Fractional Aircraft Ownership: A Pie In The Cake To Take To The Skies 

Fractional ownership is popular in other parts of the world and operates similar to timeshare holidays. Multiple owners share the usage and cost of acquiring and operating an aircraft, through a company which buys the aircraft and manages it. 

Owners then pay per hour to fly the aircraft. Rich businessmen and industrialists, who have time constraints when travelling from one corner to the other and don't want to fly airlines, buy time and get access to fly from one location to another. 

This initial sum or timeshare paid covers maintenance and other expenses and the flyers only have to pay for travel they undertake. Expenses incurred for pick-up and drop to the airport/helipad will not be chargeable.

With 10-20 seater jets costing between US$15 million-30 million, a one-time fractional ownership stake comes to about US$400,000 (or about Rs 3.2 crore) and the per hour cost is about US$ 4,000 (Rs 3.2 lakh). These are international figures and India prices may differ once it takes off after policy is framed. Though  similar arrangements exist already in the country, they are very informal pacts, a source said.

Transferable Like Shares 

If someone wants to exit the arrangement, he or she can easily offload the share in favour of the existing owners or a new one. The ownership contracts are usually done for five years as per convention. Charter companies offer a similar service, jet card products, which allows users to fly a fixed number of hours against an advance payment.

The idea is not exactly new in India since ClubOne Air toyed with it nearly two decades ago. Recognising growth in the Indian economy and anticipating the need for corporate leaders to manage their time in a better fashion, ClubOne Air  launched India’s first aircraft fractional ownership company in 2005. 

Since the idea was far ahead of its time, it got a cold shoulder. Further, there were no incentives for investors in fractional ownership. 

A senior Ministry of Civil Aviation official said, “We understand past efforts didn't pay off. This segment needs clarity and a major thrust, which is not there so far. After many rounds of interactions with stakeholders, we have reached a conclusion that to push the segment we need to have a proper policy to leverage it.” 

India May Ride Global Slipstream

Following discussions held with stakeholders a few months ago, the government is likely to bring a draft policy first, which would be placed in the public domain for comments. The government is likely to stick with extant rules in other countries.

As per industry standards abroad, anyone who wants to buy a share must hold a minimum 5-10 per cent stake in the company, which caps the number of fractional owners to a maximum 8 or 10. Besides, the fractional ownership model works best with aircraft that don't have more than 20 seats.

“India doesn’t have a fractional ownership policy. As the aviation sector grows, promotion of this segment makes great sense, we are mindful of it. The Civil Aviation Ministry is in the process of finalising the draft policy in the next few months,” the official added.

Fractional Ownership Advantages

Experts said fractional ownership brings down the cost of acquisition of both aircraft and helicopters through pooled capital by multiple owners. This will minimise capital outflow for companies and individuals, reduce their exposure to risks and make it easier to run a Non-Scheduled Operator's Permit (NSOP) business. Income tax laws extend tax benefits for fractional ownership that can be availed of.

The fractional ownership model has the potential to energise the NSOP segment and boost the number of aircraft in NSOP fleets. “This country needs a comprehensive policy on fractional ownership. It will revolutionise the segment,” added a person aware of the deliberations.

Great Potential In India 

India has nearly 100 NSOP holders, according to aviation regulator DGCA, with a combined fleet of 330 charter aircraft as on December 2023. The top players in the segment are ClubOne Air, IndiaJets, JetSetGo. Though none of them offer fractional ownership as of now,  they may be interested in it later.

With India having more than 13,000 ultra high net-worth individuals and some 7 lakh millionaires, as per industry estimates, the usage of jets via fractional ownership can only soar in the future.

Aircraft companies, both aggregators and jet owners, and industry associates have been pushing the government for the long-pending policy. 

“Fractional ownership is well-established in many parts of the world, it is struggling to establish itself because of the absence of government legislation, which could have promoted it,” said IndiaJets CEO Rajesh Rajan. “The government has been working on it but it is a subject which may take time,” he added.

Fractional ownership has been popular in the USA since the mid-1980s. Three of the four top operators in the market are US companies. NetJets is the market leader with 750 aircraft, ace investor-philanthropist Warren Buffet has a majority stake in it. The success of the business in the US is evidence that as a business proposition, fractional ownership can be monetised in India as well.

A positive policy statement from the civil aviation ministry will be the wind in the sails for this business model to flourish in India. With the government seized of its role, ministry sources hope the fractional ownership policy for aircraft will exit the hangar when the government returns to power.