Aviation Access Project: Fractional LSA
A shared ownership program based on the Net Jets model could make owning new aircraft a reality for more pilots.
Rick Mathews, the president of AAP (Aviation Access Project) thinks that common sense is one of the key ingredients needed to reduce the 80 percent dropout rate in general aviation flight training. His goal is to reduce it to 25 percent or less while also doubling the pilot population to one million or more.
That’s a tall order but according to Mathews, the industry is too dependent on pointing new pilots to rental aircraft. In fact, he strongly believes that relying on a rental strategy is unsustainable and is contributing to the downfall of aviation.
During my recent conversation with Mathews—a sharp and outspoken entrepreneur with an obvious passion for unifying the industry—he partly blamed some of the alphabet groups for placing too much emphasis on selling the concept of flight training without selling the customer the dream of owning an aircraft.
Many flight institutions, he says, continue to set students up for rental and flight training revenue, ultimately leaving the customer frustrated with the experience. He also thinks the term ‘student pilot’ is condescending. Instead, Mathews believes the industry often forgets that so-called student pilots are also consumers and should respectfully call them such.
Part of Mathews’ solution, through the AAP business model, is to offer affordable and flexible shared ownership, where buyers can purchase a quarter, eighth, or even a sixteenth share in a brand new advanced light sport model. But his concept is more than just an affordable buy-in. The AAP model is said to represent hassle-free, turnkey ownership, aircraft management, plus a country club-like experience.
Redefining Fractional Ownership
The AAP group was organized a couple of years ago at the Light Sport Aviation Expo in Sebring, Florida and continues to gain momentum (AAP is Incorporated and directors will own stock in the company). While the core of the program is based upon shared ownership, each shared aircraft is professionally managed by AAP (profit that’s built into the purchase price of each share).
According to AAP, this third-party management profile reduces the hassle for the aircraft owner, provides operating standards and procedures, enhances safety, and assures proper financial accountability. Mathews makes it clear that AAP is not an FBO or a flight school. Instead, it’s an owner-flown Part 91 operation.
The AAP business model focuses on establishing flight centers at airports around the country. AAP envisions the flight center network as a unique community for aviators. The flight center is intended to be customer-centric, friendly and a place where aviators can call home. AAP calls the center a Flyer’s Community—much like a country club for pilots. It’s intended to be a place for “like-minded friends and family to be together, learn together, have fun together, travel together, and celebrate accomplishments together,” according to the company web site.
While not all owners may be interested in this Kumbaya approach, AAP hopes that each center will be a positive step above the climate found at some flight schools. Currently, there are roughly 25 centers in various stages of development.
“What we want to do is establish an environment at any given airport with ultimately 1000 or more of these flight centers scattered around the country. Through the centers, designated ambassadors that act as counselors and advisors greet new pilots. They’ll offer advice, ask the pilot what it is they want to do with their license once they get it, and then recommend an appropriate LSA for a shared purchase. In the process of selling the share, AAP includes the cost of transition training. We want to make the process simple,” said Mathews.
AAP isn’t entirely focused on the light sport category and will manage nearly any aircraft a group is interested in. On the other hand, the idea is to make owning a brand new airplane affordable and light sport models (although hardly inexpensive) fit the profile. LSA ownership also solves potential problems a pilot may face with medical certification.
Mathews cautioned that AAP is unlike other so-called fractional programs that are actually disguised lease agreements. He also warns about programs that charge hourly rates. Mathews wants to rename the terms associated with fractional ownership and create distinction in the industry that shared ownership is just that—purely the ownership of an aircraft— preferably under an LLC.
Flight centers at any given location are often started by someone who’s heard about the AAP concept and want to become a local center director. Mathews described the business as a hybrid franchise, with a basic licensing arrangement between the director and the company. The local director has a lengthy marketing protocol to gather potential buyers—from posters on the airport bulletin board to staging large events—and to promote new centers and aircraft.
There are multiple levels assigned to a given center, with office space generally occupied at an FBO or elsewhere on the airport. For example, a Class One center might have a basic office to conduct initial selling of the aircraft shares. A Class Two center might lease an entire hangar so the fractional fleet can expand, while creating the community (or as Mathews put it, the ‘man cave’). The Class Three center (so-called Eagles Nest) would be the ultimate pilot’s country club. It would likely have multiple facilities on site, including a café and other social areas.
As for selecting the aircraft for purchase, AAP has a preferred lineup of aircraft, broken down into levels (one through five). A level one airplane is a model in the light sport category. AAP tries to select both high and low wing designs, for variety.
“The light sport category is important to our model because to lower the dropout rate, new pilot’s need to own an aircraft to help them pursue the sport pilot certificate first. It’s the simplest certificate to get,” noted Mathews.
The level two category aircraft is a model in the 160 horsepower range, perhaps a Skyhawk or a Warrior. These lower-cost aircraft might be an avenue for the sport pilot to advance to a private pilot and perhaps earn an instrument rating. From there, owners can advance into higher-level and higher-performance aircraft such as the Cirrus, for example. Mathews thinks of the various levels as a way for pilot’s to naturally progress in both ratings and aircraft ownership.
AAP has essentially adapted the Net Jets fractional model to single-engine piston aircraft. In general, they split the airplane into an industry-standard 1/8 share (they can also offer a 1/16 share, in some cases).
“Instead of someone spending $150,000 on a brand new LSA, an Initial Share Purchase (ISP) will cost around $22,000. The ISP is for a 1/8 share of the sole-purpose, free and clear LLC,” said Mathews. This $22,000 ISP example would include the management fees, insurance, transition training and non-recurring items that come up.
The monthly maintenance fee (MMF) on a common light sport model is around $200 per month (for maintenance and recurring cost items). Mathews says AAP does not use the terms fixed and variable costs and there is never an hourly charge.
The $22,000 ISP and $200 MMF pricing allows each owner an allocation of 75 flight hours per year. For owners who think they’ll need more time, they can simply acquire additional shares and own as much equity as they wish. Owners can sell their share, use the share to help move up to a bigger plane, or keep it year after year.
Since the local flight center manages the airplane, it coordinates the maintenance, cleaning, and all other activities. AAPs monthly management fee includes most all costs except for fuel. AAP says you fly your plane and you buy your gas, just like any other owner does. The monthly maintenance fee covers all the rest. The key here is you don’t have to worry about paying hangar rent, setting aside a maintenance reserve or buying insurance, since that’s all covered in the maintenance fee.
Light Sport Advantage
I spoke with John Gilmore, the US sales manager at Flight Design USA, makers of the popular CT-series LSA. For years Gilmore managed shares for a jet ownership program and is currently active in a Beech Bonanza shared ownership group. He’s well versed on what it takes to make shared ownership work and feels that shared ownership of light sport models could be more advantageous than more expensive aircraft.
“LSAs are much more likely to be used for fun rather than for business purpose. Notoriously, light sport users tend to be older folks who have more discretionary income but they might be a bit on the frugal side. For them, sharing ownership of a light sport could be a great arrangement because it’s a way to fly a brand new aircraft with the latest technology. In many ways, it’s also easy and fun to fly,” said Gilmore.
Still, there are the downsides that tag along with any aircraft partnership and Gilmore noted that even the smallest sport aircraft is still a toy—a luxury.
“You have to play fair with others. Those not accustomed to sharing toys may find conflict trying to share a new airplane at first. Then, after six months or so, the newness wears off and nobody wants to fly anymore,” said Gilmore.
For that reason, Gilmore thinks the best partnerships blossom from a single individual. He or she buys the aircraft, flies it for a while and then attracts like-minded partners to buy in. Gilmore also hinted that light sport models are better purposed in shared ownership arrangements than in flight school environments.
“Many flight schools half-commit to the light sport on their flight line. Maybe they train one or two instructors to fly it, maybe it gets banged up or the maintenance costs get out of control and then suddenly the aircraft sits, as interest gets focused more on the schools Cessna 172,” said Gilmore.
The Flight Design CTLSi is a flagship model that fits the shared LSA ownership profile well. According to Gilmore, it’s a desirable aircraft due to its versatility. It can be used for cross-country travel or casual pattern flying and it has a good support infrastructure.
The well-equipped CTLSi sells for roughly $165,000 and comes with an aircraft parachute, leather interior, plus advanced avionics—including synthetic vision, ADS-B, and an autopilot. This is a good catch for owners looking for an economical aircraft that’s on the cutting edge of technology. Incidentally, Mathews said the Flight Design is one of the most requested aircraft for purchase. Other preferred aircraft include the Cessna 162 Skycatcher and Remos GX.
When it comes to acquiring the aircraft, it’s important to note that AAP has been acting strictly as an agent and hasn’t put up any capital to purchase the aircraft.
Still, Mathews made it clear that his preference and pledge is to furnish the assets by continuing to pursue investment capital. Well-funded, AAP would be leveraged to pay cash for the airplanes, place them where they want, and sell out the shares—a lot like flipping real estate. When I spoke with Mathews in late August, he hinted that AAP would soon have the capital needed to begin furnishing the aircraft.
This also makes it easier for perspective buyers to demo the actual aircraft for sale. They can go to the center to see it and fly it, which makes for an easier purchase decision. AAP uses no sales people because the aircraft, says Mathews, sell themselves.
“It’s a soft sell because most potential buyers already know what they want. They either want the aircraft or not. Frankly, for someone who can’t afford to purchase their own plane, there’s no other place they can go to buy into a brand new airplane for this kind of small money.”