Tuesday, August 7, 2001

FAA Targets 'Fractional Ownership'
By Cindy Skrzycki
The Washington (DC) Post

Think of them as flying time shares for the business community.

Fractional ownership of business aircraft -- as the Federal Aviation
Administration and the growing industry prefer to call it -- is about to get
its own set of regulatory directives.

Because the planes were operating in a kind of regulatory netherworld --
these are not "on-demand" air charters, nor are they simple ownership of
business planes -- the agency proposed a set of rules and enforcement
policies July 18 that would create a new category of regulated business
aircraft.

Fractional ownership is an alternative to owning a business plane, an
expenditure that is seen as excessive by some companies. Under a
fractional-ownership plan, clients buy a portion of a pool of planes --
typically an eighth of a share -- which entitles them to a certain amount of
flying time each year. Owners pay a management company to take care of
operational chores such as maintenance and crew training. They also pay for
"occupied time" -- when the owner or his passengers are actually using the
plane.

The benefit to those who can afford fractional ownership is being able to
fly anywhere without connections on modern business aircraft. An owner may
not always fly on the plane he "owns" but instead may take a trip on another
plane in the fractional fleet.

The concept hasn't been hard to market to companies and wealthy individuals
who are fed up with commercial airline delays and poor service. There are
about 3,000 owners of fractional aircraft who have plunked down anywhere
from $400,000 for the smallest share of a turbojet to, say, $20 million for
a half share of a fancy Gulfstream. For their money, they get luxury,
convenience, and a plane at their beck and call.

But the industry's growth has posed a problem for the FAA: It was difficult
to determine who had "operational responsibility" for the aircraft -- the
fractional-share owners or the flight-management company.

"There was confusion within the industry and government," said Kathy
Perfetti, the FAA's program manager for fractional aircraft. "Fractional
ownership didn't fit neatly into private or commercial aviation. And this
was becoming a very important segment of business aviation."

The industry's growth and the confusion over the rules governing fractional
aircraft spurred the FAA in 1999 to create the Fractional Ownership Aviation
Rulemaking Committee -- with representatives from competing industries,
owners, regulators and anyone else with an interest in the outcome.

Though the industry has an excellent safety record, owners realized it might
be in their interest to standardize some of the "best practices" they
already were following.

"Most fractional-ownership companies just complied with the regulations for
general aviation," Perfetti said, "though most of them at a higher standard
than required."

The committee came up with recommendations that everyone could live with and
presented them to the FAA, which used them as the basis for a proposed rule.
The FAA will take comments on the proposal until October and then issue a
final rule.

The proposal would place responsibility for the operation of the aircraft
and the safety of the passengers on both the fractional owners and the
fractional program managers.

The industry also decided it was important to have an operations manual and
training programs that are FAA approved. The owners and managers will follow
flight and rest provisions for crews that are similar to those for
commercial aviation. There are instances in the industry, a source said, in
which pilots were awake for 20 hours, a situation that worried owners and
the FAA.

"It's a very comprehensive regulation that provides a standard similar to
those for air carriers," Perfetti said. "It's not an inexpensive rule, and a
higher level of regulation is required."

The fractional-ownership business began in 1984, when a mathematician named
Richard Santulli bought Executive Jet, a business-charter service. Two years
later, Santulli launched a fractional-ownership program with eight aircraft.
One of his customers happened to be billionaire investor Warren E. Buffett,
chief executive of Berkshire HathawayInc., who liked the service so much he
bought the company in 1998.

Since then, Executive Jet has been the success story in the
fractional-ownership industry and the template for others, such as
Bombardier's FlexJet and Raytheon Travel Air Co.

Altogether, there are 625 aircraft in the industry that are owned and
managed as fractional aircraft, and many more are on order. A further
competitive boost will be the entry of United and its Bizjet service, which
is supposed to be available in 2002 with 200 planes.

The fractional industry's ability to offer virtually instant service has
posed a competitive challenge to charter companies that offer on-demand
service to businesses. They operate under more-stringent rules than
fractional aircraft, and they wanted the FAA to level the regulatory playing
field.

For example, there are places where fractional jets can land but charters
are not allowed because the runways are deemed not suitable.

"They were getting a free ride, if you will," said Clif Stroud, spokesman
for the National Air Transportation Association, which represents on-demand
charter operators. He said the proposed rule will eliminate the disparities.

The new rule also will provide a definition for those who wonder just what
fractional-aircraft ownership is. A leasing arrangement? A time share? A
pseudo-charter?

According to the proposed rule, it's none of the above. To be "fractional,"
the operation has to have a program manager, more than one owner per
aircraft accounting for at least a one-sixteenths interest, and an agreement
among owners to use one another's planes.

***********************************************************************

[This letter about increasing Fractional Ownership Jets at a GA Airport in California is quite relavent to Hanscom given the significant increase in that type of traffic at Hanscom]

To: Parties Interested in VNY Noise

From: Gerald A. Silver, Pres. Homeowners of Encino,
     Stop the Noise! Coalition

RE: FRACTIONAL OWNERSHIP = MORE GA JETS!

As many of you know, there has been a big push by jet manufacturers to sell
"fractional ownership" in new jets. This allows many small business to buy
an interest in a jet and fly it part time. The result of this "scheme" is to
enable many more firms/people to fly jets in and out of airports such as Van
Nuys Airport (VNY). This of course means more noise, air traffic and
congestion for local residents.

Now it appears that the FAA is on to this mechanism to bypass usual FAA
rules and regulations. The Washington Post story (August 7, 2001), explains
the entire issue in detail. It is worth careful reading.

If you wish to voice your concerns, please contact:

Federal Aviation Administration
Kathy Perfetti
Program manager-Fractional Aircraft
800 Independence Ave. S.W.
Washington, DC 20591

Thank you
Jerry Silver

***********************************************************************
NOTICE:  In accordance with 17 U.S.C. Section 107, this material is
distributed without profit to those who have expressed a prior interest in
receiving the included information for research and educational purposes.
***********************************************************************