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Making Plane Sense
Fluto Shinzawa with Bill Quinn
12/01/2003
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Mateo’s self-admitted obsessive overanalysis was a result of a prior private flight experience that degenerated into one of the few financial miscalculations the otherwise successful start-up entrepreneur ever made. Mateo, who has launched, purchased, owned, and sold companies in diversified fields such as real estate and software, had previously purchased a fractional share that, by the end of its term, had depreciated precipitously. Fearing a similar scenario, Mateo resolved to pick through the financial scrum of fractional ownership with far greater caution and to enlist a professional to aid him during the process—a period that lasted nearly a year from the divestment of his previous share to the purchase of a new one. "I think it’s risky business without a consultant," Mateo now says. "It doesn’t matter what plane you buy. The amount of money you’d pay a guy like Bill is so infinitesimally small as a percentage of the first year’s ownership. He earned his fee—no doubt about it. And yet I was an experienced owner."
Few Options
Mateo’s business interests are checkered throughout the country, in Washington, D.C., Montana, California, and Hawaii. He is an automotive enthusiast who travels to rallies and often takes his family to his homes in Hawaii, Arizona, and Montana. Six years ago, to meet his personal and business travel requirements, Mateo purchased a one-sixteenth share in a seven person Beechjet 400A from Flight Options (then Raytheon TravelAir), one of the four major players in the fractional market. It was Mateo’s initial entry into fractional ownership. His inexperience would prove costly.
| The current aircraft market is saturated with inventory,
reducing resale value of used planes. |
In 2002, his five-year contract was coming to a long-awaited conclusion. Upon completion, owners can renew their contracts or sell their shares back to their providers. Mateo decided to sell his share back to Flight Options, which countered with a significantly lower valuation, which he considered unacceptable. The current aircraft market is saturated with inventory, reducing resale value of used planes. In 2000, value was still high; an owner selling back to a provider could have conceivably received 85 percent of a share’s original value. Today, shareholders have seen returns as low as 55 percent, and Mateo’s valuation approached the latter figure. "The investment he made," Quinn says, "was a disaster. I’ve been dealing with dozens of Flight Options valuations. There is integrity and considerations that CitationShares, NetJets, and even Flexjet extend to owners. When it comes to Flight Options, they are so far off the chart."
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