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WARNING THIS IS VERY LONG

Jan,
You are way ahead of most people when it comes to getting into a partnership. Paul made an excellent start.

I in no way present myself and an expert in the field of airplane partnerships but I am happy to pass along some of the good and bad experiences that I have had.

For the most part I have been extremely lucky in partner selection. (I have had the same wife for more that a half century ) I have been involved in several partnerships of which three involved airplanes.

My first airplane partnership was when I was a student. Two other students joined me in the purchase of a Cherokee 140. We were shortly down to two partners when it was determined that one of the original three just simply was not capable of flying an airplane safely. We bought him out and continued as a two man partnership for a couple of years.

In my second airplane partnership I purchased aircraft and my partner rented them in his flight school and rental operation. I also had access to the planes that he owned. It worked out very well for around ten years because my partner was my long time mentor and friend and best of all we both made money.

My third airplane partnership was a total disaster. It was made up of a group of five people that hated each other (and I think everyone else, including me). I purchased a 1/6th interest in their retractable single to have faster and more comfortable transportation than the 150/15o would provide for longer trips. After the first meeting which was supposed to discuss the probable need for a major overhaul turned into a shouting match and cuss fight I told them that I wanted out and for the first time that evening they all agreed that if I could find a buyer that would be just fine with them. I found a buyer.

With that brief background you at least have some idea where I am coming from in the following suggestions.

I feel that partnerships require several ingredients to be truly successful.
They are:
1. The partners need to like each other as people. There will be disagreements and aggravations in dealing with any person with whom you’re a partner, it is inevitable. It is a lot easier to reconcile differences if the partners like each other. It may take a while to find out whether or not this condition can be met. I find the best way to get acquainted is to play a few sets of tennis or rounds of golf with a person; you can learn a lot real quickly.

2. The partners absolutely must have the same long term goals in aviation. If one is going to be satisfied with a 150 for the next ten years and the other is looking to upgrade soon. There will be a problem. On the other hand if both partners really want to fly a 182 but currently can’t come up with the required funds that could work out just fine. Just be sure that you are both singing off of the same page.

3. All partners need to be of similar financial circumstances and must be able to pull their weight when bill time comes around. One of my partners got a divorce and I wound up having to buy him out or sell the plane; I bought him out but it was a strain. (And that was one of my good partnerships.) If you are well acquainted with the protective partner(s) I think that a credit check is an extremely good idea. You will be making a substantial investment as well as taking on a large amount of potential economic liability; if the partner does not pay his airplane related bills you will be on the hook for them.

4. The partners should have general agreement on equipment and toys. For most flying in a 150 a GNS 430 is a toy, not a necessity. If one of the partners is a gadget freak (as I am) and the other is not there will be problems.

5. Money matters! The bills must be paid. There needs to be an agreement on how the partners will pay their part of the expenses. I suggest that the billing be set up in two parts. The first part is a fixed amount to cover fixed cost such as insurance, hanger rent, annual inspections, tax if required and debt service if money is borrowed and should paid at regular intervals, usually monthly. I suggest that each partner, at the beginning of his/her entry into the partnership contribute an amount that is equal to three months of their fix cost assessment.

The second part of billing is for operations and includes fuel, oil, tires, routine maintenance and a reserve charge for engine and prop overhaul. This money should be treated in two different ways. The overhaul reserve should go into a savings account and should never be used for any other purpose other than overhauls: the account should require the signature of ALL partners for any withdrawal of funds. The money remaining after paying all direct operating cost should be maintained in a checking account for use in covering unscheduled maintenance. I think that it is a good idea to require at least two signatures on all checks.

If a partner misses or is late with a monthly fixed cost assessment or operating charges that is a BIG red flag. If the partner should fall behind or two months the termination agreement (more about that later) should be put into motion and should be prosecuted to completion. If a partner gets that far behind he/she is in financial difficulties or simply does not care about the airplane and relations need to be severed.

6. A firm agreement on scheduling the airplane should be established at the outset of the partnership. In my first partnership we agreed to alternate weekends. During the week we simply would ask if the other partner was planning to use the plane at a certain time and work it out from there. You might want something more formal. In any event there should be a mutually agreed upon scheduling scheme.

7. Termination is not something that one wants to think about when starting out on a new venture but a failure to agree up on a termination scheme at the beginning is asking for very large problem at the end. The most equitable arrangement that I know of is the “Buy – Sell” agreement. Under the agreement one or more partner(s) may, at any time, may offer to purchase the partnership interest of another partner for an offered amount. The partner receiving the offer may elect to pay that amount to the partner making the offer for his/her interest. Upon completion of the transaction the purchasing partner(s) acquire full title to the airplane and all of the overhaul reserve fund. The buying partner assumes all obligations under the existing loan (if any) The selling partner receives a refund of all of his/her share of the fixed cost fund less any outstanding operational charges owed by the selling partner. Sounds kind of complicated but it really isn’t.
Example (using round numbers):
You and I purchase a Cessna 150 for $20,000.
We each contribute $5000 to a down payment and acquire a loan for $10,000 with a monthly payment of $100.
We each also contribute $650 to cover three months of our fixed cost.
We set our overhaul reserve at $15 per hour of operation.
We set our operating cost at $35 per hour.

For three years we each fly the airplane 100 hours per year. That will put $9,000 into the overhaul reserve.
There is $1,500 in the checking account.
Then engine is due for overhaul in 300 hours at a cost of $10,000.
We are both current on our monthly charges and all of the bills are paid.
For whatever reason I invoke the Buy-Sell agreement and offer you $7500 for your half of the airplane. You have the right accept the offer or to say no thanks Wayne I will buy your share for the offered amount of $7500.

I get $7500 plus my original $650.
You get title to the airplane, the $9000 in the reserve account and the remaining $850 in the checking account.

You may be able to find some termination agreement that you like better but you really need one, whatever it may be.

8. Even though you are only buying part of an airplane you need to be sure that it has a clear title. Frankly if I saw unpaid liens on the title search it would be a deal killer. That is a very clear indication that the guy selling part of his plane is not financially responsible and that is not what you want in a partner.

9. Then there is the pre-purchase inspection. The trouble is that you are only getting part of the plane but you have to pay the full bill of the inspection.

I am sure that I have missed some points but I am about played out. Perhaps some of the other members will chime in.

One last thought, and this is just my opinion and worth every cent that you are paying for it, I think that you have about a 30% chance of developing a successful airplane partnership.

If you are a member of AOPA you can go to there website and find a lot of information on flight clubs that may be helpful.

I was just recently asked by a good friend to go into a partnership on a Cessna 170 that is presently for sale at a very good price. Even though I believe that the 170 is one of the prettiest Cessna's out there. I would love to get my tail dragger endorsement. And having a 170 could be a lot of fun. I turned my friend down without even thinking twice about it.

Why??

Because he is a good friend and I wish him to remain a good friend.

My advice, Jan? If you still want to partner, "try one out" for a year or so. Allow him or her access to your airplane but with your still keeping total control. Just do not jump into a partnership with somebody you really do not know. Then. if you find one that you are truly compatible with, fantastic!! If not, you still have your own airplane. Unless you are absolutely sick and tired of flying and truly wish to get out of flying entirely, find a way to keep your 152. Do not get rid of your 152. You will regret it, I have little doubt.

By the way! When living in Nevada we used to spend a lot of time in Bishop. We love that area. (Even with Wally living there! ) It's too bad it is in California! (So I suspect it's the extra taxes imposed which is also influencing your decision, huh Jan?)

Best of luck!

Bill
Grants Pass, Oregon

Wayne gets the gold star, Paul was very good as well.

I had one partnership and it went very well. A boat.

I also ran away from starting one as the owner scolded me for calling him at home and letting his wife know he owned a 150.

I'm convinced that both Wayne and Pauls points are best used (in writting) as real world discussion points. It's that proccess as much as anything that creates a realistic attitude of how to deal with things.

To be a good partner you need to be happy to see another partner enjoy the plane on a day you would have liked to use it, It's all about the people.

That's funny. How does one hide a 150 from a spouse?

Obviously quite easily. I know of several guys that are keeping "toys" without the spouses knowledge!

I was going to make a comment on how..........eh........um.......naive?...... some women are........

SLAP!!

Bill
Grants Pass, Oregon

Hiding a plane from the wife? Sound like a really bad idea to me....

Red

Apparently you can't

Can't hide a boat either.

Don't ask how I know

Try it.
How bad can it be? Worst case, you'd sell the plane and that is what you will likely do if you don't try.

...wasn't me that said that!