Fractional Programs Led the Private Aviation Industry in 2023

It’s boom time in the fractional aircraft ownership world: a spate of recent fleet orders and deliveries is expanding opportunities for customers and bringing new platforms to business aviation. That’s good news for prospective fractional-share owners who not long ago were told by providers that sales were suspended, as fleet operators struggled to service existing customers amid the post-COVID bump in demand for lift. Today, the segment outpaces charter and Part 91 private flight activity, underscoring the continuing demand for fractional aircraft shares.

Fractional flight activity was the only growth story in private aviation in 2023, up 13.4 percent for the year as of November, according to the TraqPak report from Argus International. That’s in contrast to the 6 percent drop in Part 135 charter and jet card activity and a 3.5 percent drop in Part 91 private flight operations over the same span. Meanwhile, the record-setting 833,000-plus flight hours logged by the fractional fleet in 2022 represents a 7 percent increase over 2021, and as of December, according to WingX, 2023 fractional flight departures were running 5.8 percent above 2022’s figures.

“Consumers have spoken, and they are willing to pay for the scale and quality of the [fractional] industry leaders,” says Craig Ross, the founder and CEO of advisory service Aviation Portfolio, who adds, “The number of aircraft that NetJets and Flexjet have taken over the past year is astounding.”

NetJets added almost 90 new jets to its fleet last year, and Flexjet, which began 2023 with over 90 more jets (250 total) than it had before the pandemic, has taken on more than 20 additional midsize and super-midsize jets since June.

Over the last decade, fractional fleets have purchased 782 business jets—11.4 percent of the 6,883 delivered worldwide, according to Rolland Vincent, creator/director of JetNet iQ. Fractionals’ current slice of new aircraft sales is running well ahead of average. Since the beginning of 2021, that percentage jumped to 14.4 percent or 284 of the 1,971 new jets delivered, and as of late December 2023, fractional fleets absorbed 82, or 15.2 percent of the 538 year-to-date deliveries worldwide. Historically, orders, deliveries, and backlog of aircraft for fractional fleets have averaged about 12 to 15 percent of new aircraft units, Vincent says. 

New-generation Aircraft

The growth will bring the latest-generation aircraft to the fractional market—Textron’s forthcoming Citation Ascend and Bombardier’s in-development Global 8000 at NetJets, the ultra-long-range Gulfstream G700 at Flexjet, and the HondaJet Elite II at Volato.

How many announced orders will translate into deliveries going forward is unknown; in many touted deals, options, rather than commitments to buy, comprise most of the reported sales. Indeed, widespread cancellations occurred in 2020, in the early aftermath of the COVID pandemic, when demand evaporated overnight, Vincent points out.

Argus forecasts business aviation flight activity dropping by some 0.7 percent in 2024 and expects fractional activity “will cool and moderate with the rest of the industry,” says Travis Kuhn, a senior vice president at the firm.

Demand for fractional ownership has been driven in part by service issues experienced by charter and jet card customers, including unavailability of aircraft, canceled, rescheduled, and delayed flights, and below-standard equipment. And the fractional industry played a role in those shortfalls, according to aviation attorney Dan Herr, founder of FractionalLaw, a consultancy serving shareowners.

“During peak periods in 2023, charter and card customers were frequently grounded because fractionals had the foresight and wherewithal to book charter planes with guaranteed revenue,” Herr says, monopolizing large numbers of aircraft “for days at a time.”

High Levels of Service

But for many shareowners, the consistency and high level of service, potential tax benefits, and peace of mind fractional programs provide is reason enough to participate.

Either way, Herr believes that the new reality of private flying is that “guaranteed access to an airplane on a peak day requires a long-term capital commitment.”

Fractional programs were not immune to the post-COVID operational challenges, but their service issues “are largely resolved,” Herr says, a comment others echo. Now, in addition to expanded fleets, “furloughed pilots have been retrained, new pilots have been hired and trained, and FBOs and catering companies have boosted capacity,” he notes. “Thanksgiving ’23 was night and day better than Thanksgiving ’22.” 

If you’re considering fractional ownership—because you can’t get reliable charter or jet card service, are flying fewer hours in your wholly owned aircraft, or for any other reason—the fractional fleet expansion means more choices, if not more bargaining room.

“Consumers have the least leverage to negotiate that I've seen in my 23 years [in the business],” says Ross, whose clients at Aviation Portfolio are fractional owners and high-time charter and jet card consumers. He advises drawing the line at onerous clauses and penalties. “Don’t agree to things like egregious cancellation terms in agreements,” he said. “Be patient.”

Complex Contracts

Fractional ownership contracts are typically lengthy and complex, and millions of dollars are involved, but Herr, the attorney whose firm represents shareowners, disputes conventional wisdom about the need for outside guidance.

“The advice to always consult an expert ignores the difficulty of finding an expert—whether it be a doctor, a pilot, or a plumber,” he says. “Even outsourcing a fractional project to an expert has a time cost.”

In the case of some businesses, families, or individuals, “it would be a net loss in value to expend time negotiating the intricacies of a fractional share,” rather than “spending that negotiating time on growing a business or attending a child's school play,” he said. 

Herr does offer two key pieces of advice: on the way in, know how the purchase price of a new fractional share compares with the manufacturer’s list price of the airplane; and on the way out at the end of the ownership term, know how the repurchase price offered by the fractional company compares with the market value of the airplane.

In addition to high demand, with as many as 16 principals owning a share in one aircraft, fractional operators have even less incentive to negotiate. “We need to see a harmonious, similar operating agreement between all 16 shareholders,” says Chris Tasca, co-founder and president of fractional, jet card, and charter operator Fly Alliance. “Negotiations in terms of effective hourly rate, operating area, utilization, et cetera, are very minimal.”

Fly Alliance previously offered shares only in preowned Hawker 800 and Gulfstream IV-SPs, but in 2021 the Orlando-based operator ordered 20 new Textron Citations, including the XLS Gen2, Latitude, and Longitude.

“We need to continue to stay relevant, to do the next thing, and the next thing is new aircraft,” explains Tasca. Two were delivered in June; two more are due in the first quarter.

But even in a high-demand environment, staying relevant seems to require constant tweaking of the ownership model. Fly Alliance has eliminated monthly management fees from its ownership program, as have a handful of other programs; the revenue shortfall is made up by retail and wholesale charter and jet card business that the jets service when they are available.