And it was not pretty IF your Game is Fractional
Recently, Aviation International News did a story detailing Time Sharing, oops, I meant Fractional operations. The story revealed what I have been saying since the term ‘Fractional’ was substituted for Time Share, which is that fractional does not work nor will it ever work simply because the model is – bad.
By bad, I do not mean evil, dangerous, or illegal, but a seriously senseless, obviously unworkable laissez faire model that only a low time or a no time wannabe pilot, or Dunning Kruger-type investor would think could ever work. And, it has been that way since its beginning in business aviation.
When a business generates more costs than revenues from customers or operations, that is a bad model. That business model will inevitably disappear, leaving a whole lot of well-intentioned investors and users in the lurch. By lurch, I mean the investment money is gone and the fractional users are walking.
What AIN is verifying is the massive financial fiascos of fractional and the associated chaos that appears to be news to AIN. Fractional was always destined, from day one, to this kind of outcome and that will always be the consequence for those still in operation.
The Fractional model went wrong at its root which is why real hard-core, dyed in the wool aviation people always knew it would never work. And anyone that would think it would work knows nothing about aviation like many investment bankers, MBAs, and aviation wannabes. They call themselves professionals and experts; I call them or anyone that invested in fractional, absurd. I call them Dunning Kruger-types.
Originally, fractional became a thing when the price of corporate jet aircraft reached the $15M USD mark, and basically stopped selling. Then some Dunning Kruger MBA wannabe pilot-type had a Lt. Colonel G. A. Custer at the Little Big Horn moment, “Why not sell more than one person on the same aircraft?”
Originally, they decided that number would be ‘four’ and they would be known as fractional share owners, because “time share” sounded too crass and pedestrian for these wonderkids. And no, I did not say it wrong. Fractional is just a marketing word that replaced “Time Share” when it came to airplanes. Let’s call it what it is – ‘a tool to sell to fools!’
So Fractional was born and the MBA’d creator missed the obvious problem. Anytime you put four people on the same asset, especially one aircraft, you are going to have scheduling problems. The logic that never entered the minds of these ‘know it all’ developers was that on any given day, all four of the newly minted Fractional owners just might want to go in four different directions – at the same time!
And FYI, that logical dilemma applies to any and everything that is shared or shared ownership, yet somehow, these wannabe geniuses missed it.
The obvious answer to correct that problem would require mirroring the fleet by buying three other airplanes which kind of brought them back to the original problem. And then they made it worse; waterfall effect. Unbelievably, once they had enough Fractional customers rather than acquire support airplanes, they started deadhead, non-revenue flying to reposition aircraft with non-revenue hours outpacing revenue hours with two to three deadhead hours for every revenue hour, so operating costs soared!
But, because it really was time sharing, no one at any fractional companies gave a rat’s butt. They got all of these unsophisticated time share owners to believe the tale that it was cheaper with fractional, so like all “time share companies” do, they just passed the non-revenue cost of the non-revenue hours (the cost to fly empty or full is the same) on to the time share customers making the end users cost more expensive to fly per hour than if that same time share customer had just bought their own aircraft. Yes, it is that stupid…
Then, to blur the actual aircraft purchase costs plus the additional costs of dead heading, fractional ownership went
from four-time share owners to eight and then 16 and now we are up to 32, which is oddly enough, one more time share owner than there are days in a month. And of course, the empty non-revenue hours increased proportionally, and as they are doing now, they will continue to do, as they all come tumbling down, ass over tea kettle. Yep, I know that is rude, but facts are facts according to verification in AIN.
But there is something that will work, and I know what it is. Imagine that one day you figured out the concept of container shipping when everyone else was still doing it the old-fashioned way. And yes, seeing, understanding, and creating that idea took one day. Now everyone ships in containers.
We have exactly that kind of beneficial solution to the biggest problems in the business of business aviation. But, because none of my aviation ideas ever failed, having created JSSI in 1989 and was instrumental in DHL’s logo stating – ‘since 1969,’ and I retired long ago, I did not get involved. But looking at this Fractional mess has brought me back into the game to do it one more time, and the thing I figured out long ago can easily be put into service today. The term ‘pinch hitter’ comes to mind.
This idea only requires 0.05% of 1% of the billions of dollars that the idiotic idea known as Fractional cost their investors, not to mention the Fractional customers. This concept will not just disrupt the aviation industry, it will change it – forever. Exactly the same as container shipping did for international commerce in the 20th century.
When I do talk to investors about it, they always ask what I have in it? Well, I have this: the multibillion-dollar idea plus everything to launch it quickly, with the right people in the right places.
And then there is this:
Experience, the kind you cannot buy or fake. In 1968 I was hauling checks for the Federal Reserve Bank and one day they personally called me to specifically ask me if I could build a system that would solve their $850B USD a week problem, they had in 1969. I could and I did. That operation was known then as Mid-West Air Charter, and today it is known as DHL. In 1976 I was asked to take on the role of chief pilot for Mercedes Benz North America, which I did for 12 years, then in 1988/89 I created and co-founded Jet Support Services, Inc. aka JSSI. And in case it matters, I have over 21,000 Pilot In Command hours and am typed in several jets and checked out in 52 other aircraft, so I absolutely know the business of business aviation.
Then when it is my turn, I always like to ask investors, “What have you done? Are you a trust fund baby that inherited some money and funded a Fractional or two?”
While I may not be politically correct, at least I don’t lose billions of dollars for investors like the wannabes did in the Fractional farce. Should any of you reading this article desire to make money instead of just generating tax write-offs, maybe we can talk. For just 0.05% of what you lost in the Fractional farce, within one year or less, you would be on the path to completely changing the aviation industry, not just disrupting it by creating a system that will be generating billions of dollars in EBITA in five years or less. Talk to me and you can get back everything you lost in Fractional and make billions of dollars more forever without any risk or liabilities when you are doing it correctly.
So, Investors if you would like to get back what you lost and make billions without any risk or liabilities think doing it right.
For an NDA please contact rick.eriksen@cox.net
