What’s Next for the Fractional Field?

James Butler Contemplates the Future of Fractional and Its Major Players

Bethesda, Maryland • March 2014

In a frank discussion with Business Jet Traveler, Shaircraft CEO, James Butler, offers his outlook on the future of the fractional industry. His recommendation? Rather than speculating on the future of the entire industry, it’s more prudent to look at each fractional company individually.

“You have to look at it on a case-by-case basis,” he says. “NetJets certainly is here for the long haul…[and] I think Bombardier certainly believes…that Flexjet/Flight Options is going to be a fractional company they can do business with for a long time. PlaneSense seems like they’ve got a nice niche—they seem to be fairly stable.”

Of the Avantair collapse, which Butler has commented on frequently, Butler says, “It’s certainly a cautionary tale, but I don’t think people looking at NetJets, for example, would [worry] that they would end up in the same situation as Avantair. It’s just a totally different business, capitalization and financial commitment by [NetJets owner] Berkshire Hathaway.”

Butler also is skeptical that a new major player will enter the market. “Certainly smaller operators or regional programs will sprout up as they always have,” he says. “Anybody with three jets under ­management puts together a brochure and fancy name and, voilà, you have a program. I think we’ll continue to see that, but not a major new entrant into the business.”

Butler anticipates that the fractional business will remain “fairly steady,” but acknowledges that if the economy grows, and brings more people into the private aviation demographic, the fractional industry could expand.

Looking to the future, Butler predicts that fractional leasing will become a more appealing option as well. “I think customers are going to be more enamored of leasing. I see leasing as being much more attractive over time than the asset-ownership model, both because it doesn’t take a large capital investment and because you’re willing to buy the risk of residual value up front and have more assurance as to what your end-of-the-day cost is going to be.”

To be sure, perhaps more than ever, it’s essential in making any fractional investment, that you have an expert, who knows the market and the players, sitting on your side of the table, making certain that you make the best possible deal, and avoid costly mistakes.

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