Tougher Times Mean More Selections As Fractional Fleets Get More Diverse

Fractional aircraft are still accounting for a substantial portion of the business aircraft market, with companies offering aircraft ranging from helicopters and turboprops to the Boeing Business Jet.

Operators report that business is continuing to increase, attributing the prosperity to the fact that fractionals offer a more economical way to get into business aircraft and are thus, so far at least, highly resistant to the overall business downturn.

"I'm amazed at how resilient the fractional aircraft market has been," says Kenn Ricci, chairman and CEO of Flight Options, Inc.

He and others concede that the frantic growth of years past has eased.

Now, as fractional fleets evolve, they are growing more diverse. Raytheon Travel Air has expanded beyond its parent airframer's offerings by adding a trio of used Challenger 601-3Rs, and even Bombardier Business Aircraft says it will now consider selling its jets to fractional operators in competition with its own Bombardier Flexjet program.

United Airlines parent UAL Corp. is the latest entrant with its bizjet business.

"We continue to grow very, very comfortably," says Clifford Dickman, president of Bombardier Business Jet Solutions, the parent organization for the Bombardier Flexjet program. Projections are for overall Flexjet flight hours to rise by 11% this year, to about 85,000. Shares in the Learjet 45, Dickman reports, are completely sold out.

Kevin Russell, senior VP for Executive Jets/ NetJets, the first and largest fractional operator, is even more bullish. "Our business is up this year," he says, then goes on to report that it's up an amazing 35% to 40% through July. "The economy has actually continued to help us," Russell says, as business jets are helping business people balance increasing professional demands with their personal lives.

"We've ordered nearly 40% of the world's business aircraft over the past five years," Russell says, by way of illustrating the size and importance of NetJets. NetJets offers shares in a dozen aircraft types, from the Cessna Citation to the Boeing Business Jet, and has four more coming.

Russell estimates that about 4,000 companies use fractionals out of perhaps 125,000 companies that might. Current business, he says, represents "only a small portion of the total opportunity out there."

CitationShares, a joint venture of Cessna Aircraft and TAG Aviation, earlier this year established a domicile in Orlando, and during the summer expanded its operations area to include all points east of the Rocky Mountains. It is adding the Citation Excel 560XL to its lineup effective November 1. CitationShares plans eventually to have a 60-aircraft fleet.

Ohio-based Flight Options, which keeps prices down by offering used aircraft for fractional ownership, says its fleet of 44 aircraft at the end of July 2000 has grown to 88 now, and will likely be at about 110 by the end of its fiscal year, on March 31, 2002. But such figures can be misleading, cautions chairman Ricci, because they don't account for trade-ins that reflect a loss of business.

"We had a net fleet increase last year of 33 aircraft, Ricci says, but for the first fiscal quarter ended June 30 notched a net increase of just 4.5 in terms of shares sold. The second quarter was stronger, with Ricci predicting a net gain of six aircraft. "We're going to be in the mid-20s this year as opposed to 33 last year," he predicts.

That's good, but it's not the phenomenal growth of years past.

"We've got dot.com people who have been turning in shares," Ricci told Show News, noting too that one of his best promotions of the past year has been one-sixteenth/50-hour shares in Citations, promoted in USA Today at $195,000 a pop.

A concurrent trend at Flight Options has been a rise in the sale of larger shares in larger aircraft to larger companies that used to insist on new business jets. "People are finally figuring out that private aircraft are a luxury item," Ricci says.

Flight Options offers eight different models ranging from the CitationJet to the Gulfstream IV, with quarter-share acquisition prices ranging from $790,000 to $5.75 million (as compared to about $7.76 million for a one-fourth share of a GIV-SP from NetJets). Flight Options began its pre-owned fractional program in October 1998 and notched its 700th customer this past June. The company this year opened a private terminal and regional service center in Denver, and has unveiled plans for a service center in Sacramento.

Elsewhere in lower-priced fraxes, "Business this year is better than last year," says VP Pat Reed of AlphaFlying, a New England- and Atlanta-based fractional operator of economical Pilatus PC-12 turboprops. She claims, in fact, that fractional jet owners are approaching AlphaFlying now because of heightened money concerns-shares in AlphaFlying's PC-12s are said to cost about half as much as fractional shares in a new light jet aircraft.

"Our flight missions have increased 40%," says AlphaFlying president George Antoniadis.

"We are seeing an increased interest in smaller share sizes," says Raytheon Travel Air sales chief Ron Gunnarson, meaning cash-conscious customers are asking about one-sixteenth/50-hour aircraft shares, generally the smallest fraction available.

RTA's base grew from 680 fractional aircraft owners to 770 during the first half of this year, Gunnarson reports. The Raytheon unit has logged approximately 180,000 flight hours since commencing operations in August 1997. "We exceeded all our growth expectations since inception," says Gunnarson. "We got into this business at just the right time."

RTA offers shares in turboprops as well as jets, as the Raytheon unit operates Beech King Air B200s in addition to its line-up of jets. "Raytheon Aircraft is one-stop shopping," Gunnarson says.

Also working the economical fractional field is an operation called Command Share, run by New Jersey's Tikal Aviation Services. It promises "practical and cost effective air travel for individuals and small businesses," offering economical shares in such aircraft as the turboprop Socata TBM 700, and piston -engined Vulcanair P.68C and Cessna Crusader.

Another major development this past year has been the entrance of UAL Corp. into the fractional field. They have placed orders and taken options on 135 Falcons and Gulfstreams, and plan to buy smaller aircraft as well, with a goal of a fractional fleet of as many as 250 aircraft by 2005. NBAA president Jack Olcott calls United's debut a "validation" of business aviation.

"We're very happy to have someone like United in the fractional brotherhood," seconds AlphaFlying president Antoniadis. "The more the merrier," he says.

Also welcoming them is Bombardier, which operates the Flexjet fractional ownership program. United's idea of enticing first class airline flyers into fractionals is a good one, says Peter Edwards, executive VP for business aircraft sales with Bombardier. It is "a further expansion of the opportunity base," he says. "Anything that puts people into business aircraft is good for our business."

One particular challenge facing the fractional operators, even beyond the dot.com downturn? Getting pilots to stick around, and not jump at the chance to move to larger aircraft at another company. UAL Corp, for example, expects to hire 100 pilots to start service this spring and to have as many as 1,000 when it reaches planned fractional fleet strength of 250 in 2005. "We're investing huge amounts of money to get properly trained and qualified pilots who will stay for a meaningful period," says one fractional operator. "We invest tons of money."

-Rich Piellisch