Best Aviation Business Model: buying/leasing a jet or fractional membership ownership scheme

There are three main options for private jet users - they can purchase a jet, lease/hire a jet or buy a share in a fractional membership scheme. The eventual decision to buy or lease the aircraft depends on the frequency of flying and the financial wealth of the company. Buying a jet makes economic sense for those who fly over about 400 hours a year. However, its maintenance is a very tough job and will require investment in hiring the staff required for operation. Pilot salaries, fuel cost, plane maintenance and storage are some of the major cost areas.

On the other hand, leasing a private jet is considered to be the best business model when it is required for personal usage. Leasing a jet does not involve a lengthy process and huge cost as seen in purchasing a private jet. In the leasing process, a company or individual can take the private jet on lease from the leasing companies on a contract basis that varies as per the client needs. In general, leasing offers a number of compelling cash management and risk benefits over ownership.

The third alternative, that is, the fractional membership ownership scheme is gaining equal importance in the Indian private jet market along with leasing. The fractional ownership model offers an individual or company the option to purchase a share of an aircraft, which can be as little as 1/16 of an aircraft, offering approximately 50 hours of flight time per year, to 1/2 of an aircraft depending on the needs of the operator. In addition, the management company provides all scheduling, flight planning, staffing, catering, maintenance, communications, and insurance services. A fractional owner just has to call the dispatcher and request for a flight.

In India, most of the private aviation aircraft are purchased by the companies/Individuals rather than leased. Purchasing an aircraft provides long-term benefits to the companies rather than short-term gains. However, risks are equally involved in the purchasing of the aircraft.