In an exclusive article for Robb Report, private aviation advisor and attorney, James Butler, explains why shifts in the risk associated with fractional ownership have made contract negotiation more important than ever.
Early on with fractional ownership, “owners would enjoy relative cost certainty and guaranteed liquidity, while the providers bore most of the variable cost risk,” explains Butler. In time, however, in response to increased management and operating expenses and a decline in the value of pre-owned aircraft, fractional providers began allocating more and more of the variable cost risk to the owners, both in terms of operating expenses and share repurchase valuations.
“Consequently, today’s fractional owners find themselves in much the same situation as outright owners: They pay for aircraft management, and they bear the variable cost risk associated with fluctuations in the secondary market,” says Butler. “You will not be able to reverse that situation when negotiating a fractional contract, but you can bargain for a more balanced deal and have the jet company add a number of valuable concessions to the agreement."
To learn more about the specific negotiating strategies that Shaircraft employs on behalf of fractional owners, download the full text of this article below.
Robb Report: “Fairer Shares”
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