Warren Buffett is fond of saying that you don’t know who is swimming naked until the tide goes out. Well, the tide has gone way out on the fractional jet ownership business, and everyone involved is swimming naked, or at least is down to the skimpiest of Speedos. And that’s why CitationShares has remade its business model to become CitationAir by Cessna.
In the conventional fractional business, which included CitationShares, the operator buys an airplane from a manufacturer and then sells that airplane in shares of as small as one-sixteenth to owners. The operator has large capital sums tied up in the airplane until all shares are sold, or worse yet, when it is forced to buy back shares from owners as has happened often in the economic downturn.
