UBS Measures Fractional Provider Activity

AINalerts » September 1, 2005
April 9, 2007, 7:55 AM

While the fractional market continues to expand, shareholder growth is advancing at a slower rate, according to data from the Union Bank of Switzerland (UBS). The company, which publishes a monthly statistical report on the business aviation market, also said that fractional providers continue “to lose existing shareholders at high levels.” UBS measures shareholder turnover using “churn,” or the ratio of shareholders lost to the number gained. At the end of June, UBS estimated the fractional churn average at 0.69, meaning 69 shareholders leave for every 100 that join. CitationShares had the highest retention rate at 0.11 (11 shareholders lost for every 100 that join), “primarily due to its rapid growth in recent years,” UBS said. NetJets followed with a below-average churn of 0.54. Flexjet at 1.59 and FlightOptions at 2.15 “are both losing nearly two shareholders for every one gained,” UBS said. “We believe fractional programs are losing shareholders at a high rate primarily because of significant declines in residual values; the advent of other less capital-intensive programs, such as [fractional jet cards]; and the expiration of initial five-year contract periods.”

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