Aircraft Fractional Ownership Programs in Canada
- kgill038
- Nov 25
- 4 min read
In some cases sharing ownership in an aircraft is preferable to outright ownership. How do aircraft fractional programs work in Canada?
Fractional ownership for private jet aviation emerged in the mid-1980s in the US with the creation of programs that offered aircraft owners increased flexibility in the ownership and operation of the aircraft. Such programs typically involved shared or joint aircraft ownership by owners without the need (or means) to acquire an entire business jet, with the aircraft being actively managed by an aircraft management company for all flight operations.
A key feature of fractional ownership programs emerges when multiple aircraft are involved; aircraft owners participating in the program agree not only to share their own aircraft with others having a shared interest in that aircraft, but also to lease their aircraft to other owners in the program (on a “dry lease exchange program”), in a manner that optimized operating costs and increases owner access to aircraft to a level beyond what could be expected from scheduled airlines.
All owners of a fractional ownership program use a single program operating company to provide all management services including maintenance of the aircraft, crew training and scheduling, and administration of the leasing of the aircraft. In certain circumstances, owners may also be the beneficiaries of charter revenue to offset their costs of maintaining their aircraft interest.
Several large, successful fractional ownership programs exist in the US (such as NetJets and Flexjets), and these are paralleled in Canada by providers such as AirSprint (larger), and Jet-Share (smaller).
Key components of fractional programs
When entering into a fractional program, owners can expect to see four “operative” legal documents – these are the key components of the fractional ownership program itself, and are the rules by which the implementation and management of the program takes place:
(i) Purchase [or Lease] Agreement – the purchase and sales contract through which the share is acquired from the fractional program provider.
(ii) Owner [or Lessee] Agreement – a contract among the owners [lessees] of each of the factional program aircraft, which establishes the rights and obligations of all owners with regard to the use of the aircraft.
(iii) Dry Lease Aircraft Exchange Agreement – a form of lease among all fractional aircraft owners [or lessees] in a program giving each the right to the use any of the others’ aircraft (interests) – applicable if multiple aircraft are involved (or planned to be involved).
(iv) Aircraft Management Agreement – a contract between an aircraft fractional owner and the fractional program manager (in this case, Librico Aviation) governing how the program manager coordinates the use of the aircraft by the fractional program aircraft owners [lessees].1
Some advantages and disadvantages
The primary advantage of a fractional ownership program relates to how the aircraft within the program, as well as the program itself, is capitalized. It is the fractional owners/lessees themselves who are responsible for providing the cash required to own and operate the aircraft. This creates a situation where operational financial risks are minimized (subject to the creditworthiness of participants) while creating a viable air transportation service for customers.
On the other hand, fractional ownership programs increase the complexity of ownership structures and introduce additional parties to ownership and operational structures. The Canadian Aviation Regulations (unlike the US equivalents) do not have specific provisions regulating fractional ownership programs, leaving some uncertainty as to how specific programs may be interpreted by TCCA and other regulators.
While well-designed fractional programs can mitigate these risks, and while several fractional programs do operate successfully in Canada, some risk and uncertainty does exist with respect to their implementation in Canada.
Questions? Contact our Aviation Team:
Christopher Knight | Barrister & Solicitor | 403-209-5648 | |
Robert M. Schuett | Barrister & Solicitor | 780-628-3532 | |
Ishpreet Golhar | Barrister & Solicitor | 403-209-5643 | |
Ryan Morstad | Barrister & Solicitor | 403-209-5646 | |
Brandon Kohlman | Barrister & Solicitor | 403-209-5647 | |
Deanna LaCaprara | Paralegal | 403- 209-4085 | |
Olene Andrew-Taylor | Paralegal | 403-668-4746 |
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Please note that the information provided here is a general overview of issues not related to any particular situation, and does not, nor is intended to, constitute legal advice; instead, this information is for general informational purposes only. You should contact your lawyer to obtain advice with respect to any particular legal matter. You should not act, or refrain from acting, on the basis of the information here without first seeking legal advice from counsel in the relevant jurisdictions. Only your individual lawyer can provide assurances that the information contained here (and your interpretation of it) is applicable or appropriate to your particular situation.
(1) Items including costs, geographical limitations, and administrative and aviation support services provided by the program manager are detailed here.