DiamondShare: Buy It To Share It
Owning and flying a new Diamond DA40 won’t be cheap, but DiamondShare could make it easier to justify.
DiamondShare, a cost-sharing program for new Diamond DA40 aircraft, isn’t designed to be a cheaper way to fly. Instead, it's intended to make the high cost of new aircraft ownership more compelling, especially for owners that don’t plan to fly more than 100 hours per year. For the non-owner, it’s a way to gain access to a new DA40 without the restrictions of renting, without the complexity of traditional shared equity arrangements or without participating in pricey fractional programs. Whether it sells more new DA40 aircraft remains to be seen.
The $1000 Club
The original DiamondShare concept was originally created—and failed—as a shared, three-way equity partnership program in 2008 by John Armstrong, the president of Dominion Aircraft Sales (also a Diamond Aircraft distributor). Armstrong, who recognized that many owners were looking for an airplane in the $100,000 price range, rather than the $300,000 Diamond, quickly recognized the challenges that partnerships might create.
“It wasn’t so much a problem finding three owners to share a new Diamond as it was getting the partnership to stay together long enough to launch the deal. Once spouses and different personalities got involved, it just got weird,” said Armstrong. When the airplane market slowed in 2010, Armstrong revisited the idea, but got rid of the equity concept.
Armstrong did a lot of market research and found that many pilots planned to fly 100 hours per year and were spending around $1000 per month to do so; something Armstrong labels the “$1000 per month club”. Armstrong found that a majority of potential buyers he surveyed were considering older aircraft, a common thread among a broad range of pilots who could afford to purchase a new airplane and ones that couldn’t afford it.
“Some buyers could afford to pay cash for three new aircraft if they wanted to, but had trouble justifying the purchase because they might only fly 100 hours per year or less. It’s the equivalent of buying a pricey beach condo that you know you’ll use twice a year,” said Armstrong.
Recognizing that smart people manage their money with an eye toward proper utilization, he re-crafted DiamondShare based on two core elements: People want and can afford new airplanes but have a hard time justifying it, and there are those that can’t afford to buy or own an airplane but can spend roughly $1000 per month and will fly at least 100 hours per year.
Simple Numbers, Simpler concept
The concept is simple. The owner buys a new Diamond DA40 XLS and qualified members (up to three) pay a monthly fee to fly the airplane, much like a lease agreement. Each member can use the aircraft up to 100 hours per year. Go over that 100-hour mark and pay additional usage charges, much like a vehicle lease program.
Once Armstrong qualifies the Diamond DA40XLS as the right aircraft for a potential buyer, the structured DiamondShare Share and Save Plan package includes delivering the owner a factory new DA40 XLT. The aircraft has a Garmin G1000 glass cockpit with SVT synthetic vision, DFC700 digital autopilot, active traffic alerting system, XMWX satellite weather and XM entertainment, plus the new “luxury package”, which includes leather seating and significant interior enhancements..
One example (these aren’t guaranteed numbers) of a total DA40 XLT buy-in, including the FAA licensing fees and delivery charges, is a total investment of $416,650. With $100,000 down, the monthly payment on a 5.15-percent, 20-year note is around $2100. The idea is that two non-owner members, paying roughly $1000 per month each for access to the aircraft, will cover the monthly loan payment on the aircraft . Members have access to the aircraft for one year and are eligible for renewal, should the owner wish to do so. Members are generally required to have a private pilot license or higher. These prices do not include taxes, member fees and security deposits. With a third member, Armstrong says the owner can end up with a surplus, as that third member contribution covers most of the expenses.
Here's one example of a DiamondShare Share and Save Plan with three participating members.
The current DiamondShare promotion includes the first year of insurance and G1000 navigation data subscription costs. Additionally, there’s a $1000 training credit, redeemable at a DiamondShare partner flight center and a $3000 rebate for annual inspections and oil changes. This is in addition to the two-year factory warranty.
“The structure is not like a leaseback arrangement that is trying to make money, but instead a means to give an owner full control while dramatically changing their economic outcome,” Armstrong said.
Armstrong makes it clear that DiamondShare ownership is applicable to many pilot types and situations, and can be particularly attractive for business owners that are early-stage pilots trying to find a justifiable way to get into modern aviation. As they ponder using an airplane for their business (50 percent utilization is required to qualify for the tax deduction, under the current tax structure) and for learning to fly or for earning an instrument rating, the concept could be compelling.
"When properly structured, the member usage can be considered business hours. This can lead to positive tax implifications for the owner," Armstrong noted.
Another point that Armstrong made clear is that DiamondShare is a non-commercial, Part 91 fixed cost-sharing structure that’s limited to a maximum participation of the owner plus three members. It’s up to the owner to decide how many members they want using the airplane and the owner always makes all the decisions related to aircraft operation, including scheduling, maintenance, storage and usage rules. There are no hourly rates involved.
Speaking of hourly rates, Armstrong argues that the industry places too much emphasis on hourly costs. Instead, he thinks in terms of monthly and yearly costs. It’s the amount of time you fly that determines the hourly rate, he notes.
“When pilots learn to fly, they see the cost of flying as the hourly rate that’s posted on the flight school wall. When you want to get out of the rental game and start using an aircraft for travel, it’s a different mindset that makes the hourly rate useless,” he said.
New versus old
We challenged the DiamondShare concept by looking at some rough numbers for a traditional partnership. Those numbers are pretty simple, too.
Take for instance an early 1970s Cessna T210, bought at around $100,000, plus a $30,000 engine overhaul accomplished soon after purchase. A three-way partnership (all are equal owners) set up to cover all maintenance, hangar costs at Denver Centennial airport, a major avionics upgrade, interior refurbishment, plus a paint job, costs each partner around $950 per month for 60 hours of flying time per year.
An older aircraft like a turbo Centurion could have a broader mission profile than a DA40, plus it’s a six-place aircraft. On the other hand, it’s not new and it doesn’t have a G1000 glass cockpit—one marketed value of DiamondShare. Still, the traditional partnership gives each person ownership, which isn’t the case with Diamondshare. Only the buyer owns the aircraft.
Armstrong, who’s sold enough new Diamond models to know, admitted that sole ownership of a new DA40 is going to be in the $2500-3000 per month price point. We ran some rough numbers on a 2014 Cirrus SR20 Perspective and came up with a fixed monthly expense of roughly $4000, when factoring a 20-year loan, insurance, annual inspection and reserves, plus storage and nav data subscriptions. Financing represents nearly half of the fixed monthly costs.
We heard from Rich Kulesa, a DiamondShare member (not an owner) based at a DiamondShare arrangement in New Jersey. According to Kulesa, DiamondShare isn’t a long-term option for him, one of the downsides of the program.
“The arrangement is only for 12 months at a time and less so—with some notice—if the owner were to move the aircraft. As a result, I'm somewhat dependent on the owner wishing to keep the plane nearby— and myself—as a member. So I don't consider it a long-term option, but I am enjoying it year-to-year while it’s available," said Kulesa.
Still, it’s easy to recognize the appeal of having access to a brand new airplane at a fixed monthly rate.
“I receive high availability of a very modern aircraft at a cost I find palatable. I can actually budget for my annual flying by setting aside the monthly fee, plus extra for fuel, but no other unanticipated expenses,” Kulesa said.
There could, however, be additional expenses, including a location surcharge for high-priced hangar space at premier locations.
Gerry Kaplan, a DiamondShare owner, had good things to say about his experience so far.
"Sole ownership proved to be costly no matter how I sliced it, while starting a partnership before owning a plane had endless complications and delays. I placed an ad on AOPA's website looking for a partner that would be interested in one of several planes. I was specific as I could be in terms of the required financials, but the majority of responses I got seemed like people were window shopping. The DiamondShare model allowed me to be a sole owner with predictable cash flow for the aircraft," Kaplan said.
DiamondShare ownership isn’t for the pilot that doesn’t like other people touching his stuff—something Armstrong establishes up front. In other words, if you’re uncomfortable with other people flying your aircraft, this won’t work for you. Remember, members don't own the airplane—they pay to use it.
According to Armstrong, the program could expand to the more advanced Diamond DA42 aircraft and DiamondShare locations are expanding, with new locations at Farmingdale, New York, Caldwell, New Jersey, and Raleigh, North Carolina.
Armstrong summarized DiamondShare in simple terms. “You buy a new aircraft that you can fly as little or as much as you want, while other people help pay for it. While those people are privileged members—since they have access to flying it— you, as an owner, are still 100 percent charge."