The Benefits of Co-Ownership: Financing an Aircraft with Partners

Aircraft ownership is expensive—there's no way around it. Between acquisition costs, insurance, hangar fees, maintenance, and fuel, even a modest single-engine aircraft can cost $15,000-$30,000 or more annually to own and operate. For many pilots, these costs put sole ownership out of reach or make it financially impractical given their actual flying needs.

Co-ownership offers a compelling solution. By sharing an aircraft with one or more partners, you can dramatically reduce your individual costs while still enjoying the benefits of aircraft ownership. Many pilots find that co-ownership provides the best balance between cost, convenience, and availability.

In this comprehensive guide, we'll explore the financial benefits of co-ownership, compare different ownership structures, explain how lenders approach partnership financing, and provide guidance on creating partnership agreements that protect everyone involved. Whether you're considering your first partnership or looking to improve an existing arrangement, this guide will help you structure a successful co-ownership.

The Financial Case for Co-Ownership: Splitting Costs Without Splitting Hairs

The primary motivation for co-ownership is financial—sharing costs makes aircraft ownership accessible to more pilots and more economical for everyone.

Cost Sharing Breakdown

The Economics of Utilization

Most privately owned aircraft fly 50-150 hours per year. This low utilization means fixed costs are spread over few hours, making the per-hour cost extremely high.

Per-Hour Cost Analysis

Co-ownership spreads fixed costs over more hours, dramatically reducing the effective hourly cost of flying.

Beyond Direct Cost Savings

Access to Better Aircraft

Co-ownership can put higher-quality aircraft within reach:

• Newer aircraft with modern avionics
• Higher-performance models
• Better-equipped aircraft
• Aircraft you couldn't afford alone

Shared Expertise

• Partners may have different skills (maintenance, avionics, etc.)
• Collective knowledge improves decision-making
• Shared responsibility for management tasks
• Multiple perspectives on upgrades and maintenance

Reduced Individual Risk

• Major repairs split among partners
• Unexpected expenses less devastating
• Easier to maintain reserves collectively
• Partners can cover each other's obligations temporarily

The Trade-Offs

Co-ownership isn't without drawbacks:

Reduced Availability

• Must coordinate scheduling with partners
• May not get aircraft when you want it
• Holiday and vacation conflicts
• Weather delays affect multiple schedules

Shared Decision-Making

• Must agree on maintenance decisions
• Upgrade disagreements possible
• Different risk tolerances
• Varying standards for aircraft care

Partner Risk

• Partner financial problems affect everyone
• Personality conflicts can arise
• Partners may want to exit at inconvenient times
• Liability concerns with partner actions

Ownership Structures: Partnerships, LLCs, and Flying Clubs Compared

How you structure co-ownership affects liability, taxes, financing options, and operational flexibility. Choose the structure that best fits your situation.

Direct Co-Ownership (Tenants in Common)

The simplest structure: multiple individuals own the aircraft directly, each holding an undivided percentage interest.

Pros

• Simple to set up
• No entity formation costs
• Direct ownership and control
• Easy to understand

Cons

• Personal liability exposure
• All partners on loan (all credit checked)
• Transfer requires all partners' consent
• Less formal structure

LLC Ownership

Partners form a Limited Liability Company that owns the aircraft. Partners own membership interests in the LLC.

Pros

• Liability protection for members
• Easier transfer of interests
• More formal governance structure
• Operating agreement defines all terms
• Can add/remove members more easily

Cons

• Formation and maintenance costs
• Annual state fees and filings
• More complex tax reporting
• Some lenders prefer individual ownership
• Must maintain corporate formalities

Flying Club

A non-profit organization where members pay dues and hourly fees to access club aircraft. Members don't own the aircraft directly.

Pros

• Can have many members (10-50+)
• Very low individual cost
• Professional management possible
• Multiple aircraft possible
• Easy member turnover

Cons

• Less availability per member
• Less control over aircraft
• More complex organization
• Requires active management
• Members don't build equity

Structure Comparison

Financing a Partnership Aircraft: How Lenders View Co-Ownership

Financing a co-owned aircraft involves additional considerations compared to sole ownership. Understanding lender perspectives helps you structure a financeable partnership.

Lender Concerns with Co-Ownership

Multiple Borrower Risk

• More people = more potential for default
• Partner disputes can affect payments
• One partner's financial problems affect all
• Coordination challenges for collections

Collateral Concerns

• Multiple owners complicate repossession
• Partnership disputes can cloud title
• Exit of one partner affects loan

Financing Structures for Partnerships

Joint and Several Liability

Most common structure: all partners sign the loan and are each fully responsible for the entire debt.

• Lender can pursue any partner for full amount
• Strongest protection for lender
• All partners' credit evaluated
• Weakest partner may limit loan terms

LLC Borrowing with Personal Guarantees

LLC takes the loan; members provide personal guarantees.

• LLC is primary borrower
• Members guarantee proportionally or jointly
• Provides some separation
• Still requires credit evaluation of guarantors

Single Partner Financing

One partner finances the aircraft; others contribute to payments.

• Only one person on loan
• Simpler for lender
• Financing partner bears all loan risk
• Requires trust and strong agreement

Qualifying for Partnership Financing

What Lenders Evaluate

• All partners' credit: Usually need all to qualify
• Combined income: May consider total partnership income
• Partnership agreement: Want to see formal agreement
• Exit provisions: How partner exits are handled
• Payment structure: How payments will be made

Improving Approval Chances

• All partners should have good credit (680+)
• Have formal partnership agreement in place
• Designate one partner as primary contact
• Show how payments will be coordinated
• Larger down payment reduces lender risk

Down Payment Considerations

For more on partnership financing, see our aircraft partnership financing guide.

Creating a Bulletproof Partnership Agreement: Essential Provisions

A comprehensive partnership agreement is essential for successful co-ownership. It should address every foreseeable situation and provide clear procedures for resolving disputes.

Essential Agreement Elements

Financial Provisions

Capital Contributions

• Initial contribution amounts
• How down payment is split
• Treatment of unequal contributions
• Additional capital call procedures

Ongoing Costs

• Fixed cost sharing (equal or by ownership %)
• Variable cost allocation (by hours flown)
• Reserve fund requirements
• Payment due dates and methods
• Late payment penalties

Major Expense Decisions

• Threshold requiring partner approval
• Voting requirements (majority, unanimous)
• Emergency repair authority
• Upgrade decision process

Scheduling Provisions

Scheduling System

• Online scheduling tool or manual system
• Advance booking limits
• Minimum/maximum booking duration
• Cancellation policies

Priority Rules

• First-come, first-served vs. rotation
• Holiday and vacation scheduling
• Extended trip policies
• Conflict resolution procedures

Operating Rules

Pilot Requirements

• Minimum certificates and ratings
• Currency requirements
• Checkout procedures for new partners
• Guest pilot policies

Aircraft Use Limitations

• Geographic restrictions
• Weather minimums
• Night/IFR requirements
• Passenger policies
• Commercial use restrictions

Exit and Buyout Provisions

Voluntary Exit

• Notice period required (60-90 days typical)
• Right of first refusal for other partners
• Valuation method for buyout
• Payment terms for buyout

Involuntary Exit

• Grounds for forced buyout (non-payment, violations)
• Process for removing a partner
• Valuation discount for forced sale
• Loan assumption or refinancing

Valuation Methods

• Agreed value updated annually
• Independent appraisal
• Average of multiple value guides
• Formula based on market data

Dispute Resolution

Escalation Process

1. Direct discussion between partners
2. Mediation by neutral third party
3. Binding arbitration
4. Litigation (last resort)

Deadlock Provisions

• Buy-sell provisions (shotgun clause)
• Forced sale of aircraft
• Coin flip for minor disputes
• Rotating decision authority

Finding Compatible Partners

Where to Find Partners

• Local flying clubs and FBOs
• AOPA partner matching services
• Online aviation forums
• Flight school alumni
• Aviation social media groups

Compatibility Factors

• Similar flying frequency and patterns
• Compatible schedules (weekday vs. weekend flyers)
• Aligned maintenance philosophy
• Similar financial stability
• Compatible personalities
• Shared aircraft preferences

Trial Period

Consider a trial arrangement before committing:

• Rent together for 3-6 months
• Test scheduling compatibility
• Evaluate communication styles
• Assess reliability and responsibility

Related Resources

• Aircraft Partnership Financing Guide
• Entity Structures for Aircraft Ownership
• Aircraft Insurance Requirements
• Total Cost of Ownership Analysis