Brazil gets first fractional program

 - August 29, 2011, 10:10 AM

The Latin American Business Aviation Conference & Exhibition in São Paulo last month marked the dawn of fractional jet ownership in Brazil, with two companies launching programs.

Prime Fractional Club (PFC) purchased a Phenom 300 in July and was scheduled to take delivery of a Phenom 100 in August. PFC has already sold out the Phenom 300, structuring the sale as three one-third shares in a special-purpose company that actually owns the aircraft to meet current Brazilian aviation regulations. Under PFC’s business model shareholders each receive a certain number of flight hours per month in the aircraft of their choice.

Also at Labace, Global Aviation announced a fractional plan it explains as tailored to differences in the Brazilian market.

Two regional challenges facing the fractional market are a lack of specific legislation and a concentration of business in the Rio-São Paulo-Brasilia triangle that makes sale of empty legs difficult.

Embraer, which manufactures the Phenom series, sees Brazil as ready for fractional ownership. Breno Corrêa, director of marketing sales for the Brazilian OEM, believes “a [fractional] company with credibility and critical mass” is necessary for the concept to take root.

However, says Corrêa, “Once the market [demand] is there, the [new] legislation will come.”

Cultural differences are not an obstacle to the growth of the fractional industry, Corrêa maintains. “The business jet is overwhelmingly a business tool. If one-third of a jet meets a company’s need, [customers will] look to buy one-third of a jet. Psychological factors don’t come into it.” He also sees multinational corporations with Brazilian offices as a neglected market. “If a company has a jet at headquarters but doesn’t have one in Brazil, the availability of fractional shares might provide a cost-effective way of getting the same transportation flexibility it has at the head office.”

Global Aviation, with 62 aircraft, is one of the largest Brazilian executive charter firms. Rogério Marques, commercial manager for Global, sees the empty legs as the biggest local problem for fractional sales. Global’s model, he says, recognizes that and charges fractional owners for empty legs, just as charter clients are charged.

The formula developed divides fixed costs among the fractional owners, who pay only the variable costs for a certain number of monthly flight hours. Hours above that are charged at normal rates, with the income going to reduce fixed costs. When owners are not using a fractional aircraft, it can also be chartered to outsiders through Global’s charter business, with the income again going to offset fixed costs.