
Aircraft shared ownership has numerous potential benefits, including:
1. Cost Savings: Sharing an aircraft can be more cost-effective than owning an entire aircraft by yourself. Having just one co-owner can generate 50% in cost savings on monthly fixed expenses.
2. Capital Access: Shared owner capital may open access to a pilot’s first airplane or a step up by combining resources. The aircraft acquisition price is divided among the co-owners, making a newer safer plane or significant upgrades or higher performance more affordable.
3. Availability: Aircraft co-ownership allows greater flexibility in scheduling and usage compared to flight schools or rentals.
4. Time Savings: An aircraft co-ownership may include professional management services to save time and provide skills not available from the individual owners. Otherwise, the co-owners will usually share in the coordination of maintenance services, accounting, billing, payments and scheduling.
5. Tax Benefits: Co-ownership can provide tax benefits for the owners, such as deductions for depreciation, maintenance, and operating expenses.
6. Goodwill: A successful co-ownership can create value above and beyond just the aircraft’s market price. Good organizational practices and reputation can build intrinsic value for the exchange of ownership shares.
7. Camaraderie: Great co-ownerships have a culture of camaraderie, life-long friendships, mentorship and social interactions that support proficient aviation habits, skills and knowledge.
8. Diversity: Cost-sharing can significantly reduce ownership expenses, making flying more accessible to a wider range of people.
Aircraft co-ownership can be a practical and cost-effective option, but it’s important to understand the risks and responsibilities involved. You should seek legal counsel in your state knowledgeable in aviation and business law. Discuss the proper organizational structure with potential co-owners, put it in writing and have all parties sign it.
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Best Practices in Aircraft Co-Ownerships
Following best practices can help you achieve a successful aircraft co-ownership:
1. Obtain legal guidance from professionals knowledgeable in aviation and with your state’s business and tax law.
2. Have proper written documents including articles or regulations, operating agreement and aircraft lease agreement.
3. Co-owners should preferably sign dry lease agreements
4. Include spousal consent and put / call provisions
5. Variable expense should be paid by the pilot flying the aircraft, to ensure adequate reserve funds are accumulated for variable maintenance, whether the costs are incurred next month or years later.
6. Fixed costs should be shared equally between co-owners and should not be paid from hourly rate contributions. Co-owners benefit by paying only their fair share.
7. Bring like-minded individuals with similar missions together to help match the right aircraft type within a shared aircraft ownership.
8. Take the necessary steps to discuss the organizational structure with potential co-owners, put it in writing and have all parties sign it.
There are three common legal structures used to share aircraft ownership: simple co-ownership agreement, limited liability company (LLC) and corporation. Your choice should be an informed decision guided by competent, professional counsel knowledgeable in tax, liability and regulatory considerations, including state, federal and aviation.
- 3 Common Aircraft Co-Ownership Structures
- Understand fixed and variable operating costs
- Put it in writing and sign it
Emiliano B.
Houston, Texas
We’re here to help
To learn more about aircraft co-ownership, read our free guide “A Pilot’s View of Aircraft Co-Ownership Structures.”
To Learn more about airplane fixed and variable costs, review our free guide “The Value of Shared Aircraft Ownership.”
Learn more through our free resources
- “A Pilot’s View of Aircraft Co-Ownership Structures”
- “The Value of Shared Aircraft Ownership”
Chris H. – Houston, TX
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