It’s no secret that the cost of flying has gotten up to the point where many who are interested in becoming pilots or owners are deciding it’s just too costly, and that many owners can simply no longer afford to fly their airplanes. A quick informal survey of aircraft sellers reveals that a higher percentage of pilots than ever before are selling beloved aircraft because they simply can’t justify the expense. From a purely financial standpoint, it doesn’t make sense to have an aircraft that is flown only 50, 100, or even 150 hours a year sitting idle in a hangar or worse yet on a tie-down for the 8,600-odd hours remaining in the year. Given the current cost of fuel, utilization appears to be going down, not up, which further exacerbates the problem—when utilization goes down ownership cost per hour goes up.

It’s also no secret that sharing ownership can greatly reduce the cost of flying. After all, having just one equal partner cuts acquisition cost in half. Shared ownership also tends to enhance safety, particularly in the aging and underutilized portion of the fleet. Regular usage tends to decrease expensive and potentially dangerous problems due to corrosion, fuel and oil degradation, seals and rubber embrittlement, and critters taking up residence in your airplane. There are also more and different eyeballs looking at the plane more often. Given seemingly ever higher operating and ownership costs and the significant underutilization of much of the fleet, shared ownership appears to be a no-brainer for those who want to keep on flying, start flying, or just fly more often.

The answer is that while the concept of shared ownership is simple, its execution is not—the devil really is in the details. Many a flyer has started down the shared ownership track but abandoned the idea it due to inherent obstacles and complexity.

The newly-formed Aircraft Partnership Association (APA) means to make sharing aircraft ownership a far more straightforward—and common—process.

We asked David Kruger, CEO of the APA to describe the shared ownership or partnering process (the terms are interchangeable). He answered, “There are three distinct phases. Phase 1 is simply finding the right partner or partners. The success of a partnership is based on people, not planes. Good partnerships are characterized by no mutual mystification about how and when the aircraft is going to be used and maintained. A bad partnership always seems to be bad due to poor communication both before and after the partnership is formed. Phase 2 is sorting out the purchase, finance, insurance, legal, and tax issues required to form the partnership. Although there are some excellent model partnership agreements to start with, there is no one-size-fits-all solution. Each partnership is a unique combination of variables based on aircraft itself, the country and state where it is based, what it is used for, and the pilots flying it. Phase 3 is actually operating the partnership; partners have to manage all the flight scheduling, maintenance, and bookkeeping.”

So what is the APA doing to make this process easier? Kruger says “In Phase 1 we facilitate finding the right partners through the Virtual Pilot Lounge™, our online matching service. Each APA member completes a detailed profile including information on the aircraft they want to own or already own and wish to share, where the aircraft is based, how often they will use the plane and what they will use it for, maintenance and/or upgrades, what kind and how many partners they are looking for, and more. The Virtual Pilot Lounge™ works very much like an online dating service and does so for good reason; in both instances you are looking for persons with similar interests for the purpose of establishing a long-term relationship. The idea is to find and screen potential members before you meet them in person.

“In Phase 2, partnership formation, APA goods and services supplier members go to work for would-be partners. They provide vital expertise of all sorts: help in finding the right aircraft, obtaining financing if needed, taxation issues, creating optimal partnership agreements, and insuring the partners and the aircraft. Suppliers become APA supplier members because they understand partnerships and are dedicated to supporting the shared ownership model. Additionally, APA supports all shared ownership models; private partnerships, cooperatives, fractionals, and clubs. All of the various current partnership models have a common need; identifying flyers who want to own and fly for less. We believe that as the APA grows, shared ownership models will continue to evolve and new and improved shared ownership models will arise.

“In Phase 3, operating the partnership, APA will provide a suite of simple-to-learn and use online management services: flight scheduling, maintenance scheduling, partner and pilot and aircraft logbooks, partnership bookkeeping, and secure storage of the partnership’s data and documents. Another key element is our online supplier work order system linked to APA supplier members of the partnerships choosing. Operating the partnership need not be a brain-damaging exercise.”

Since the APA is a newly-formed organization, we asked “What the does the APA hope to accomplish for its members?” Kruger replied, “The APA is designed to cut its members cost of aircraft acquisition by half or more with little or no impact to aircraft availability.

“Let’s take those two goals in order. Look at the current situation. It is highly unlikely that aircraft are going to suddenly get substantially cheaper and by substantially cheaper I mean by half or more. Granted, there will be fluctuations in pricing over time due to market conditions. Right now pre-owned aircraft pricing are falling largely due to a fuel costs and foreign exchange rates are inflating the cost of new aircraft manufactured overseas. However, these fluctuations take place at the top of the cost range—costs vary from really high down to plain old high. For new aircraft, the higher per unit manufacturing and sales cost inherent with low production will keep prices up until and unless production levels go much higher. In other words, if you are waiting for pre-owned or new aircraft prices to come down at least by half or more due to market forces before you can justify the expense, you’ll probably be waiting a very long time. We know of no other means of cutting aircraft acquisition cost in half or more other than sharing ownership.”

“The second goal, high aircraft availability even though ownership is shared, is achievable because the APA screening process helps prevent members with built-in scheduling conflicts from becoming partners in the first place. Potential scheduling conflicts loom large in a lot of pilot’s minds; they automatically assume that if they have just one partner, their airplane’s availability will be cut in half. In reality, scheduling conflicts are rare in partnerships with good communications and a common calendar.

We asked how the APA plans on building their membership quickly. Kruger responded “The short answer is to make APA membership dirt cheap. By that I mean making the APA the least cost/most effective means of finding potential partners. Our annual membership dues are inexpensive to begin with; $29 per year. For a limited time, during the initial building phase, we have cut first year membership dues nearly two-thirds to $9.99.”

Kruger explained further. “A more complete answer is rooted in understanding “network effect.” The APA aims to build a global network of members interested in reducing costs through shared ownership and suppliers dedicated to supporting them. Network effect is defined as: "The phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters." Think of the telephone system, Google, and social networking sites like MySpace and Facebook. The more APA members there are, the more likely they will connect and form partnerships and the more partnerships that are formed the more likely our members will be able to keep on flying, or start flying, or fly more often, all at a lower cost—which is precisely how we define successfully serving our members.

“We occasionally get emails and calls asking us questions like “can you tell me if you have x # of persons interested in aircraft type or model within a certain distance of a given location? If you do, I will become a member.” This is akin to suffering from the cold and commanding a stove to “give me some heat and I’ll give you some wood”—you’ll be staying cold for foreseeable future. Of course partners can be found without the APA but they are mostly “happy accidents”—the partners met accidentally or happened to know somebody who knew somebody who was also looking. In a post-911 world these happy accidents are getting harder to come by; fewer people are hanging around the airport. What is the true cost of composing and then printing a partnership notice and then burning gas driving over to the airport put it on the bulletin board? And then doing it again when it gets torn down or covered over? What is the true cost of surfing the internet sales ads hoping to get lucky; additionally, if all you are doing is looking at what other people want, how are they going to know what you want? What is your time worth? Each pilot genuinely interested in sharing ownership costs would do well to spend a moment or two figuring out if those methods are indeed the least cost/most effective means of finding partners.”

We asked how the success of the APA will impact the market in the long term. Kruger responded “There are three long-term impacts that we hope to achieve. The first is, financially speaking, putting the bottom rungs of the ladder back on for those new to aviation. Shared ownership is one of the best ways to reduce training costs. Lower training costs equals more new pilots, something GA must have. The second impact is more sales of new aircraft; when more new aircraft are sold, unit cost of manufacture and sales cost come down. Note that these first two impacts are self-reinforcing—lower costs creates more new pilots who buy more new airplanes which lowers new aircraft costs which in turn creates more new pilots. I don’t want to overstate this, but we know of no other way to reverse the decline in GA other than really dramatic reductions in cost—and we aren’t aware of another way to reduce the cost of aircraft ownership more dramatically than sharing it with partners.”

“The internet and network effect breed innovation at a breathtaking pace. The APA’s third impact is bringing that innovative power to aviation in a way that has not been done before. As I said earlier, shared ownership models, financing, and insurance will evolve and improve but there are many other potential benefits; some of which we haven’t even thought of. One we have thought of is optional cross-partnership flight scheduling. That one capability opens up the door to owning smaller shares of multiple aircraft; one reasonable expectation is that APA members and partnerships will have the opportunity to own and fly different aircraft for different missions for about the same cost as ownership in one aircraft. Cross-partnership flight scheduling also increases availability. We are excited and are very much looking forward to finding out where the innovative power of the technology and our members takes us.”

It sounds like the APA may be on to something. To learn more, visit www.theAPA.com

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