Fractional Ownership
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Fractional ownership is the practice of dividing an expensive asset into percentage shares and selling those shares to individual owners. A fractional share gives an owner certain privileges, such as a number of hours, days, or weeks of using the asset, and may also offer a share of income from the asset. Typically, a company manages the asset on behalf of the owner, and owners pay fixed fees for the management in addition to variable (per-hour/per-day, etc.) fees for use. For rapidly-depreciating assets, the management company may sell the asset after a fixed number of years and distribute the proceeds back to the owners (who can then register a capital loss and purchase a fraction of a new asset if they wish).
There is some debate about whether fractional ownership provides a financial advantage over renting. Some countries and regions have tax laws that provide additional benefits for owners, such as capital-loss allowances, while others might penalize ownership over renting.
Aviation
The term fractional ownership originally became popular for business jets. Richard Santulli of NetJets pioneered the concept of allowing businesses to purchase shares in a jet to reduce costs — other companies such as Flight Options and FlexJet followed with the same model. With a fractional jet plan, members will typically fly in any jet available, not necessarily the one in which they own shares. The company will reposition jets as necessary and provide flight crews. Companies with greater needs purchase larger shares to get access to more time.
The fractional-ownership concept has since been extended to smaller aircraft, and is now become common for single-engine piston aircraft like the Cirrus SR22, which are beyond the financial means of most private pilots. The same concepts apply, except that the management company does not typically provide flight crews or reposition the aircraft. The first prominent company in this area was OurPlane, but many others have since started up.
Fractional ownership has played a significant role in revitalizing the general aviation manufacturing industry since the late 1990s, and most manufacturers actively support fractional ownership programs.
Other areas
The popularity of the term fractional ownership has caused extensive rebranding in other industries where similar concepts, such as the timeshare of real estate, were already well established. For example, Donald Trump has been a pioneer in offering fractional ownership of investment properties in New York. Similarly, companies such as Intrawest offer fractional ownership of vacation properties. Fractional ownership is also beginning to appear for luxury items such as yachts and high-end sports cars.
External links
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