Tuesday, February 21, 2012
Co-Own A Plane!
With aircraft ownership costs skyrocketing, finding a partner could keep you flying
Jessica Meredith co-owns a 1979 Citabria with three other pilots at Santa Monica Airport. Each owner pays $160 per month of fixed costs, $30 per hour for future engine maintenance, and their own fuel.
Owning an aircraft is expensive. If you've ever sat down with a spreadsheet and input all the costs that go into owning and flying an aircraft, you've realized that financing it all yourself is a ponderous burden. The big-ticket items of maintenance, insurance, storage (hangar) and, of course, the cost of unexpected "surprises" are enough to dissuade anybody with an average pocketbook from owning an aircraft.
Unlike a car—where you can run to the local Pep Boys and pick up any part on sale—aircraft require specially certificated parts installed by mechanics with unique training. They require specialized "care and feeding" because of their unique role in flying several miles high at speeds much faster than a car. Not to mention the regular inspections and highly specialized instrumentation, as well as highly refined (and expensive) fuel requirements. No, owning an airplane isn't for the timid.
But pilots were never meant to be renters. If you think about it, aviation is one of very few areas where renting is considered normal. Though it's possible, you don't usually rent your motorcycle; or your mountain bike, or horse, or race car or boat. Yet in aviation, most of us have to rely on an FBO with possibly tired airplanes and unknowable maintenance to provide us our flying fix. Owning an aircraft has become too expensive for most folks. And that's where partnerships save the day.
There are many flavors of partnerships: limited liability company (LLCs), simple partnerships, fractional ownership and flying clubs. The difference is in the individual responsibility of the members, the liability exposure of the group, insurance ramifications and tax implications. The structure of the partnership can be anything from an informal agreement between two or more pilots to a corporate arrangement with officers, yearly meetings and shareholder agreements. One of our great freedoms in this country is the ability to create aviation partnerships that fit our unique situations.
A better word for sharing the cost of owning an aircraft is "co-ownership." The word "partnership" is actually a formal designation of one type of co-ownership, and carries with it certain legal parameters. The term is usually used with a "for-profit" business relationship. It would be prudent to note that the legal, liability and tax variables for each type of co-ownership scenario is outside the scope of a magazine article and should be researched further—preferably with the advice of an attorney.
The simplest arrangement for pilots is the "co-ownership" scenario where there are two variants: tenancy in common and joint tenancy. The difference between the two relates mainly to whom the owner's interest goes after death. Co-ownerships aren't subject to tax because they aren't a business entity. If an accident were to occur with a co-owned aircraft, attorneys could go after each individual for damages.
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Labels: Buyer's Guide, Features, People and Places, Pilot Guide, Pilot Resources, Fractional Ownership, Ownership, Best Buys, Aircraft Partnership, Partnership, Aircraft Ownership