If you’re considering Partners In Aviation’s program, PIA Managed Co-Ownership, you might be wondering what our customers have to say about their experience. Have their expectations been met? Has the program delivered the financial benefits they expected and mitigated the inherent risks of DIY partnerships?

Allow us to introduce you to four PIA clients. Their individual journeys from sole-aircraft ownership to co-ownership are unique. But you may be able to relate to each one, especially if you own an aircraft and have considered selling it outright or thought about bringing on a partner.

If, by chance, you’ve come directly to this post and are unfamiliar with us, we encourage you to take a look at this 2-minute video explaining the basics of PIA Managed Co-Ownership.

Keep the Company Jet Without Reinventing the Wheel

Don Dahlgren is an Oklahoma-based entrepreneur with a 40-year track record of success in the real estate and energy sectors. He grew up around airplanes, got his pilot’s license while still in high school, and went on to own aircraft that he used for business – and just for the joy of flying. He progressed to a turboprop and then a light jet before buying his current aircraft, a Cessna Citation CJ4. 

“I like having my own plane,” Dahlgren says. “I was very familiar with the ins and outs of aviation, and I knew that coming up with a good partner can be hard to do.” Dahlgren also points to the recent impact of COVID-19 on influencing his decision to consider options. “During the early days of the pandemic, the oil business was especially hard hit, and the expense was wearing on us. I considered selling the whole aircraft. I looked at fractional ownership. But nobody really wants to sell their jet and lose that convenience.

“My aircraft-management company connected me with Partners in Aviation,” continues Dahlgren. The matching process was particularly smooth. “The person I ultimately co-own with now was also familiar with PIA and had been chartering in the past. We checked each other out thoroughly, but we live in the same city and are both pretty well-known in the community.

“I was particularly impressed with PIA’s well-thought-out co-ownership agreement,” Dahlgren concludes. “These things could get complicated and cumbersome, but we didn’t have to reinvent the wheel. My aviation attorney was minimally involved, which ended up saving me even more money in the end.”

Navigating Efficiency in a Remote Locale

Richie Morgan is a business owner in a region of Northern California that is, shall we say, underserved by commercial air travel. “The lack of reliable air travel where I live prompted me to purchase a Pilatus PC-12 turboprop for my business, but I was looking to be smart about aircraft ownership from the get-go,” he says.

Like many owners, Morgan explored ways to be more efficient. “I was new to aircraft ownership and tried to defray some of the costs with charter, but that wasn’t working out for me,” Morgan says of his early experiences. “Partnership made more sense. I put some feelers out, but really didn’t know how to go about it.” 

Morgan read about Partners In Aviation and contacted them to discuss his specific situation. “I was a little concerned that my remote location was going to create a problem finding a partner,” Morgan continues. “But PIA really screened potential candidates for optimal location. My co-owner is just a 30-minute hop from me, and things are going well. I’m not sure I would have found him without PIA. I put a lot of trust in their vetting process.

“Overall, PIA Managed Co-Ownership is a great way to manage an asset. There are so many fixed expenses when you own an aircraft, even when it isn’t flying. Sharing the costs makes the approach a much better business decision.” 

Juggling Travel Requirements During Business Cycles

​​Jim Ostrum is the owner, CEO and president of Wisconsin-based MilkSource, a multistate dairy operation whose travel needs have evolved significantly over time. CFO Tim Olson says, “We entered a phase of facility expansion, and the prolonged travel and drive time involved was just overwhelming. We tried some occasional charter, but that wasn’t particularly efficient. In the meantime, we had acquired a new facility in Missouri with an airstrip right next to it that we couldn’t use – frustrating.” So the company purchased a jet.

The Cessna Citation XLS performed yeoman service for MilkSource during the company’s expansion, but the rapid growth eventually slowed. The jet was used less and less, and company leaders began to consider options. “We had a preference for some kind of ownership-partnership,” Olson continues. “Our president, Jim Ostrum, approached colleagues in our area, and one party was interested but just not quite ready. It can be hard to find someone you trust. So we investigated selling the aircraft, which wasn’t the ideal solution from our point of view. And then we began speaking with PIA about co-ownership.” 

The CEO and CFO were impressed with the program and the service. “We both liked the comfort level, legal structure, and guidance PIA brought to the process,” Olson concludes. “As the CFO, I can tell you the billing process has been flawless, and ditto on the aircraft maintenance and management. Everything has been going very well. Without PIA’s help, I imagine doing this on your own would be a pretty difficult experience.”

Embracing a Smart, No-Compromise Ownership Alternative

Allen Sirkin, the former CEO of Van Heusen, personally owned a super-midsize Gulfstream. “I enjoyed sole ownership but became a light user and wanted a smarter way to own,” Sirkin says.

So he contacted Partners In Aviation to explore PIA Managed Co-Ownership and see whether the program would work for him. “PIA was the solution,” he says. “I sold half my Gulfstream to a gentleman and his wife, introduced by PIA, and now I fly the same trips I always have – at half the cost.”

What We Do – Every Single Day

PIA has successfully assisted aircraft owners like Allen, Jim, Richie and Don – people looking for a smart solution to a specific need, and we would welcome the opportunity to assist you. We’ve amassed an extensive database of interested parties that enables us to find and vet qualified matches for you to consider. Today, PIA co-owners are operating coast-to-coast in every category of aircraft, from turboprops to heavy jets.

If you’d like to learn more, please schedule a consult. We’d enjoy hearing from you and discussing options available to you. We’d also be happy to connect you with PIA clients who can share firsthand how we helped them achieve their goal of operating more efficiently.

Two Owners. One Aircraft. 
Half the Cost.

 

Survey Says:

4 Out of 10 Jet-Card/Membership Flyers Are Not Satisfied and Considering Alternatives.

PIA Managed Co-Ownership℠ is an Option of Choice for Many.

A recent survey by Private Jet Card Comparisons suggests that customer satisfaction has dramatically declined among a large segment of private-aviation travelers. An abundance of demand and a shortage of availability are nibbling away at the user experience for fractional owners, jet-card holders and jet-program members. The data indicate that shortcomings in service and availability are likely to drive these customers to explore alternatives.  The value proposition has eroded to the point of forcing significant change. 

A Tipping Point?

The survey, covered by AINonline in late February, indicates that more than half of current business-aircraft users plan to fly more hours this year than last. However, supply chain issues, labor shortages, and high demand are causing users to question whether their expectations can be adequately met. According to the article, jet card and annual membership programs typically achieve renewal rates exceeding 90 percent. But 43 percent of these survey respondents report that they are considering options. 

It appears that a sea change is in the making. To understand this profound shift, it may be helpful to understand the genesis of fractional ownership, jet cards and other “time-share” private aviation options.

The Birth and Evolution of Aircraft “Timeshare” 

In 1984, former Goldman Sachs executive Richard Santulli purchased Executive Jet Aviation (later renamed NetJets). Santulli, a mathematician with some experience in aircraft leasing, developed a concept that could apply partial aircraft ownership to an entire fleet of business jets, creating a completely new transformative model for private aviation: fractional ownership. The NetJets fractional jet ownership program was officially launched in 1987. 

NetJets initially focused on quarter-shares in specific aircraft types, but today, shares options are skewing ever smaller, with 1/8th, 1/16th and even 1/32nd shares being offered by some fractional ownership programs. In addition to the asset investment of the share, fractional owners pay monthly maintenance fees and hourly operating fees, occupied-hourly fees for their trips, and additional incidental expenses related to the aircraft operation.

Jet cards entered the market as a form of pre-paid hourly access to private jets, which removed the asset investment portion of the equation. First developed by Sentient Jet in 1997, the concept grew in popularity. Now, there are over 200 jet card programs, and many fractional ownership providers offer their own jet card options (often with the goal of growing a jet card flyer into a fractional owner). 

Upside/Downside 

Fractional ownership and jet card/membership programs promise travelers on-call demand, convenience, and flexibility. However, those benefits come at a cost. Depending on the program and level of commitment, users are offered a wide array of options and perks, including these:

  • Upgrade or downgrade aircraft type, depending on your trip needs (plus a prorated change in operating cost and usually an additional fee for the change)
  • Flying on-demand, sometimes with as little as four hours notice
  • Accommodates complex, multiple, simultaneous trips, with numerous aircraft and itineraries (again with commensurate surcharges)
  • VIP access to major sporting, entertainment, and social events. Many operators offer special “in-the-club” hospitality experiences and meet-ups for events like the Super Bowl, the Kentucky Derby, the Academy Awards, and so on.

Many fractional owners and jet-card holders/members question the value equation offered by their current service option, especially when considering their increasing need to travel. So now, they’re actively seeking a better way to fly, and there couldn’t be a better time to look.

The Next Evolution: PIA Managed Co-Ownership 

Partners In Aviation (PIA) was founded in 2016 with the express intent of helping clients reap the financial benefits of sharing an aircraft while eliminating the myriad problems endemic to aircraft partnerships. PIA developed and launched PIA Managed Co-Ownership, working with industry experts in aviation law, tax, aircraft management, and maintenance.

Optimal for clients flying 100 hours per year (+/- 50 hours), PIA Managed Co-Ownership is a turnkey program that matches two compatible co-owners in one aircraft, effectively splitting capital and fixed costs in half. Each co-owner remains autonomous in tax and title. The program will more than satisfy the access demands of travelers whose usage requirements fit PIA’s model. 

Why Consider PIA Managed Co-Ownership?

  • PIA has built a critical mass of qualified co-owner candidates that allows them to effectively match co-owners anywhere in the U.S. in any class of aircraft. 
  • PIA Managed Co-Ownership is comprehensive: It defines how the aircraft is owned, how it’s shared and how co-owners exit the program — every aspect of the relationship is defined, from entry to exit.
  • The legal structure’s safeguards have passed the test of their clientel’s discerning counsel and gives co-owners the access, flexibility and autonomy they require.
  • Co-owners are in control. As the key decision-maker in PIA’s structure, a co-owner has final approval on their co-owner match, choose which aircraft to purchase, approve the expert third-party aircraft manager and make the final call on their pilot/crew selection. 

Spend Half, Stay Whole

PIA president Mark Molloy says, “We know that jet cards, membership programs and fractional ownership are the right fit for many people, especially those with modest travel needs. Our program attracts clients who want more control than what membership programs offer. Sole ownership provides that. Co-ownership does too, but it also delivers efficiencies that sole ownership can’t.

“PIA Managed Co-Ownership delivers the best of both worlds,” continues Molloy. “The efficiency of sharing and the control of owning. It’s our job to guide our clients to the right match, with the right aircraft, and help get them up and flying. We create successful aircraft co-ownerships. It’s all we do, and we do it well.”

Partners In Aviation (PIA) president, Mark Molloy, joined Tony Kioussis on the Asset Insight Podcast to describe how PIA Managed Co-Ownership℠ matches two owners to one aircraft and pairs them with the appropriate aircraft manager. Owners fly their aircraft, on their schedule.  However, by cutting acquisition and fixed costs in half, PIA Managed Co-Ownership provides the lowest net cost of aircraft ownership while maintaining access comparable to sole-ownership.

Topics covered in the 20-minute podcast include:

  • How PIA Managed Co-Ownership works and what PIA specifically provides.
  • How PIA Managed Co-Ownership compares with other ownership options.
  • Who the typical client is.
  • What aircraft size and model options are available.
  • The costs associated with PIA Managed Co-Ownership.
  • Charter revenue under PIA Managed Co-Ownership.

 

Podcast Transcript

 

Tony Kioussis (00:33):

Welcome to another Asset Insight Podcast, covering the aircraft ownership life cycle. I am Tony Kioussis, president of Asset Insight and your host.

Tony Kioussis (00:42):

Partners In Aviation matches two owners to one aircraft and pairs them with the appropriate aircraft manager. Owners fly their aircraft on their schedule, however, by cutting acquisition and fixed costs in half, Partners In Aviation contends that its managed co-ownership program provides the lowest net cost of aircraft ownership while maintaining access comparable to sole ownership.

Tony Kioussis (01:09):

We found the concept which one article described as the next evolution in business aircraft ownership, sufficiently intriguing and wanted to invite Mark Molloy, the company’s president, to help our listeners learn more.

Tony Kioussis (01:24):

Thanks for joining our educational podcast, Mark, I have to tell you that the concept on the surface at least sounds like a better option than relying solely on charter revenue to reduce your direct cost. How has it been received by the business aviation community?

Mark Molloy (01:41):

I’d say it’s initially skeptical because there are so many different programs, and there’s a little bit of a deluge for folks that are trying to find the right program as to which one is the right fit.

Mark Molloy (01:55):

It took us a while really to get the momentum in the program and to have enough matches out there to really start to become mainstream. But we’ve now been out in the space for about six years and we have matches all over the country from Seattle to Miami, we have them in lights, mids, and super mids. We’ve got CJs ones, twos, threes, and fours. Phenon 100s, Phenon 300s, Lear 45XRs, we’re doing three hard currently G200s. We’ve got challengers, we’re doing a Legacy 600 right now as well. So now we’ve got the momentum, and I would say the credibility and customers that are considering us have the ability to visit with folks that are in the program and have been through the whole process.

Mark Molloy (02:41):

It took us two years working on the program before we were brought it to the marketplace, but now it’s up and running. And now we’ve got enough momentum with the program that it’s becoming an option for folks as they’re looking at all the options they have to solve their needs,

Tony Kioussis (02:57):

Skepticism in the marketplace. What a concept, how unusual? Happens with every new concept that comes along, right?

Mark Molloy (03:05):

If the word partnership doesn’t raise the hair on the back of your neck, you’re not really thinking straight. It really should.

Mark Molloy (03:12):

All of our clients have had some partnership somewhere along the line, that’s gone south on them, and so there should be some red flags, but that was the issue. The math was good, the structure wasn’t, and so what it needed was someone to take the time to really do this and nothing but this and that was kind of the genesis of the program. We felt like we could solve this if we stuck to our guns and stuck to just this.

Mark Molloy (03:38):

Yeah, I understand the skepticism, it should be there, but when done right, the math is pretty compelling.

Tony Kioussis (03:45):

So tell us how your company’s manage co-ownership program works. What the process for structuring one of these relationships is, and what does Partners In Aviation specifically provide?

Mark Molloy (03:57):

The elevator speech on this is we are match.com for business aviation. We match two owners to one aircraft. That’s all we do. It’s never anything else. It’s never multiple owners. It’s not multiple aircraft. This is not a fractional program. Every match is two owners, one aircraft and a manager. It’s a little triangle. And we assist in matching the owners. We then assist in the acquisition of the aircraft for those owners. And then we assist in the legal structure. We have an aviation law group that handles all of the agreements. The two owners enter three separate agreements. They enter a 50% interest purchase agreement. They enter an aircraft co-ownership and operation agreement, and they enter an aircraft management and pilot services agreement.

Mark Molloy (04:44):

We assist with those in conjunction with their counsel. So we’re matching them to a co-owner, we’re matching them to an aircraft and then we’re matching them to a manager or charter manager depending on how they intend to operate.

Mark Molloy (04:58):

So we’re not the manager in this. We work with managers all throughout the country. We work with the 800-pound gorilla, big national managers. And we work with a lot of boutique, small managers that manage 15 or 20 aircraft. And the two owners choose who that manager is usually with our guidance.

Mark Molloy (05:15):

But at the end of the day, it’s two owners, one aircraft and a manager. We try to keep it simple. Our typical client flies 100 hours a year which translates to three to four, maybe five days a month that they’re using their aircraft. That means the other co-owner has access to his aircraft about 25 days every month. It’s not 30 out of 30, to have 30 out of 30 you’d need to pay 100 cents on the dollar for the aircraft. Inside of this model, our folks are paying 50 cents on the dollar for the capital and for the fixed costs. And they have access about 25 days a month.

Mark Molloy (05:53):

Most of our clients have reasonable flexibility in their schedules. That’s why they’re coming into this program. And so that handles 100% of their trips. That’s the value proposition to be paying 50 cents on the dollar for the big numbers, with access that really handles 100% of the flying that they’re currently doing.

Mark Molloy (06:12):

Think of us as match.com, but we’re matching you to more than just to partner. We’re matching you to a partner we’re matching you to an aircraft. We’re matching you to the right manager. And then we’re providing this legal structure that you’re going to operate under.

Tony Kioussis (06:27):

There are numerous options out there if one wishes to fly privately, including of course, charter possibly through a Jet Card and Fractional, how is Partners In Aviation’s managed co-ownership compare to these and other options?

Mark Molloy (06:44):

For everybody that’s looking at those options usually comes down to how much are they flying and we’re not the right program for everybody. We’re a bit of a niche business. And I think there’s a spot for all of those programs. Usually, as folks go through the process of trying to identify which is the right program for them, it’s going to come down to how much they’re flying.

Mark Molloy (07:07):

If they’re flying less than 50 hours a year, usually they’re going to bend towards charter, Jet Card, or a membership program of some type, because in our program this is aircraft ownership and there’s capital invested here. So there has to be enough usage for that to make sense. And usually, if it’s under 50 hours a year, you are not flying enough to justify this capital acquisition. Once you start getting north of 50, certainly 75 hours, then a lot of folk are starting to look to see if there’s maybe a better way than what they’re currently doing in charter and Jet Cards and that’s usually the time they’re going to come to visit with us. I would say on the low end, our clients are flying 50 to 75 hours a year.

Mark Molloy (07:54):

The high-end customers that we have fly 125 to 150 hours a year. About 85% of our clients fly between 75 and 125 hours a year. So we’re really kind of a tight niche business.

Mark Molloy (08:07):

If you’re flying much more than 150 hours a year, you’re probably going to bend towards full ownership. I really think all of those programs have a space and we’re in that space of that 100 hour a year operator plus or minus about 25 hours. That seems to be where the math is pretty compelling. They’re probably spending more than they’re comfortable with on charter or Jet Cards, but they’re not to the point where they’re ready to purchase a whole aircraft. I think that’s where we best fit.

Tony Kioussis (08:37):

Those are interesting statistics on the typical managed co-ownership client. I would not have thought it was that low a utilization. That is really interesting to me. What are the aircraft size models, options that are available to people?

Mark Molloy (08:53):

We’ve got matches in turboprops. We just finished two PC12s and we have matches in heavy jets, but not a lot in either of those two categories. We’re really light, mid and super mid. Our business is about a third in each of those three. As I said before, we’ve got pretty much all the models of light jets now flying CJs ones, twos, threes, fours, M2s, Phenom 100s, Phenom 300s, Lear 45s, we’ve got Citation XLS and a multitude of Hawkers flying now in the mids. In the super mids, we’ve got Gulf Streams, Challengers, Legacies and Falcons. So we’re about a third in each of those categories. So it’s relatively evenly spread.

Mark Molloy (09:38):

We don’t work with any Piston aircraft and we don’t do a lot of international work. So it’s mostly domestic, but a lot of our domestic guys will take the airplane to Europe once or twice a year. Nothing unusual about that. But if it’s a customer who’s going to Europe as a regular course of business, that’s probably not going to be a fit for the program at this time.

Tony Kioussis (09:57):

Are there any costs specific to managed co-ownership that an interested party needs to keep in mind?

Mark Molloy (10:05):

Well, this is ownership. So it’s got all the costs of ownership. You’ve got a dedicated crew, you’ve got insurance, you’ve got hangar, you’ve got all the way down to subscriptions and wifi. You are paying for everything, it’s just that you’re paying 50 cents on the dollar for it. So it’s no different than any other owner that owns his own airplane.

Mark Molloy (10:22):

There is a management fee involved and that’ll be based on the manager you choose. And again, like everything, you’re paying 50 cents on the dollar for each of those. So really no different cost than what you would have as a sole owner, going to pay 50% of the capital. You’re going to pay 50% of the fixed costs. You’re going to pay 100% of your direct operating costs. And typically the direct costs are the cost of fuel and engine programs. Otherwise, everything else is split.

Mark Molloy (10:50):

Just know that it’s the same as ownership in terms of all of that.  The good news is somebody else is picking up half the load.

Tony Kioussis (11:00):

Is it possible to generate charter revenue under managed co-ownership or is this structure limited to part 91 operations?

Mark Molloy (11:08):

You tell us which of those two avenues you choose and we match you accordingly. And right now about 25% of our business is straight part 91, where it’s just the two owners flying their aircraft. And about 75% of our business is what we call the subservient third partner and that’s revenue.

Mark Molloy (11:27):

In our program, the revenue is done on a limited and strategic basis. And what I mean by that is in the old model of charter revenue, it was a little bit of tail wagging the dog, where the airplane flew mostly in revenue and the more hours the better to drive the cost down. We don’t subscribe to that theory, but we do think there’s logic in putting revenue on the airplane where it makes sense and where it makes sense is leveraging your fixed costs. When you see the performance, it’s pretty easy to see the single biggest line item as an owner is crew.

Mark Molloy (12:06):

There’s nothing more expensive as an owner than what you pay salary benefits and training for your crew. And you’re going to have a crew of two to operate the airplane. So it does make sense to leverage that cost, but not to add to that line item. And typically, depending on the airplane, a crew can fly somewhere around 300, 350, maybe 400 hours a year, depending on the kind of aircraft. That’s really a days driven equation, more than it is an hours equation, but it equates to somewhere around 350 hours a year where we have two co-owners each flying somewhere around 100 hours a year, that leaves us about another 150 hours that the airplane can be flown in revenue with that crew.

Mark Molloy (12:48):

And typically what will do then with that manager that’s managing this is we will mitigate the deadheads. A lot of our customers have a second or third home that they’re flying to, or a vacation destination where they’re going for a while.

Mark Molloy (13:02):

The airplane’s going to take them there, and then it’s going to depart in revenue. It’s not going to deadhead back. And as you know, in today’s market, and it’s been this way for a while, we can fly these airplanes in revenue pretty much every day, every direction. That’s not a problem. The demand has been such that’s relatively easy to do.

Mark Molloy (13:22):

So the revenue piece to the model mitigates deadheads, and they’ll also cherry-pick good charter opportunities that don’t interfere with either of the co-owners flying. And when you do it that way and you keep it inside of the space that the crew can handle. Typically at the end of the year, we’ll have put about 350 hours on the airplane. About a third of that will be co-owner A’s hours, about a third of that will be co-owner B’s hours. And about a third of that will be revenue hours. And that’s pretty good math at the end of the day. And now you’ve leveraged your fixed costs. You haven’t added to those and the net cost of ownership under that model is a good value proposition.

Tony Kioussis (14:04):

Yeah. The other thing that dawns on me is you really haven’t run the flight hours up substantially on the aircraft. If you’re doing 350 hours a year, that’s pretty routine. So you’re not taking a devaluation on the aircraft when you go to sell it because of high time, which is one of the problems that a lot of people forget about when you’re chartering. I imagine managed co-ownership works best if the two owners live near each other, which avoids repositioning costs, who pays for the cost to position the aircraft when the owners live in different locations?

Mark Molloy (14:40):

We do the matches geographically. And so you are going to be matched to somebody who’s inside of your region and where we can keep the repositioning to typically 30 minutes or less that actual cost to move the aircraft, usually once or twice a month is minimal. That cost, which is fuel and engine program is a split cost. So neither owner cares where the airplane sleeps at night, whether it’s a corner at A’s base or a corner at B’s space. What they care about is that they drive to their local airport, walk through their FBO, get on their airplane with their crew at the best cost. So that cost of repositioning goes into the split bucket. But as I say, it doesn’t even move the needle in the big math we’re talking about here.

Mark Molloy (15:24):

That’s how it works. You’re going to be matched to somebody geographically. There’s a very small amount of repositioning cost. You’ll save more in hangar rent by cutting your hangar in half than you will pay in repositioning costs. You’re talking about folks that have a couple of trips a month typically.

Tony Kioussis (15:40):

This is an intriguing concept and one that no doubt makes sense to many existing and prospective owners. What haven’t we covered that you would want people to know about our managed co-ownership or Partners In Aviation?

Mark Molloy (15:55):

It’s probably worth saying that the way this works as a customer, you and your legal folks are going to be directly involved with our law team and our aviation tax consultant to assist you on your end, but you’re going to be treated like a sole owner in tax and in title. So not in a partnership legally or structurally, this is a little different, you’re in a co-ownership. Each owner owns an undivided interest in 50% of the aircraft. There is no K1s at the end of the year, it’s not a partnership. There’s no entity where they reside together and they’re treated autonomously for tax and title. So say it’s a $6 million airplane. Each owner has a $3 million asset. One of them might be taking bonus depreciation, and maybe they’re showing 70% business use and 30% personal in terms of write-off. And the other owner might be chasing grandkids and do none of that. And what one owner does has no effect on the other, in terms of tax and titles. So it’s a little different than what the old partnership model was.

Mark Molloy (16:55):

We find that their legal folks much prefer this from liability and from a financial entanglement perspective. That’s a big part of this too, is the legal structure that comes with it. That’s all part of the service.

Tony Kioussis (17:12):

This has been another Asset Insight podcast, covering the aircraft ownership life cycle. Please visit our ever-growing podcast library at assetinsightpodcast.com and select from any number of topics discussed with business aviation industry experts. This is Tony Kioussis, and as always, thank you for listening.

Originally Published by Business Jet Traveler.

While the COVID-19 crisis has affected all sectors of aviation, some companies are recovering quicker than others. One that claims to have already returned to pre-crisis levels is Partners In Aviation (PIA), which was founded in 2016 to match people who wish to share in the purchase of a private jet.

“Everything kind of went silent for 60 to 90 days,” said Mark Molloy, PIA president and an industry veteran of nearly four decades, “but now we’re actually getting a little bit of a COVID bump in terms of inbounds and folks that have made the decision [to fly privately]. They basically say they’re not going to travel with 250 of their closest friends anymore…and they’re looking at options.”

The process begins when people contact PIA with an interest in sharing ownership. Based on its existing contacts and research, PIA will then search for a geographic match. Typically, according to Molloy, they are familiar with private aviation, having come from jet card programs, or perhaps they even previously owned a small airplane and want to move up to a different class. In another scenario that’s becoming more common since the start of the company, existing aircraft owners seek to take on a partner, possibly due to their own reduced flight hours. “They’re not ready to give up on what they’ve become used to, but they’re down to 75 to 125 hours a year, and that gets hard to justify,” Molloy told BJT.

Molloy cited a recent example where a customer who owned a super-midsize jet signed up with the company and immediately had three potential matches. “That wasn’t the case in the early stages [of PIA’s business],” he said.

Since it began, PIA has seen its arranged partnerships change. Initially, they involved just light jets but, said Molloy, “folks that are coming out of jet cards or membership programs are often more accustomed to larger-cabin aircraft. He added that “right now it’s super-mids and mids where most of the activity is.” Molloy estimates that the three size categories currently each represent a third of PIA’s business and notes that the company has overseen transactions on aircraft ranging from an SF50 Vision Jet to a Challenger 605; as of press time, it was working on its first marriage involving an ultra-long-range jet. The company declined to note exactly how many matches it has arranged thus far.

“A lot of folks want to get a third or fourth person, but our belief is this works really well if we keep it in between the lines of this legal structure, which is two low-time users and one airplane, professionally managed,” said Molloy. That management is a crucial part of the process and is mandated by PIA. The company has preferred aircraft management partners it can recommend to customers, or they can choose their own, based on mutual agreement. PIA recommends enrollment of the aircraft in engine-care and parts programs. The two sides will also determine whether the aircraft will be placed on a charter certificate.

The initial term of the owner partnership is three years. “There are options to exit pre-term if you need to because life happens, but those options are such that you may not see the full fair market value of your interest,” Molloy said. “What we tell people is if a three-year commitment is not something you are comfortable with, it’s probably not the right program for you.”

Partners in Aviation provides managed aircraft co-ownership services for owners of business jets and turboprops who fly less than 200 hours per year. The company brings together an aircraft owner and a prospective co-owner or two entities looking to purchase a comparable aircraft. It then assists in acquiring the aircraft if necessary, setting up the partnership, scheduling usage, and providing an exit strategy.

A regional sales director for Beechcraft (later Textron Aviation) in the greater Chicago area for 34 years, PIA founder Mark Molloy took note of the number of people he met who owned or wanted to own a turboprop or light jet but couldn’t justify the expense for the hours they expected to use the aircraft. While many of these people were interested in splitting the cost with a partner, they were daunted by the legal complexity of an aircraft partnership agreement and the uncertainties concerning scheduling and maintenance.

In 2016, Molloy partnered with Tom Bertels, a marketing executive from Wichita, Kansas, who had a long history as a commercial and instrument-rated pilot. Recently retired as a managing partner from Sullivan Higdon and Sink, an advertising company that works with aviation clients, Bertels (who left PIA in 2019) added marketing expertise to Molloy’s aircraft transaction knowledge, and the two began to develop a way to fill the gap between fractional programs and sole ownership.

While the company was launched in late 2016, it took nearly two years of meeting with tax and finance consultants, legal advisors, and other industry experts to develop PIA’s managed co-ownership model. Legally structured differently than a partnership, the managed co-ownership structure allows each owner to create an entity with no connection to the other, providing autonomy in tax and title. PIA handles the communications between co-owners, who have 100 percent control of the aircraft schedule on alternating weeks with incentives to share when the other owner needs the aircraft on an off week.

For the first co-ownership deal, completed in 2018, the company took more than six months to find and match the co-owners, two frequent charter and jet card customers. The company acquired an Embraer Phenom for them that is based at Florida’s Palm Beach International Airport.

PIA has since completed matches in a wide range of business aircraft, including Cessna Citations, Embraer Phenoms, Hawkers, Gulfstreams, Bombardier Challengers, a Cirrus Jet, and Pilatus PC-12 turboprops. The majority of these have been preowned aircraft that were approximately 10 to 15 years old. Having identified a nationwide pool of prospective co-owners, PIA now typically completes matches within 60 days.

Originally published by Business Jet Traveler.

Partners In Aviation (PIA) has appointed aircraft finance, sales and operations veteran, Perry D. Bridges as its new Vice President of Operations.

“My aviation career started with a 20-year run at Cessna Aircraft Company, which included 11 years with Cessna Finance Corporation,” said Bridges. “My experience in contract administration, sales and aircraft lending gives me unique and pertinent insight into aircraft purchasing and financing. My new role with Partners In Aviation brings that involvement full circle, pivoting my inside knowledge to bear to support customers on the acquisition side. I’m thrilled to be a part of the team.”

Bridges also recently served as vice president, Aviation, for Bank OZK, based in Chicago, where he led turbine-lending efforts for a 13-state region of the Midwest. As regional sales director for Textron Aviation in Chicago, Bridges tallied $202m in new Cessna Citation and Beechcraft King Air sales for his region.

Partners In Aviation founder and President Mark Molloy, said: “Perry just brings a wonderful and singular skill mix and attitude to Partners In Aviation at this important time in our story. His experience and expertise will add volumes of benefit for our aircraft co-owners as we continue our market growth and PIA Managed Co-Ownership becomes a more and more popular aircraft solution.”

A native of Wichita, Kansas, Bridges holds both bachelor (accounting) and masters (MBA) degrees in business administration from Wichita State University. Bridges lives in Geneva, Il, with his wife and three daughters.

“Flying privately as an aircraft co-owner for a lower cost not only allows business owners to grow faster and more efficiently, it delivers a way to better enjoy the successes of life,” Bridges concludes. “Managed Co-Ownership gives you all the access at half the cost. Partners In Aviation provides the formula for all of this to occur. I’ve been a big believer in the success of this program ever since Mark Molloy first told me about his plan to bring a fully realized co-ownership product to the market.”

Partners In Aviation (PIA), which has developed a “managed co-ownership” model that matches two owners to one aircraft, is seeing that business continue to grow. PIA noted that its time-to-match aircraft owners metric has dropped from the initial six months to just a couple of months.

“When we first brought managed co-ownership to the market in 2018, the concept was new,” said PIA founder and aviation veteran Mark Molloy. “Taking what had in the past been an ad hoc, legally-intimidating, co-ownership search process and creating a coherent operation was a major undertaking,” he said. According to Molloy, that process involves identifying, vetting, and introducing like-minded co-owners based in a common geographic region, and then getting them into an aircraft they choose.

PIA believes it now has built a “critical mass” of interested co-owner candidates nationwide, significantly reducing the time it takes to pair owners. That ownership has crossed turbine categories, the company added, including turboprops and jets from light to heavy.

“At the end of the first quarter, our time-to-match average is down to two months. It’s a gratifying statistic and underlines the acceptance, interest, and growing popularity of managed co-ownership,” he said. “Our inquiries continue to climb.” As the program matures and more owners come in, Molloy said they are having a “more efficient experience.”

Originally published by AINonline on June 3, 2021 

Using a contractual model similar to fractional ownership, Partners in Aviation wants to be the Match.com of private jets

Seeking to bridge the gap between full ownership and fractional shares and jet cards, Partner’s in Aviation moves into its fourth year in the market seeking to be the Match.com of private jet owners. Most of all, its principal Mark Molloy, a former Beechcraft executive, says the PIA formula is structured to avoid the pitfalls of those multi-owner partnerships that often don’t end well.

The service targets both current private jet owners and non–owners. PIA offers an alternative to selling the aircraft if you aren’t flying enough in the owners’ case. For non-owners, it offers the benefits of ownership at half the cost.

Customers only pay PIA if it’s successful in consummating a deal, although you make a refundable deposit akin to what you would pay an aircraft broker. Molloy says it means that customers are serious, so you don’t end up wasting time. Over the past two years, the rate of customers who end up walking down the aisle increased to 80% from 50%.

Private jet co-ownership target customer

In many ways, the process is similar to buying a jet, except it starts with finding the right partner. You don’t have to fly out of the same airport, but owners are typically within a 20-to-25-minute flight of each other. One pair of partners splits their jet between Palm Beach and Miami-Opa Locka.

At the outset, PIA identifies if you are even a fit before you start dating.

The flight calendar entails alternating weeks, typically Monday to Monday, although that can be negotiated. Holidays alternate by year. You can use the aircraft when it’s not your turn if your co-owner doesn’t need it. Just pay ferry fees, if there are any. “You buy the aircraft for $4 million instead of $8 million, and you pay repositioning fees a couple of times a year,” says Molloy.

The concept works best for folks who fly 75 to 125 hours per year, are flying four or five times a month, plan their trips, or have the flexibility to fly in their weeks. When you know you won’t need the plane, you can release those dates. De facto, the co-owners end up with access about 25 days per month.

In addition to making sure you are compatible – if you are allergic to cats, you can stipulate no cats on the jet before PIA seeks your sky match – the company helps identify potential aircraft, if neither partner has one, and then leads you through the full buying process, including its legal team to work with yours to get the deal done.

Finding the right aircraft management company

PIA also helps the two co-owners identify the best management company options. Sometimes one owner will already have a favored option that can be considered. As typical, the management company organizes hiring pilots, hangar leases as needed, and all the elements you expect. Partners also decide if they want to make the aircraft available for Part 135 operations.

The option works for those of you who are pilots as well. “We have some owners who turn right and some that turn left,” Molloy tells Private Jet Card Comparisons.

Most importantly, the deal structure removes typical friction. While there is an online calendar, requests between owners are channeled through the management company. Molloy says the structure, which minimizes contact with your air spouse, means less friction and a happier marriage. The standard ownership term lasts three years. There are mutually agreeable one-year auto-renews after that. There is also an escape clause if you need to exit early. How the aircraft will be sold is also part of the contract, so there are no surprises.

Molloy says that the pre-deal vetting process and dealing with all of the friction points in advance are key. The co-owners each pay their own expenses such as fuel, airport fees, and catering.

How long does it take to buy a private jet?

The time to make a match can be as short as 30 days. In some cases, it has taken over a year. Speed is largely based on the type of aircraft you want to co-own and where you live. Light and midsize jets had been the sweet spot although, there is a growing interest in super-midsize aircraft. If you are in South Florida, the Northeast, Houston, Dallas, the San Francisco Bay Area, or Seattle, there is a larger pool of potential partners. That said, Molloy just did a deal for a client based in Glacier Park, Montana.

He says the best way to convince prospects that properly structured co-ownership can work is to have them talk to existing clients. While he declines to say how many marriages PIA has consummated, he says there are enough success stories to connect prospects with owners who are flying the same type of aircraft you are looking at.

While PIA has done deals for new jets, the used market is more attractive to his “value-oriented” prospects. He says the ideal aircraft are typically manufactured between 2000 and 2015, bringing significant depreciation and modern avionics to the relationship.

PIA was launched in 2016; however, it took two years to develop the right structure. He says that legal structure, developed by experienced aviation lawyers, has made co-ownership attractive for those of you who have been reticent about those murky partnerships where it’s unsure whether they truly meet FAA regulations.

Private jet interest surges

Molloy says PIA’s 2020 was similar to the rest of the industry. A deep dive in March, but then a strong finish led to a record year. It’s currently running about 90 days to find a match. Then it takes another six to eight weeks to complete the purchase once the right aircraft is identified. So, it’s similar in many cases to if you were doing it yourself.

In addition to aircraft owners who want to cut costs, Molloy says a significant percentage of clients are former jet card flyers. He says that at 50 to 75 hours, they are looking for a more cost-effective solution and are open to a longer commitment, and don’t need short-notice guaranteed availability.

Originally published by Private Jet Card Comparisons on January 29, 2021 

Many people who can afford to fly privately don’t travel enough to justify the cost of owning a jet, yet some of them buy one, anyway. Once they own the airplane and see it sitting on a lot, they might explore the possibility of sharing usage or ownership, though many jet buyers have no interest in sharing their aircraft with other people, no matter how little they use it.

For those who are interested, the challenges are often legal. Aviation is a highly regulated industry and presents special problems for 21st century business jet schemes based on car services like Lyft. Charging for air transportation generally requires a commercial certificate, which is much harder to do without than a taxi license. Some companies have tried to circumvent aviation regulatory requirements by availing themselves of FAA flight-sharing rules, but the results have been mixed at best. The FAA shut down Flytenow and Airpooler (see “A Flight-Sharing Scheme Collides with Federal Regulations”) and reportedly sent a warning letter recently to Blackbird Air, a similar program. Uber Copter, on the other hand, is a charter business offering flights operated by HeliFlite.

Flight sharing would help to fill the seats, but what about sharing ownership? The original innovator here was NetJets, which launched a program based on what seems to have been a creative reading of the FAA’s Part 91.501 regulations, where people could gain access to a whole fleet of aircraft on short notice by owning an undivided share of one of its jets. After years of controversy, and after the share programs retooled a bit to satisfy the FAA, the agency eventually issued regulations specifically allowing fractional programs. Jet cards and other charter-based programs like Wheels Up and VistaJet followed, allowing access to a fleet of jets without the need to own anything.

Fractional and charter programs are not the only way to share jets under Part 91.501, however. FAA regulations also permit wet leases for limited compensation, called “timeshares”; aircraft exchange agreements, called “interchanges”; and even joint-ownership arrangements that permit one registered joint owner to operate an aircraft for the other owners. Finally, there’s “co-ownership,” where each owner of the aircraft (or an affiliate) operates it for itself.

Co-ownership has a special appeal for people who don’t like the idea of flying around on business jets owned, operated, and maintained by somebody else. With co-ownership, you can still control how the aircraft is equipped, operated, and cared for, and you can cut your costs significantly because you share the fixed operating expenses like crew salaries, hangar rent, and maintenance charges with the other owners.

A major difference between share and charter programs, on the one hand, and the joint and co-ownership options on the other, is locating people to do business with. Buy a NetJets share or a Wheels Up membership and the company will provide the other riders that make the program work economically. But how do potential jet co-owners find each other?

They could put ads in a newspaper. FAA common carriage rules are a significant stumbling block to “holding out” to the public a willingness to share rides or do timeshares, but you can hold out all you want for someone to co-own part of your airplane.

However, now you may not have to; a company called Partners in Aviation (PIA) will help you locate someone or something to share jet ownership. PIA basically creates a network of clients who can afford to own a business jet but can’t justify it to themselves financially for flying, say, only 100 hours per year. They then discuss the prospects on a no-names basis, including location (preferably within 20 to 30 minutes for positioning), preferred type of aircraft, anticipated annual usage, and the like. If it looks as if two owners would work well together, PIA introduces them to each other.

In the company’s basic model, just two parties split the fixed cost of owning the aircraft equally. One of the parties may be providing the aircraft, in which case it would sell half of it to the other party, or the parties may (with PIA’s help) go out and buy an aircraft together. The owners are then responsible for the direct operating costs of their own flights, including positioning. As in most co-ownership arrangements, there’s a true-up at year-end based on actual usage.

Of course, when you own anything with somebody else, you need to work out many issues, but an advantage of using a company like PIA is that someone is in the middle to mediate. PIA wants each owner to acquire its interest in an entity, not use a partnership or individual ownership structure, and to hire a reputable management company to help operate the aircraft for both owners. Prospective owners will need to retain aviation counsel, and an acquisition consultant and tax advisor may be required as well.

One of the thorniest co-ownership issues is the exit strategy. PIA contemplates a three-year contract, with a penalty for a party that wants to terminate early. That’s probably unusual for co-ownership agreements generally. Many such arrangements are between friends or people who know each other and who don’t worry a lot about splitting up, but that’s not necessarily a good thing. Owning an aircraft with a friend can spell the end of the friendship.

In a typical co-ownership arrangement, if an owner wants out, the other owner has a right of first offer and/or first refusal to buy out the share. If the other owner declines, then they basically have to sell the aircraft, for unless you’re a share program, it’s difficult to sell a piece of an aircraft, though you could always try to find another partner.

An alternative to co-ownership is a joint ownership arrangement pursuant to Federal Aviation Regulation 91.501(b)(6). The FAA defines joint ownership as “an arrangement whereby one of the registered joint owners of an airplane employs and furnishes the flight crew for that airplane and each of the registered joint owners pays a share of the charge” specified in an agreement among the owners. Unlike co-ownership, joint ownership is ideal when one of the owners wants nothing to do with operating the aircraft. You can also have more than two joint owners, though each must be registered with the FAA. No one should enter into a joint ownership agreement without consulting aviation counsel, but that’s true of any aircraft agreement.

Original Article Published by Jeff Wieand in Business Jet Traveler – November 2020

Photo by David McIntosh

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