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Fractional Ownership
✈️ Definition
Fractional Ownership is a business model where an expensive, high-maintenance asset is divided into shares, allowing multiple parties to own a portion of the asset and split the usage rights and operating costs.
🚀 The NetJets Model (1998)
The 1998 acquisition of Executive Jet Aviation formalized Berkshire’s interest in the economics of shared utilitarian assets.
How it Works:
- Ownership: A customer buys a fraction (e.g., 1/8th) of a specific aircraft.
- Availability: The provider guarantees an aircraft will be available within a few hours.
- Logistics: The provider handles all pilots, maintenance, and hangars.
🧠 Economic Advantages
- Capital Efficiency: Provides private aviation utility without the massive outlay for a full jet.
- Scale: A massive fleet allows for optimized pilot routing and volume discounts.
- References: 1998 Letter
- Index: index
📚 Historical Mentions & Citations (1)
Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.
📜1998 LetterExcerpt Available▼
1998 LetterExcerpt Available
To understand the huge potential at Executive Jet Aviation (EJA), you need some understanding of its business, which is selling fractional shares of jets and operating the fleet for its many owners. Rich Santulli, CEO of EJA, created the fractional ownership industry in 1986, by visualizing an important new way of using planes. Then he combined guts and talent to turn his idea into a major business.
In a fractional ownership plan, you purchase a portion — say /1 8th — of any of a wide variety of jets that EJA offers. That purchase entitles you to 100 hours of flying time annually. (“Dead-head” hours don’t count against your allotment, and you are also allowed to average your hours over five years.) In addition, you pay both a monthly management fee and a fee for hours actually flown.