Fractional Ownership vs Charter

The mid-60's offered the dawn of corporate jet travel. At first, the use of business jets was typically limited to a very select number within the company, often only the president.

In these situations the pilot held a privileged position in the company. He knew where the execs traveled...who they met with... where they played...the closets where skeltons were kept...where company money was spent. In return for his discretion, the chief pilot had immediate access to the front office and other perks along the way.

In time, companies began to realize there were gains to be made by having more people within the company utilize the company jet. It became a business tool, a necessity.

Another indicator of this phenomena was the sales picture for new aircraft. The old saying was, "if the economy gets a sniffle, the corporate jet business catches pneumonia". Corporate jets were seen in the early days were seen as luxury items and was typically one of the first item cut in bad times.

As the role of the corporate jet shifted within the company, oversight of the flight department shifted as well. The individual in charge of the copy machine and phone system was likely put in charge of the flight department. Use of the company airplane became more accountable... more business-like.

Oversight of the flight department meant facing a large number of high- dollar decisions that needed to be made on a regular basis. Hangar costs, aircraft maintenance, engine maintenance, aircraft updates, service bulletins, training personnel matters, scheduling, scheduling conflicts, periods of underutilization etc etc. An ongoing Excedrin headache...a tough assignment for anyone.

Big bucks are involved and how do you say no to the Flight Department when they continually want new equipment that involves safety issues or that will enable the company jet to land in weather that would ground the bravest Canadian Goose.

Richard Santulli is credited with developing the market for fractional ownership. His concept was simple. Companies could purchase ownership shares in aircraft and he would provide airplanes with crew on demand. He would assume the headache of managing the flight department.

The time was ripe for the idea and fractional ownership caught on. Over 800 aircraft are now part of the fractional fleet, with over 4,000 share holders. Part of the market came from companies previously having a flight department, more from companies who have never owned aircraft.

In either case, the main selling point was "on demand service", without the hassles of ownership.

But if that is the case, why haven't charter operators seen a similar growth? They offer "service on demand" without the hassles of ownership plus there is no need to take an equity position in an aircraft plus fixed monthly fees?