Fractional Ownership
Occupied Hourly Rate, Defined (and What Rides on It)
The occupied hourly rate is the number every fractional and card conversation revolves around. It is also the number least likely to describe what you will pay. Here is what it is, and what sits on top of it.
Tyler Hults
Founder & Managing Principal, TRH Aviation
In brief
The occupied hourly rate is the fee a fractional or card program charges for each hour you are aboard the aircraft. It is the most-quoted figure in the industry and the most misleading when read alone, because it is one line in a cost structure that also includes fixed monthly fees, capital or lease cost, fuel adjustments, taxes, minimums, and repositioning rules. This short definitional piece explains what the rate covers, how it is measured, what is typically excluded, how it escalates, and how to turn it into the only figure that matters: your all-in cost per occupied hour.
The definition
In fractional ownership, fractional leases, and many jet card programs, the occupied hourly rate is the variable charge for each hour the aircraft is in flight with you or your passengers aboard. It sits alongside fixed charges: in a share or lease, a monthly management fee and the capital or lease cost; in a card, the deposit and any membership fee. The rate covers the operating cost the program attributes to your flying: crew, maintenance, and the like, according to the program's own allocation. What exactly it covers is defined in the agreement, and definitions differ.
How the hour is measured
Programs define flight time in slightly different ways: block time from engine start to shutdown, wheels-up to wheels-down, or a schedule-based figure. Some round to the nearest increment. Over a year of flying, the measurement convention alone can move the total by a noticeable margin. Ask how the hour is counted and whether taxi time is included.
What typically rides on top
- Fuel variable or fuel surcharge: an adjustment tied to fuel prices, re-set monthly or quarterly on many programs, separate from the rate.
- Federal excise tax and segment fees where applicable to the structure; whether they are quoted inside or outside the rate varies. See the taxes and fees not in the rate.
- Minimums: a per-leg or per-day minimum billed regardless of actual flight time.
- Repositioning or ferry charges outside a primary service area, sometimes at a separate ferry rate.
- Peak-day surcharges, international fees, de-icing, and specific airport or handling charges, depending on the agreement.
- Supplemental hours beyond your allotment, often at a different rate than your contracted hours.
How it escalates
On multi-year programs the rate typically adjusts annually. In agreements we review, the mechanism is commonly the greater of an inflation index and a fixed percentage, applied on a set date each year. Because that is a floor rather than a cap, the rate rises at least by the fixed figure regardless of inflation. Some agreements add step-ups tied to the aircraft's age. The escalation clause belongs beside the rate in any comparison; a lower starting rate on a steeper escalator can cost more over the term. The contract guide covers the clause.
From the rate to your number
The figure that decides whether a program is right for you is your all-in cost per occupied hour: every fixed charge and every variable charge for a year, divided by the hours you actually flew. The rate is one input. The method is laid out in the all-in cost method, and the reason the rate alone misleads is that two programs with identical rates can differ materially once minimums, fuel, taxes, and fixed fees are applied to the same pattern.
Questions to ask about any quoted rate
- 01How is an occupied hour measured?
- 02What does the rate include, and what is billed separately?
- 03What is the minimum per leg or per day, and how do multi-leg days bill?
- 04How does the rate escalate, on what date, and is the mechanism a floor or a cap?
- 05What rate applies to supplemental hours and to ferry time?
- 06What would my last twelve months have cost, all in, under this rate and these rules?
Key takeaways
- "Occupied" means you are aboard. Positioning and ferry time are usually not occupied hours, and how they are billed is a separate clause.
- The rate rarely includes everything. Fuel variable charges, taxes, segment fees, and certain handling costs commonly ride on top.
- Minimums convert the rate: a short leg billed at a minimum is a higher effective rate for that trip.
- The rate escalates annually on most multi-year programs, often on a formula with a floor. Read the escalation clause with the rate.
Put this to work
Where this decision goes next — the advisory guides and head-to-head comparisons behind it.
Source notes
- Definitions reflect standard usage in fractional ownership, fractional lease, and jet card agreements as reviewed by the author in practice. Individual programs define terms differently; the agreement governs.
- Escalation structure described (greater of an index and a fixed percentage, applied annually) reflects agreements the author has reviewed; no specific provider's figures are stated.
Educational, and deliberately general. Your situation turns on specifics — routes, hours, and terms — which is what an engagement is for.