Airplane Partnership Agreement

[weilke]

My major concern comes from the fact that some costs are purely calendar-driven, others are purely hour-driven, and many others are somewhere in between. For example, if you hit a dry spell for a few years where only one guy flies the plane but he doesn't fly it much (say 15 hours a year compared to the other guy's 0), the engine will likely need an overhaul before it reaches TBO, but the guy who was at least making an effort to keep it running might unfairly have to pay 100% of the overhaul cost just because his partner didn't fly at all and their agreement divides maintenance based solely on hours of use.

What did you end up doing ?

I am in two co-ownership setups on aircraft. One is a Corp with 5 shares, the other an LLC with currently 3 ownership interests. Both function the same. A monthly charge that covers hangar, basic annual fee, insurance, databases. For every hour flown, money goes into a separate account to cover overhaul reserve and and hourly maintenance (PM and things that break). Once a year we meet, go over the budget vs. expenses, decide on upgrades etc. It worked for 15 years before I joined and has worked the 6 years since. When we did an overhaul and came up short vs. the reserve account the assessments were paid in equal shares, not prorated by the hours.

 

[iamtheari]

What did you end up doing ?

We ended up splitting all fixed and maintenance costs down the middle other than that I paid a bit extra for insurance the first year since I was new to the plane and the premiums reflected that. We paid for our own fuel and filled the plane before putting it away. An exception would have been made for any extraordinary repairs required due to one of us damaging the plane by our own stupidity, but that never came up.

This worked really well but the same drive that made the previous owner want me to buy into the plane also resulted in me buying him out, so now I'm a sole owner after all.

 

[weilke]

We ended up splitting all fixed and maintenance costs down the middle other than that I paid a bit extra for insurance the first year since I was new to the plane and the premiums reflected that. We paid for our own fuel and filled the plane before putting it away. An exception would have been made for any extraordinary repairs required due to one of us damaging the plane by our own stupidity, but that never came up.

This worked really well but the same drive that made the previous owner want me to buy into the plane also resulted in me buying him out, so now I'm a sole owner after all.

Congrats. Aren't you based in my neighborhood ?

 

[iamtheari]

Congrats. Aren't you based in my neighborhood ?

It depends on how big your neighborhood is, but probably.

 

[Ronnie Godfrey]

I haven't the time right now to read through all the previous comments, but I'll offer my two cents as someone who is a 50/50 co-owner in a plane.

We bought a '69 Cherokee 140 and financed it, with each man contributing half of the down payment. Costs to get the airplane home from point of purchase were shared evenly, even though I did the flying because I was the only licensed partner at the time.

My partner and I are friends and co-workers and have a very similar philosophy regarding upkeep and maintenance. When something gets broken, it gets fixed. If one partner finds a squawk, he tells the other immediately and we discuss the next steps and arrive at a mutually agreeable solution. We do pay an hourly rate into an account, and we calculate hangar, insurance, note service, and annual fees. All of those fixed costs are split down the middle and we each have them auto-drafted each month. The plane is always left fueled to the tabs at the conclusion of a flight so that one partner is never paying for the other's gas.

Those are the basics of our agreement. When we first bought the plane, we found a written agreement online, edited it to suit our situation, and signed it. We seldom if ever reference the agreement, but should we need to dissolve our "partnership," we have the mechanisms in place to do so.

Thus far, our arrangement has worked out great. Availability is hardly ever an issue, and because we share the same philosophy about upkeep, we never really disagree about what should happen with the airplane. I think that for a partnership to be successful, this is the key element. If one person is a penny-pincher who wants to defer maintenance while the other guy wants to spare no expense, you're going to have an issue. With a little due diligence and careful selection of a co-owner, it can be a really great arrangement. Neither of us could afford sole ownership so this was a great solution for him to get his private and for me to get my instrument. Later on, we plan to sell and upgrade to a real traveling machine.