A Guide To Group Ownership
Group Ownership - A Way Forward (By Alan Gray)
As an operator of group-owned aeroplane for many years, I have frequently been asked about the advantages and disadvantages of syndication and how it influences my flying.
Here is a selection of ”FAQs¯ that may help to provide an insight into this popular and convenient method of aircraft ownership.
Q. What are the principal benefits of forming or joining a group, as opposed to owning an aircraft outright?
A. 1) The most obvious is a reduction in capital cost. As a member of, say a five-person group, one would only have to pay for 20% of the purchase of the aircraft.
2) The next saving is in fixed costs i.e. Hangarage, insurance, annual inspections etc. These costs are broadly the same whether the aircraft flies 50 hours or 500 hours per year and are usually shared equally between the members as a fixed monthly fee.
3) Camaraderie. It can be of great benefit to have someone to share the flying or in some cases help with the maintenance, cleaning etc. Most groups have a ’pool’ of skills that few people will possess individually. Difficult decisions can be easier to take if discussed and agreed democratically.
4) Opportunity. For some people the savings made will allow the purchase of a second share, in a different group-owned aircraft. i.e. a family tourer and a single seat aerobatic ’hot-ship’. In most cases we can aspire to a larger or better aircraft than our personal budget would have allowed.
5) Cumulative utilization benefit. Put simply, the more an aircraft is flown the cheaper it is to operate, pro-rata. The most expensive aircraft to own is the ’hanger-queen’, which spends more hours in maintenance than it does in the air!
Q. So what are the main pit-falls?
A. This will depend largely upon your own aspirations, the aircraft which is operated and the structure of the group, but more about that later.
Most people are initially concerned about not being able to get their hands on their aircraft when they need it. Aircraft availability will always be better than for the hire fleet at a flying club, because there are less people to accommodate. A good booking system helps to avoid frustration and sharing the flying with another member, perhaps by flying alternate legs, will allow you to travel twice as far for the money. Experience has shown that only a few group members will fly frequently, most occasionally and some quite rarely.
Disagreements can be best avoided by having regular meetings (Say in the local pub) and by always ensuring that the flying accounts go out on time.
Q. Who has to pay if somebody bends the aeroplane?
A. Your group rules or ’Heads of Agreement’ should cover this. It is best to know in advance. Usually the insurance will cover repair or replacement, less an ’excess’, typically £500 to £1000. The excess may be payable by the individual or from group funds.
Q. How do I join a group?
A. The first thing to consider is what type of flying you want to do. Some groups discourage ’hours builders’, working towards commercial licences, in order to preserve availability for other members. Some groups operate their aircraft mainly for business use, others for touring or aerobatics etc. It is important to decide on the type of aircraft that will most suit your requirements.
The next thing to consider is location. The further you have to drive to the airfield, the less often you will be able to fly, but the airfield or strip should be suitable for the aircraft type. For example, a six-seat twin may take off and land easily on a local grass strip in the summer, but will it be bogged down for months in the winter?
Thirdly the structure of the group should be considered. In addition to having various objectives as mentioned above, groups are structured in different ways. In most groups, each member owns an equal share of the equity (Usually defined as the value of the aircraft plus any equipment and/or funds in the bank). Some flying groups offer the use of the aircraft for just a monthly charge plus flying costs. This helps to ensure that a privately owned aircraft is flown more often and reduces operating costs for the owner. No capital investment is required in this case.
About two-thirds of the GA fleet in the UK falls under the auspices of organisations such as the LAA or BMAA. Groups operating these aircraft frequently take care of their own maintenance, overseen by an appointed inspector, who signs the logbook on behalf of the appropriate organisation. You may be encouraged to help with this work. Someone is usually available with appropriate skills to lead a ’work party’ at regular intervals.
Check out advertisements in magazines, on club notice boards and on the internet. Ask around in flying clubs and try to speak to group members. Don’t be surprised if members have as many questions for you, as you have for them. They are trying to safeguard the harmony of their group by making sure that any new partner will ’fit-in’. Many groups insist on a minimum level of flying experience.
Q. I can’t find a suitable group to join, how can I form one?
A. If you can afford to buy a suitable aircraft, base it at a local airfield and then offer shares for sale, this is the easiest way. Failing this one can advertise, as above for like-minded souls to club together to buy such a machine, but it will be necessary to have all the funding in place before making an offer and it is best to delegate no more than 2 or 3 people to make the purchase, as owners will not want to provide 10 free test flights! Draft sets of rules can be obtained from the LAA and Members operating LAA aircraft should join that organisation.
Q. What is the best size for a group?
A. This is a matter for your own judgement. The larger the group the lower the cost and of course, the more restricted the availability. I have been a member of seven groups in the last twenty-five years, operating nine different aircraft, (Groups can each operate more than one plane) with membership ranging from two to twenty. Twenty is currently the largest size under CAA rules for an equity-sharing group.
Q. How likely is it that I will loose my investment?
A. Well-run groups seldom go bust. The value of aircraft unlike cars, does not depreciate rapidly with age. There are however, a few points to watch out for:
1) Flying accounts have to go out on time and members must pay up promptly. It’s cash flow rather than budgetary shortfalls that causes most of the problems.
2) Fixed costs should be adequately covered by monthly charges. It is wrong to rely on hourly rates to cover hangerage etc. because if the aircraft cannot be flown for any reason, the group will quickly become insolvent. It is also worth checking periodically, that all members meet the criteria laid down by the insurance company.
3) When calculating the hourly rate it is important to include a contribution to the ’engine fund’ rather than just cover the cost of fuel. For example, if your new engine cost £10,000 to replace and is ’lifed’ for 2000hours, its direct cost is £5.00ph. Add 30% for, other replacements, inflation and sheer bad luck; say £6.50 plus fuel depending upon the aircraft. These figures should be reviewed at least annually.
Q. So in conclusion, what might be the total hourly costs?
A. For a pilot sharing a basic single-seat aircraft running on mogas and flying 50 hours per year, the all-inclusive costs should be less than £30.00ph; for a two-seater, perhaps £40-45 all in. Not bad at 2009 prices!
Hopefully this information will be of help to anyone thinking of flying within a syndicate environment. It is possible for new PPLs/NPPLs to join some groups and I even know of group members who do not fly themselves, but share flights with other members. In this way even the loss of a medical certificate need not be a problem. It is difficult to justify the cost of operating an aircraft, flying less than 100 hours per year, but this is one way in which more and more people in the UK are seeking to ’realise the dream’.
If the above has inspired you to form a group, you might want to take a look at the Group Ownership section on our forum. To help you along the way, we have also uploaded a sample of some group rules for you.