According to the management of Jet Republic, the overriding reason that the company suddenly ceased trading on August 20 was because “the aviation asset finance market has completely dried up, making it much more difficult for potential clients to take out and obtain financing for fractional ownership of jets.”
Fractional aircraft providers have reshaped their marketing efforts to address the difficulty of trying to get customers to buy aircraft shares during a recession. To help stimulate growth, Flexjet has introduced a fly-away lease program, which lets buyers who might not want to make a capital purchase lease a fractional share and exit the lease at any time with 90 days’ notice and with no penalty.
As the recession tightens its grip on the economy, fractional aircraft providers have stepped up their marketing efforts not only to sell more shares but also to encourage shareowners to fly more. “In this tough economy, the pressures on all parts of the aviation business have been extreme,” said Bob Knebel, Flexjet v-p of sales.
The roll-out of ExecuJet Aviation’s new Simply Fly lease-based alternative to fractional ownership, block charter and traditional aircraft management has been extended and revised to take account of tightening credit conditions in financial markets.
San Carlos, Calif.-based XOJet has laid off “around 20” pilots and some additional operations and sales staff, according to John Magner, the company’s executive vice president of commercial operations. XOJet is still taking delivery of Challenger 300s and Citation Xs at the rate of about one a month and the company is still closing deals, “but not to the degree we wanted to grow,” he said.
Charter/management and FBO company Key Air has adopted the Key Air name for its three FBOs in Oxford, Conn.; Blaine, Minn.; and Fort Pierce, Fla. The facilities used to be branded as Keystone Aviation Services. All the locations provide FBO and concierge services, aircraft maintenance and refurbishment, gourmet dining, Key Share fractional ownership, aircraft management and charter.
“What’s the difference between fractional helicopter operations and fractional business jet operations?” asked one fractional sales professional rhetorically. “Well, it’s like comparing a rare tropical orchid with dandelions. The orchid can grow and prosper in only a special and rather rare environment, while the dandelion sprouts up just about anywhere there’s sunlight and water.
As fractional ownership programs grew in size, complexity and number, considerable controversy within the aviation community arose as to their appropriate regulatory structure. The main question was whether they should be conducted under FAR Part 91 or, as in the case of on-demand charter operators, Part 135.
The concept of fractional ownership in the transportation industry is nearly half a millennium old. From the 1500s to the 1800s, it was common practice for owners of trade vessels to use fractional-ownership arrangements.
Business aircraft owners who want to move up have the option to engage in a “like-kind exchange” that could save thousands of dollars in capital gains taxes, according to Tonya Fritts, vice president and relationship manager for North Carolina-based Wachovia Exchange Services (Booth No. 3769).