In a special anniversary edition of Business Jet Traveler, Shaircraft CEO, James Butler, uses his “Inside Fractionals” column to reflect on where the fractional jet business has been and, more importantly, where it’s going.
While the major players in the fractional industry have remained the same (NetJets, Flexjet, Flight Options and CitationShares), according to Butler, the biggest change has been that “as the fractionals have struggled to achieve profitability, the business model has continued to evolve — mostly to the detriment of shareowners.”
Whereas cost certainty has been touted as a major benefit of fractional share ownership, Butler explains that, “[S]lowly but surely, the fractional providers have shifted the variable-cost risk to the owners.” Providers are tacking on exorbitant fuel surcharges, and some have instituted new surcharges for insurance and pilot salaries. At the same time, guaranteed share repurchase prices have been eliminated.
As to the future, Butler says, “The key question is whether private flyers will continue to be willing to fund the capital cost of purchasing aircraft and assume the market risk associated with owning this asset, or will instead prefer to pay higher flying rates in order to leave that cost and risk with the providers.”
For an in depth look at the fractional jet industry, download the full text version of this article below.
Business Jet Traveler: “Looking Back…and Ahead”
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