Changes to a Flying Group

[MarcJF]

I currently own a 1/10 share of a C150. There are three other 'private' shareholders with the remaining six being owned by a flying school. The aircraft is old and tired, but quite cheap and has been very well maintained.

The school puts the aircraft on their line and there are no charges for parking or landing and all maintenance and insurance is paid for by the club. It's £25 a month and £59p.h wet all in. An arrangement that has worked well for all involved.

The club is trying to sell it's six shares to one of the private shareholders, a chap who is (and apologies if he reads this as i'm guessing) well into his 70's.

Aside from any personal thoughts on this, I'm looking for a bit of guidance on what to expect from this deal. I.e. the engine has 500 hours left, but as the club pays all the maintenance there is no engine fund. As is there no maintenance or prop fund. Essentially we would own all 10 shares between 4 people and be starting from zero with nothing in the pot.

To me, this can't be right as the insurance is due later in the year, a big check is looming and the engine is well on it's way. I'd like to think that everything is above board but am not sure what questions to ask. Without being disrespectful, all my other co-owners are elderly.

Any thoughts either public or via PM appreciated.

Thanks.

[flybymike]

If the new owner of the club shares is prepared to take on the expenses previously borne by the club then presumably you have no problem.
If he is not, then you are all obviously going to have to come to a mutually acceptable financial arrangement to cover these costs.
In any event, if the new owner intends to proceed with the purchase then presumably you will all thrash these points out before the deal goes ahead

[gasax]

Looks like a classic case where the share value will take a real hit.

Presumably the group has no agreed (written ) rules?

If so then its doen to all of you to agree the new shape of things. I'm guessing the club will no longer provide parking or maintenance so your costs will be higher. With no engine fund, you'll have to start building one.

Whilst the initial deal looks to have been pretty good financially it looks like you're now going to have to pay for it - either in direct costs or a reduced value of the share if you sell.

But if they are no rules to ddetermine what happens with shares then it down to being nice to everyone and making the best of it. I can see you're not keen on the increase in costs but I cann't see any reason why the club should n't do this.

Read the many threads on group aircraft to illustrate just how bad things can be....

[dublinpilot]

Of course we all know from the recent thread that an engine fund forms no part of the value of a share. :rolleyes: So you should have nothing to worry about :rolleyes:

As your case demonstrates, a share with an engine fund certainly does have a higher value than one with the same aircraft without an engine fund.

Seriously though, what would happen when the engine was due to be replaced? I presume the cost of the new engine would have been split 10 ways? Or did your agreement with the flying club extend to them replacing the engine, as well as doing the maintenance? If the later, was there a written agreement specifying this?

In the more likely case that each member must pay for 1/10 of the engine replacement cost, then nothing has changed. Whoever holds the six shares, currently owned by the flying club, will have to pay 6/10 of the cost of the new engine (plus 1/10 if they already own another share).

Obviously your ongoing costs will have to be looked at if you now have to start paying for maintenance, parking, landing etc, and when reviewing them you would be wise to include an amount to start building up an engine fund as you go along.

dp

[Mike Cross]

Let's try a little logic.

You own 10% as do each of the other shareholders, except for the school, who own 60%.

If the club sells their shares to one of the existing members he will own 70% and the other three of you will own 10% each.

The way you've been working up to now is not as a normal group. Normally your fixed costs would be covered by the monthly payment and your variable costs by the hourly charge. However the club has been paying all of the fixed costs and you have been paying less than your share of the fixed costs and over the odds on the hourly rate. This will have to change.

In the normal course of events you'd have availability and costs in proportion to your shareholding. You need to add up your annual fixed costs (insurance, maintenace, hangarage/parking etc), add a little bit for contingency and inflation, divide the answer by 120 and that gives you the fixed costs per share per month.

So how are you planning to apportion it? Does the guy who owns 70% of the aircraft pay 70% of the fixed costs? He may be being philanthropic and helping the group out by investing more dosh but at the end of the day the fixed costs are being divided between fewer people. On the plus side, availability should be better.

How about you come to an agreement to share the fixed costs equally pro-tem with you all trying to sell the surplus shares to bring in more monthly income and reduce the amount you all have to pay? Or reduce the number of shareholders, e.g take it down to 6 shareholders to keep good availability, the three of you stump up some dosh to increase your share from 10% to 16% leaving your philanthropic friend with a half share from which he can then sell two thirds to put you all on an equal footing? There's a lot of ways of doing it, you just have to agree on how.

At the end of the day it's down to finding something that's mutually agreeable. If you can't agree then the way out is to sell the a/c, pay the bills, and split what remains in proportion to shareholding.