Pitfalls in aircraft sharing/group flying?

[Bird Strike]

We're looking to either buy or buy a share in an aeroplane.

We've done spreadsheets etc etc for owning, renting and sharing to compare options.

One problem I can see about buying outright is the under-utilisation risk when we get too busy and don't have a huge amount of spare time to fly it, and therefore pushing the effective hourly rate up above the cost of renting. Of course this is dependent upon the aircraft purchased, but we worked out the minimum breakeven point at about 200 hours per annum for the types that we're interested in. If we use it less, it might not be financially beneficial, while having all the hassle of ownership.

Well, renting IS easier than owning after all in many ways, as I won't have to worry much about anything other than the normal obligation as a renter/flyer. Ownership will bring lots of benefits like you know who's flown the aeroplane and you know exactly what it's done and it's not done, and you can have it when you want it (well as long as it's not gone tech or needing maintenance).

But then again, we thought if there is a cost and other benefits (such as availability, fewer people flying it in comparison to a rental one etc), sharing could be a half way between owning one and renting one.

So we're weighing up the benefits of sharing one against the benefits of owning one and renting one.

When it comes to the shares, we're concerned about "rogue" members. By this, those who don't contribute properly, whose flying is crap enough that they do subtle damage not covered by insurance, bossy ones with weird ideas and other members not realising that the idea is dumb, those who think it's "their" aeroplanes and not anyone else in the group etc etc.

How do you overcome the potential problems with aircraft shares, and how do you prevent them in the first place if possible?

For the purpose of this post, I'm more interested in the human problem side of sharing, rather than the financial side of sharing.


Thanks for your help!



P.S. I did a search but I couldn't find much on the subject. Whether that was due to my poor searching skill, impatience to go through all of the threads that search returned, or non-existence, I don't know! If there is an existing thread covering the same subject, please let me know and you're welcome to slap me on the wrist.

[FNG]

I won't go on about the intangible, non financial benefits of ownership, as they've been well debated. As for the people thing, it's a matter of exercising personal judgment much as you would in deciding to share a flat or start a business with a bunch of others. If you don't have an instructor member of the group, then you need one or two trusted instructors to check out new members' flying (they can do your BFRs etc also). You can either work to a close verbal understanding (usually works well when a group of established friends form a group), or maybe formalise rules on money, currency etc (maybe prudent overall and needed when founder members leave and new people come in). Long conversations in the club house before commitment usually offer a clue as to whether people are in sync with the ethos of the group. Good luck with your group.

[A and C]

I have found that as a licenced engineer ownership is an issue , the aircraft is always group owned when it is servicable but when something goes wrong ownership is 100% mine !!!.

[IO540]

Bird Strike

You don't give an idea of your budget, or whether the flying is VFR or VFR/IFR. That makes a huge difference to the way one would set up and run a group.

Many/most groups are around VFR-only, with members who can barely afford it. These have all the usual problems. At the other end of the scale, you could dig up say 10 instrument rated and non-skint pilots who each put up £25k and then you can buy a decent plane.

One thing to avoid is a mix of VFR-only and VFR/IFR pilots. The VFR-only ones don't like paying for bits which they don't need, and the ones that need to fly IFR soon jump ship - if they can. Shares can easily take a year to sell.

[QNH 1013]

There are some owners who put their aircraft on a Public Transport C of A, and make the necessary insurance arrangements to allow other pilots to hire their aircraft. I have benefited from this arrangement with more than one aircraft in the past.

This give the advantage of more hours per year for the owner, and therefore costs per hour fall, plus the really big advantage for the (carefully selected) hirers of having the availability that you get from a group aircraft without the capital cost of a share. This would be beyond my budget for an airways-equiped aircraft. The hourly rate tends to be nearly as much as hiring from a club, but the availability (and aircraft condition) are the two major advantages.

[IO540]

QNH1013

This is what I do with mine. It has the great advantage that I can kick people off (and have had to do so) without fuss.

In the end, the operating costs have to be recovered somehow. They ALL have to be recovered from the people (or corporate bodies, if applicable) who fly it around. So, different structures (pure rental, shared ownership, various levels of fixed monthly payment, etc) are just different ways of shifting the money around.

If one has a conventional syndicate of X members, each flying Y hours, the cost to the individual member has to be the same as having Z owning the plane and renting it out to X ordinary renters.

So what does that leave us with? I suppose it means that the whole reason behind syndicates is that a lot of people prefer to keep the option of flying very little, or perhaps a lot, while dumping their responsibility for maintenance (scheduled and otherwise) onto somebody else :O

[Bird Strike]

Thanks for your contributions everyone.

IO540 it'll be IFR, max number of members of 6. Possibly less.

QNH1013 good suggestion. Unfortunately the very reason why we need to either buy or buy a share is the difficulty in finding suitable aircraft to hire, and also if we do buy or buy a share, aircraft won't be hired out due to the expense and insurance implication + availablity issues, plus the maintenance frequency difference we would have over here (difference between 100-hourly or annual etc etc).

[Dan Winterland]

Bit late I know, but here are my thoughts based on the experience of several groups.

1. Numbers, 6 ideal. I suggest a mx of 8. I was once in a group of 20 - a nightmare!

2. When chosing members, I suggest they all have similar hours and aspirations. I reckon a min of 100 hrs P1 since Licence issue should be a minimum. One exception is that an instructor in the group can be jolly useful - as can a licenced engineer!

3. On the above, don't accept hours builders. They will abuse and hog the aircraft and bugg@r off after 700 hrs. I sugest on accepting new members, have a 'black ball' system. I was once overuled on some one I had reservations about. He subsequently proved me right by crashing the aircraft!

4. Make the group a limited company with each member owning a share or shares rather than a part of the aircraft. This will give you more cover should anything nasty happen, and if a member is declared bankrupt, the liquidators can't impound your aircraft!

5. Run a realistic engine fund and don't spend it on anything except a repalcement engine.

6. Have the aircraft on a private C of A if at all possible.

7. Set up a booking system. I suggest an on-line system using your own private web-site is ideal.

8. You may be mates with the group now, but be prepared to fall out and make enemies. Artguements are inevitable.

All of this advice is from hard experience. Not all is bad, do enjoy the flying!

[IO540]

All good stuff. Just one little point though:

"if a member is declared bankrupt, the liquidators can't impound your aircraft"

The above isn't quite true, because the plane (plus any money in the bank) will be the limited company's principal asset, and if a shareholder goes personally bankrupt, his Trustee in Bankrupcy will become the effective owner of his share.

I don't know if the trustee can impound the plane if say the bankrupt's shareholding was just 15%, or whether he would even bother, but I don't see this differs much from a pure partnership case.

The only way to completely protect the group from a member's bankrupcy is for some individual, who is very unlikely to go bankrupt, to own the limited company outright, and rent the plane out to the others. Then it has to be on a Transport CofA.

This is all moot for most syndicates where the plane is worth say £30k and that is split up so much that any individual's share is worth peanuts on the scale of likely personal assets. But higher up the scale...?

Another tack would be an agreement where the share passes back to the group if the shareholder goes bankrupt. I know this can be done in other situations; I once lent a friend a bit of money, secured with a charge on her house, and to protect her I had the charge drafted so it was cancelled if I went bankrupt, died, etc.

[Davidt]

No a trustee in Bankruptcy cannot impound an aircraft if one of the bankrupts assets consists of shares in a ltd co which owns an aircraft.

Imagine if I go bust owning shares in Shell,Ford,Barclays can my trustee walk in and impound their assets - no.

He can however exercise such rights as are confered upon the shareholder ie to sell the share or vote at company meetings (do you want him selling the bankrupts share to Mr Recklessidiotpilot or proposing a resolution to disband the group and sell its asset?)

For these and a million other reasons unless you are going in with a small number of mates you know well, you should have a carefully worded members agreement and if you do incorporate your group a shareholders agreement separate from the company memo and arts to define relations as pilots rater than mere shareholders.

A cautionary tale - I have been involved in two groups in a relatively short period of time and have had to suffer the effects of three accidents involving other group members, one of which treatened to invalidate the insurance cover! Had our agreement been tighter we would have had a lot less agro than we did.

I decided to buy my own .

Good luck

[Dan Winterland]

True Davidt. In our case, the sequestrators arrived at the airfield demanding the aircraft be impounded. We pointed out that the bankrupt individual only owned one share in a private company with a nominal value of £100 which had very restrictive transfer conditions. They had no option but to depart empty handed. :D

[FlyAnotherDay]

The syndicate I was a member of (23 members, not in the UK, no problems with numbers of members) had a number of safeguards in the syndicate agreement. This included (as I understood it) the chief pilot may for any reason ground any member until the next syndicate committee meeting, when the grounding can be lifted or continued
a share can only be transferred to a person approved by the committee if an account due hasn't been paid by the time of a committee meeting, the member gets grounded, and if payment hasn't been made by the next meeting, the share gets transferred back to committee who can sell the share and after payment of outstanding charges, refund the balance to the (now) ex-syndicate member.


The hourly rate I paid as a syndiacte member included a full overhaul allowance and was less than half the local rental rate.