Are aviation partnerships a viable option?

[SWL]

I was asked to share my experience in avaition partnerships and thought it would be interesting to see if others would add their insights as well.  If there is already a similar thread in mooneyspace, perhaps someone can post a link.

Background:

Pfter obtaining my ppc, i was able to buy into a club with 3 airplanes and more than a dozen active members.  My learning curve benefitted tremendously, rubbing elbows with a number of experienced pilots thru the club.

With a year in the club under my belt, and an increase in flying time to approx. 120 hrs/yr, it was time to step up to a partnership. I was fortunate to locate a local mooney in an established LLC with an existing partner wanting to sell.

3.5 yrs later, my flying hours increased enough to warrant my own ride.

The club and the partnership were helpful to a rookie pilot learning the ropes.  I highly recommend both options for anyone flying 150 hrs / yr or less with access, or a sufficiently strong local community to start one.

Partnerships:

Here is a "Top 10" list from my bag of lessons learned.  I hope others will chime in with their lessons as well.

1.  The value proposition makes partnerships an obvious choice.  In a four way partnership for example with 100-150 hr partners,  for the price of 25% of the capital and maintenance costs,  each partner has 80 - 90% availability access to the airplane.  Upgrading to a kfc500 or a glass panel? How about a 75% discount since you are sharing costs among the other partners.

2.  The challenge with partnerships is seldom the aircraft. It is more often interface issues among the partners.  Buying into an existing partnership should include extensive interviews with the existing partners.  Consider 80% of your decision determined by the partnership compatibility interviews and 20% by the aircraft.

3.  Establish a charter, an operating agreement, and by-laws. These documents shouldn't need to be dragged offnof the shelf unless you have an unruly partner. Howeevr, well developed documents are critical as they may have to stand up in court.

4.  Keep an electronic calendar for on-line scheduling, and keep it up to date. On-line calendars allow for backup schedules as well as mx schedules, squawk lists, and notes.

5.  Be sure all partners are engaged with the airplane as owners. A "renters" attitude from a partner can become problematic.

6. If possible, identify a single cfii that all partners can use for proficiency flights.The cfii can help normalize best practices among all the partners over time.

7.  Optional upgrades and non-airworthy repair issues may be debated but safety issues should always be repaired when discovered. 

8.  Keep an engine reserve. Among other things, it makes transferring ownership to a new partner much easier as the buyer gets an effectively zero-time engine.

9.  Keep the flying rates dry and keep them low to encourage more flying time among the partners.

10.  Require (in the by-laws) that the existing partners retain voting rights of approval (or rejection) for new candidates into the partnership. Some partnerships allow the exiting partner sole discretion on the new partner.  This is a bad idea on several levels (see rule no.2)

Parting thought:  If you can afford to own an airplane outright, why not own 25% of four airplanes with four different mission types?  Cross-country, aerobatic, seaplane, heli - my dream team.

 

[carusoam]

Nice write up on partnerships, SWL.

Got any insight to how you handle taking the plane for the weekend?

More days away vs hours used... Friday to Sunday, only using 3 hours of flight time.

This was the driving force to own my own plane... 

Best regards,

-a-

[amillet]

My first Mooney (N201XG) @adverseyaw was with two other partners. We each had 10 days of the the month ( I had the last 10 days) when we were priority pilot. The plane was mine those 10 days unless I gave consent for the others to use the plane. It worked well for 5 years.

[gsxrpilot]

1 hour ago, SWL said:

Parting thought:  If you can afford to own an airplane outright, why not own 25% of four airplanes with four different mission types?  Cross-country, aerobatic, seaplane, heli - my dream team.

I've never considered having a partner or partners in my Mooney... until you said this.

[Stetson20]

Thanks, Steve! Partnership route is very attractive to me for several reasons. 

All:  any inputs welcome- good, bad, other. Im sure there are partnership horror stories as well. 

Roy

[SWL]

5 hours ago, carusoam said:

Nice write up on partnerships, SWL.

Got any insight to how you handle taking the plane for the weekend?

More days away vs hours used... Friday to Sunday, only using 3 hours of flight time.

This was the driving force to own my own plane... 

Best regards,

-a-

-a-

Partnership agreements that I've seen limit away trips to less than 7 days without prior approval from the other partners.  Mooney's are cross-country airplanes so one would generally expect a long weekend trip now and then.  If the partners treat each other as they would expect to be treated, everyone will have equal opportunities for an occassional long weekend, holidays, etc.   Partnerships tend to be like gym memberships. The initial pressure on the airplane schedule drops over time.  Some partnerships have an obligatory requirement for minimum flying times to be sure the plane doesn't sit hangared for extended times for the sake of engine longevity.

[midlifeflyer]

Great write up.

to answer the "weekends" question, it also applies especially to holiday weekends. In some small groups it's not an issue and they work it out informally until they see they need something more formal. But even then, agreeing not to formalize a system should be a conscious agreement.

if formalizing it, I mostly see a rotating priority system as the default. Think in terms of the same type of system you might use for a shared beach condo. A basic one is simple rotating weeks, weekend, and holidays. But this is an area where you can really step outside the box and be creative. The key is to think in terms of "where do we see potential problems?" and try to create solutions,

 

[steingar]

I ran both met 150 and my Cherokee in partnerships both with good friends and relative strangers.  So long as everyone is up front and honest they work great.  I can't fly an airplane enough to justify single ownership, I'd love a Mooney partnership.  Three is really the magic number, where you have a minimum of disruption of your flying and a maximum reduction of your expenses.  and big expenses are a lot easily to bear divided three ways.

[co2bruce]

Food for thought. I was in 3 partnerships before owning my own. All is great until one is ready to sell and move on. Selling a “share” of an airplane limits your potential customer base to a 20 mile circle around the airport where the plane is based. This is a very small limited audience. I have seen it take months to sell or sometimes never. You may have to buy the others out to sell. If it’s your plane your potential buyer can live anywhere........in the world. I understand the financial benefits of the partnership, but paying for a plane for months or years if you can not fly (medical or situational change) , or do not want to fly anymore for whatever reason can alter this financial benefit drastically. Just my life observation. 

[SWL]

Great points Co2Bruce.  Location and population densities proximite to the airport can are determining factors in the viability of an airplane partnership.  The feasibility of a partnership seems inversly proportionate to the availability of hangar space.  If the supply of potential buyers is low, consider a buy-out clause in the partnership agreement to reduce or eliminate uncertainty when a partner needs to transition out.

[midlifeflyer]

1 hour ago, co2bruce said:

Food for thought. I was in 3 partnerships before owning my own. All is great until one is ready to sell and move on. Selling a “share” of an airplane limits your potential customer base to a 20 mile circle around the airport where the plane is based. This is a very small limited audience. I have seen it take months to sell or sometimes never. You may have to buy the others out to sell. If it’s your plane your potential buyer can live anywhere........in the world. I understand the financial benefits of the partnership, but paying for a plane for months or years if you can not fly (medical or situational change) , or do not want to fly anymore for whatever reason can alter this financial benefit drastically. Just my life observation. 

...another one of those things to think about in advance. What happens if someone loses their medical ability, relocates, just wants to leave, or dies?

Or... getting rid of a partner who consistently violates organizational policies?

Edited June 3, 2019 by midlifeflyer

[Bob - S50]

4 hours ago, SWL said:

-a-

Partnership agreements that I've seen limit away trips to less than 7 days without prior approval from the other partners.  .......  Some partnerships have an obligatory requirement for minimum flying times to be sure the plane doesn't sit hangared for extended times for the sake of engine longevity.

Ours does both.

For reservations of 7 days or less, the reservation is yours unless somebody objects.  For reservations over 7 days it takes specific approval of the partners.

If the airplane has not flown for 2 weeks, and weather is suitable, somebody has to fly the airplane.  The requirement falls to the partner who has gone the longest time without flying.  If they can't/won't, they can get one of the other partners to do it for $50 (billed to one and credited to the other on the monthly bill).  So far we have never needed to enforce this rule in 6 years.

3 hours ago, midlifeflyer said:

Great write up.

to answer the "weekends" question, it also applies especially to holiday weekends. In some small groups it's not an issue and they work it out informally until they see they need something more formal. But even then, agreeing not to formalize a system should be a conscious agreement.

if formalizing it, I mostly see a rotating priority system as the default. Think in terms of the same type of system you might use for a shared beach condo. A basic one is simple rotating weeks, weekend, and holidays. But this is an area where you can really step outside the box and be creative. The key is to think in terms of "where do we see potential problems?" and try to create solutions,

 

We have a formalized plan since scheduling is included in the agreement.  We do not use any kind of rotating priority system.  Instead we follow a decision making matrix: Can the two conflicting partners reach an agreement?  If not, the partner with the fewest currently reserved days will prevail.  If there is a tie, it will be by vote of the (4) partners.  If that is a tie it will be decided by coin flip.  So far we have never needed this either.

1 hour ago, co2bruce said:

Food for thought. I was in 3 partnerships before owning my own. All is great until one is ready to sell and move on. Selling a “share” of an airplane limits your potential customer base to a 20 mile circle around the airport where the plane is based. This is a very small limited audience. I have seen it take months to sell or sometimes never. You may have to buy the others out to sell. If it’s your plane your potential buyer can live anywhere........in the world. I understand the financial benefits of the partnership, but paying for a plane for months or years if you can not fly (medical or situational change) , or do not want to fly anymore for whatever reason can alter this financial benefit drastically. Just my life observation. 

On the other hand, there are a lot more people who have $15,000 to $40,000 available for a partnership than there are people who have $60,000 to $160,000 available to buy an entire airplane.  So while your geographic market may be smaller, the total number of people with available funds may be pretty close.  So far we have had 2 partners sell their share.  Both got the deed done within a month or two.

8 minutes ago, midlifeflyer said:

...another one of those things to think about in advance. What happens if someone loses their medical ability, relocates, just wants to leave, or dies?

Just include it in the agreement.

Lost medical?  No longer pay dues and stop flying.  Sell the share.

Just want out?  Keep paying and flying.  Sell the share.

Dies?  The estate will pay no dues.  The remainder of the partnership will ask the estate if they want to keep owning the share and fly the plane (probably pretty rare case).  If they don't want it we will try to sell the share for the estate and give them the proceeds.  If after a reasonable time we can't sell the share we can either buy the share ourselves or sell the plane and divide the proceeds according to the plan.

Not covered in the plan?  Come up with a plan and vote on it.

[midlifeflyer]

31 minutes ago, Bob - S50 said:

Just include it in the agreement

Of course. I was mentioning a few of the many things to think about and reach agreement on in advance.

[flyboy0681]

Very interesting responses here I must say.

I am now into the ninth year of my partnership and it has been an excellent experience. All partners have been on the same page regarding maintenance, that is, we never skimp. If one of us brings up an issue, we don't argue among ourselves, we simply get it taken care of. The urgency obviously is dictated by the seriousness of the squawk. But most importantly, we have all become good friends. Whenever one of us needs to do some air work or approaches, we never hesitate to accommodate the request, after all, we get to fly with someone just as passionate about the plane.

There are three of us in the partnership and I would not recommend more than that. I have friends whose partnerships contain four or more and while it does keep the expenses down, I see them encounter scheduling conflicts all the time and that creates friction. In the nine years that I've been associated with my partners, I can't recall one scheduling conflict, although we each know to get the trip on the calendar as soon as the date is known.  We don't frown upon someone taking the plane for an extended trip, if someone wants to take her for two or three weeks, that's just fine with us.

Bruce is correct when it comes to selling and finding a new partner. One of ours decided to sell his late last year and it took four months for us to find a new one, but he was worth the wait. His personality and mission fit in perfectly with us and as an American Airlines captain, he surely knows his stuff. If it took us four months in a very densely populated area to find one, I imagine it could take a year or more to find one in a rural area - if at all.

We bill wet because it obligates the person returning to make sure there is fuel in the tanks for the next guy. Although we don't have any formally written requirements, we know to top off if we are returning with a little more than half tanks.

The original poster is correct about interviewing the prospective new partner because the fit is so critical. In our case the three partners and spouses had dinner with the new prospect and wife and we all hit it off very well. Now several months into it, he has become one of us and puts the Mooney to good use. And as far as bringing on an additional partner, our agreement states that the vote must be unanimous as this would keep the peace. Upgrades are always on our mind and again we are on the same page. Over the years we installed a GTN 750, took care of our ADS-B requirements early on in 2015 by installing the GDL 88 and undertook a complete glass replacement project (windows, not panel) and none of us even flinched.

There are some out there who would never consider taking on partners, but I would never consider owning a plane without them.

 

[bob865]

I'm now in my second partnership.  I really don't fly enough for owning or even the partnership to make much sense, but I pay the premium for access to the plane.  It would be FAR cheaper for me to rent at the rate I fly, but the problem comes in trying to plan trips last minute.  There was nothing more annoying than finally getting time to fly and a nice weather day and I either coudn't find an available plane or it was too short notice to organize the keys to the plane.  Plus a rental at a school they really frown on or don't allow taking the plane for a few days for a beach or weekend trip.  There are no clubs where I am and the one that almost opened fizzled out before it even got started.  I wanted to go when I want, where I want, and not have to be on the hook with hundreds of other people.  I could own the plane on my own, but why should I?  I only fly a few hours a month, why should I pay for 100% of the cost of a plane sitting on a ramp?  Not to mention the havoc sitting causes on the plane.

Financials aside, the partners make or break a partnership.  If you and the partner(s) do not get along, or dont' have the same goals, that's where partnerships fail.  When you have good partners you can be super flexible and have no policies on handling the plane.  When you have bad partners, you need to have a really good partnership agreement in place.  I knew my partner from another partnership when we wanted to move up and the others didn't.  We have a formal agreement in place, but we don't keep up with hours, or days, or any of the typical stuff.  We don't run a formal engine reserve or maintenance reserve becuase we don't need to.  But this is the exception, not the rule with partnerships. 

We have talked aobut adding a third, but have so far steered away from it becuase it means adding an unknown person.  The unknown means we have to be more formal.  We would have to start an engine and maintenance reserve.  We would have to start a formal calendar, etc. This would be to protect us from a potential wild card.  Inteviews and long checkouts are always better, but not fool proof.  Not saying this is a bad thing, but it definitey is a thing to consider.

[KLRDMD]

On 6/2/2019 at 10:10 PM, gsxrpilot said:

I've never considered having a partner or partners in my Mooney... until you said this.

Just this week a friend with a V35 and I (S35) put each other on our insurances. Since we both have time in type there was no additional premium to do so. Now if one airplane is down for maintenance we can fly the other if it is available. It isn't having a partner and doesn't give you the ability to fly a number of different airplanes but works for our needs.

[SWL]

Creative alternative KLRDMD. Kudos and thx for sharing.

[SantosDumont]

I’ve thought that if I could find an A36 partnership I’d buy in for the times when I want to fly the family somewhere and keep the Mooney for my primary mission of just flying myself around.