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Making Plane Sense
Fluto Shinzawa with Bill Quinn
12/01/2003
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According to Quinn, Flight Options uses a different valuation model than the other three providers when appraising about-to-expire shares. Flight Options buys back shares at the cheapest prices possible, often less than the real-market valuations of other providers and independent appraisers. "They use a buyer’s mentality as opposed to a valuation mentality, and that’s unfortunate because it hurts their program," Quinn says. For some time, Mateo negotiated with Flight Options to achieve a better valuation, but the two parties could not arrive at an agreeable resolution. Meanwhile, a former Flight Options executive, who was an acquaintance of Mateo and a friend of Quinn, urged the businessman to contact Aviation Management Systems to help him exit the program. Quinn presented two choices: His company could act as an appraiser to value Mateo’s share, or become his personal consultant and handle all negotiations on his behalf.
In September 2002, Aviation Management Systems took over Mateo’s exit strategy, winning a higher valuation for its client but one that still, in Quinn’s opinion, did not come close to the real value of the one-sixteenth share. Mateo was discouraged by the negotiations, but his travel requirements—his business takes him to small towns such as Hallettsville, Texas, and Bozeman, Mont.—could not be served by commercial flight. He decided to stay in private aviation, but was determined not to repeat his past mistakes.
Starting Over
If the 5,600 worldwide owners of fractional shares, Quinn estimates that 70 percent of owners are first-time buyers with little or no experience in private aviation. Many fail to establish their flight needs before the purchase, and rarely do any consider an exit strategy when shares expire. Mateo, who considered whole aircraft ownership and membership programs after selling his Flight Options share, did what Quinn recommends to all his clients: he performed a needs analysis to determine his common destinations, frequency of travel, average size of his traveling party, and his financial constraints.
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