Share with others.” “Use only what you need.” Most of us learn these valuable lessons in kindergarten. It has taken the impending ascendency of a younger generation as decision-makers to fully implement these ideas in business aviation. They are asking: “Why own an entire airplane when you can share the cost and use it with others?” The answer is a more widespread move to fractional ownership and other modes of joint ownership and shared use.
While the fractional option has been available for decades, today’s younger business leaders are more fully embracing the practical benefits than their more senior counterparts.
According to research by international market research firm YouGov, 67% of those with $10 million or more in assets like the convenience of “pay-as-you-go” for access to goods and services. And 14% of those with assets valued at more than $20 million are willing to use a jet charter subscription or on-demand service.
It makes sense that Millennials would be the ones to look more closely at the value of fractional programs. These “cord-cutters” broke the traditional structure of television by eliminating cable TV. Why pay for 100 channels, if you’re only really watching 10?
Younger leaders see corporate aircraft the same way. They don’t have to own the entire aircraft to garner the benefits. They’re willing to share – crews, expenses, and upkeep – to get the 20 trips they really need each year.
Information Is the Asset
Those born after 1980 are becoming leaders of middle-market businesses that don’t have the budgets of Fortune 500 companies, but still have travel needs that aren’t met by commercial carriers.
They’re interested in sharing valuable information and learning from their peers, to gain insights about all aspects of their transactions. The result? A large percentage of fractional shares sold now are based not just on price, but on mission-specific aircraft. A contract that allows the flexibility to downsize aircraft for a specific trip? Even better.
Leasing Leads to Growth
Operating leases are important to the future of the business aircraft market. A JETNET research study showed that leasing as a preferred method of payment has nearly doubled year-over-year, according to quarterly surveys conducted in 2016 and 2017.
For the customer, leases offer great travel flexibility without a long-term commitment. It’s much easier to project budgets one to two years out than five or 10. Making a 24-month investment is a great way for businesses to gauge and refine their travel needs. If demands increase, it’s easy to convert to a fractional share. If demands drop, there’s a well-defined, shorter time to manage the accounting.
For the operator, leasing creates revenue opportunities that are less reliant on maintaining residual value, lately notably flat due to the abundance of aircraft on the market and belt-tightening by bizav users. When an aircraft comes off lease, it can be leased again easily. There’s less pressure to sell before the aircraft depreciates too much.
The Privileges of Membership
Charter cards and membership programs are enticing for younger leaders. They’ve never known a time when commercial travel equated to luxury. They came of age in the cattle-call era of being herded through security lines, squeezed into ever-smaller coach seats, and bumped from over-sold flights.
Membership programs allow them to bypass airport hassles and missed connections, while still saving over one-off charter trips. They don’t want to pay for in-flight cappuccino machines and crystal. They just want to roll up their sleeves and get to work: a message that resonates with an increasing number of more senior business leaders. BAA
Keith Plumb is President and CEO of Executive AirShare, the nation’s third-largest fractional provider. With 25+ years of experience in the aviation industry, he serves as Kansas City Chapter Chair of Young Presidents’ Organization.