Fractional aircraft flights reached a new record level in 2022, with hours flown growing even more than charter flights or wholly owned flights, according to data from ARGUS TRAQPak. These figures confirm the trend of significant growth across the whole of private aviation in the last two years.
We expect the next 12 months will continue to be very busy for the fractional market. The reasons are multifaceted, but key trends for increased activity relate to a wider variety of aircraft, shorter wait times to gain access to fractional ownership, a more favorable buyer’s market, flexible structures, and an increased focus on sustainability.
1. New aircraft are being added to fractional fleets to meet a wider variety of needs
As more private and corporate owners show interest in the fractional space, the needs of fractional owners are diversifying and the variety of opportunities is growing. All fractional companies, therefore, including NetJets, Flexjet, PlaneSense, Airshare, AirSprint, Jet It, Nicholas Air, Volato, and flyExclusive, have placed orders with OEMs for new aircraft that are being delivered in 2023 and shortly thereafter.
The types of aircraft being ordered run the gamut from helicopters and turboprops to ultra-long-range jets. During COVID lockdowns, smaller jets were popular as there was little or no international travel. Since the world has reopened sending international travel booming, the competitive landscape is driving the fractional companies to widen the long-range fractional market. They clearly see the market, for 10 to 13 hours of travel has bounced back and will continue.
Flexjet has recently added Gulfstream G650s and plans to add G700s, as well as super mid-sized jets such as Challenger 3500s. NetJets is also growing its fleet of ultra-long-range jets, ordering Bombardier Global 7500s and 8000s. It also placed an order for 100 additional Phenom 300 light jets during COVID.
However light jets – usually the work horses of large fleets – have also seen a surge in popularity. HondaJets have been very popular among newer fractional companies such as Volato and Jet It. PlaneSense added its first Pilatus PC-24 a few years ago and has been adding more over the last few years. Both flyExclusive and AirSprint state they have or will have fractional shares available on new Citation CJ3+ aircraft this year.
Fractional companies are not just replacing existing aircraft, they are adding to their fleets. NetJets, for example, is aiming to have 1,000 aircraft in its fleet by end of 2023 – up from 750 before the pandemic. Flexjet is expanding its fleet from 160 aircraft pre-pandemic, to over 250 at the end of 2022, and anticipates taking delivery of approximately 40 additional aircraft in 2023.
2. The waitlist to become a fractional owner is diminishing
Wait times to buy a new fractional share have been extensive over the last few years, varying from several months to several years. However, the addition of hundreds of aircraft to fractional fleets in the U.S. will put more fractional owners into their aircraft in 2023.
Smaller fractional providers, which offer smaller aircraft, generally have had shorter wait times. Whereas at NetJets, to get a fractional share in an entry-level light jet like a Phenom 300 meant a wait of over a year, getting a share on a Pilatus PC-24 at PlaneSense would be much faster. Customers requiring large ultra-long-range jets will have a more limited choice between the big fractional companies like NetJets and Flexjet. In the coming year, however, the wait times at even the larger companies will diminish due to the new deliveries and leveling off for demand.
3. 2023 will be a kinder year for buyers
This year, we’ll start seeing something resembling more of a buyer’s market. Historically, discounting has been available, but not recently due to the high demand. As the market starts to level out from the recent rapid growth and the supply of fractional aircraft increases, some level of negotiation of fractional agreements is likely to return.
4. New flexible structures will entice some to fractional ownership
Traditional fractional agreements consist of four payments: the initial purchase, a monthly management fee, hourly usage charges, and variables, which include fuel. Newer providers have entered the market over the past few years and are trying alternative structures to woo customers including adjustments to those traditional agreements.
Here are some examples;
- No monthly management fee (flyExclusive and Volato);
- Usage rebates (Volato);
- Unlimited hours and days (Volato);
- Pilot your own fractional (Jet It);
- Day-based programs (Jet It and Airshare);
- Designer aircraft with dedicated crew (Flexjet Red).
Customers who in the past shied away from ownership – whether full or fractional – due to environmental concerns may be at least partially swayed in 2023 and beyond. The entire business aviation industry is aware of the need to increase sustainability and fractional companies are no exception. To differing degrees, fractional companies are increasing their use of sustainable aviation fuels (SAF), purchasing carbon offsets, pledging to become carbon neutral, using book-and-claim, and reducing their ground emissions.
- Increasing their use of sustainable aviation fuels (SAF), which can reduce greenhouse gas emissions by up to 80% compared with conventional jet fuel. For instance, NetJets has committed to buying 3 million gallons of SAF a year.
- Purchasing carbon offsets through verified credits. Flexjet, for example, offsets 300% of the carbon emissions from every flight. Canadian company AirSprint measures the greenhouse gas (GHG) emissions of all flights and sources third-party verified carbon offsets to mitigate the climate impacts from their aircraft. Volato partners with 4AIR to offset the CO2 in every gallon of jet fuel used across its HondaJet fleet. flyExclusive has an optional program to buy carbon offsets with 4AIR.
- Pledging to be carbon neutral. Operator NetJets says it’s been carbon neutral in Europe since 2012. AirSprint has commited to making all flights carbon neutral by 2025.
- Using Book-and-claim. Because SAF is not yet available at most airports, a “book-and-claim” registry allows a flight to utilize SAF where available while another operator pays for it and claims the credit. This process makes the creation and distribution of SAF as efficient as possible, maximizing global emissions reductions while minimizing transportation as availability grows.
- Reducing ground emissions. AirSprint conducts reduced ground engine operations when possible, including reducing its auxiliary power unit (APU) use before and after each flight. NetJets has purchased an electric aircraft tug at one of its repair stations. It also claims most of its ramp- and hangar-based vehicles that support daily operations will now produce zero emissions.
- Finally, some newer aircraft being added to fleets have an Environmental Product Declaration, which confirms their sustainable sourcing and manufacturing.
While concerns about a changing economy and higher interest rates in many parts of the globe may affect the number of people ready to purchase a fraction of an aircraft, fractional ownership should continue growth in 2023 and beyond. The number of ultra-high net worth individuals (UHNWI) continues to increase globally. In addition, commercial flying is plagued with more headaches and delays now than it was before COVID-19, meaning those companies and individuals having switched to private aviation during the pandemic are expected to stay and more are likely to join their ranks. Fractional is expected to secure business from these trends, as it remains more cost-effective than full ownership. The fact that a wider variety of aircraft is being added to fractional fleets, wait times to obtain a fractional share are going to be shorter, buyers will have greater negotiating power, incentives are being offered, and actions are being taken to reduce the environmental footprint will all help ensure the fractional market has a succesful 2023.