And then there were three: US fractional jet operators remain optimistic

Corporate Jet Investor Staff
By Corporate Jet Investor Staff February 8, 2013 15:23

Fleet of jets

It is no secret that the last five years have been tough for fractional aircraft operators. Although profitable now, in 2010 Warren Buffett described NetJets as his “problem of the year.”

Last year, Cessna also announced that its fractional operator – Citation Air – would no longer sell fractional shares. But while no one is getting carried away, if you speak to any one of the three fractional operators left in the US, you will hear a lot more optimism.

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Flight Options

At Flight Options, chairman Kenn Ricci – and head of Directional Aviation Capital – acknowledges that the past few years have been tough on the industry. But he believes his company has weathered the storm. “The total flight hours have decreased, but the percentage of fractional hours has actually gone up,” says Ricci. “In 2008, 22 per cent of total flying hours were on a fractional programme. At the end of 2012, that number was up to 38 per cent.”

The year 2012 was a strong one for Flight Options. In 2011, the company sold 5,400 hours, and ended 2012 with a 33 per cent increase, selling 7,200 hours. Ricci believes this increase was largely triggered by consolidation within the market, which lead to CitationAir’s retraction in February 2012.

Despite the apparent growth of the remaining fractional operators in the US, Flight Options’ Jet Membership Club programme has emerged as a popular choice for the company’s customers, by offering 75 hours on a Phenom 300 business jet for $135,000.

Another notable development at Flight Options has been the recent addition of Nextant Aerospace’s (another company owned by Directional) ‘re-manufactured’ 400XT business jet to the company’s fleet, which according to Ricci, has “really exceeded expectations.” Initially offered exclusively under fractional ownership, Flight Options placed an order for 40 Nextant 400XTs, with twelve jets already flying.


NetJets

After the recession cost the world’s first fractional jet operator 18 per cent of its flights in 2009, NetJets claims to experiencing something of a revival, which is backed-up by the company’s record-breaking order placed in June 2012 for up to 425 new business jets.

“NetJets has experience general improvement in business across the board every year since the recession hit,” says Adam Johnson, SVP of global customer service, sales and marketing. “The fractional market – at least with us – has been very strong.”

The recent addition of the Bombardier Global 6000, the Embraer Phenom 300 and the Bombardier Challenger 300 – which make up the NetJets signature series – to the company’s fleet has seen NetJets further establish itself as a luxury aviation brand – having already used sportsmen such as Roger Federer, Tiger Woods and Tom Brady in advertising campaigns – as part of a $18 billion investment.

“We do fly celebrities, but our clients include Fortune 100 companies and entrepreneurs who really know business,” says Johnson. “Private aviation is as much about safety and getting to places which you could not otherwise get to as it is about luxury. It is unfortunate that private aviation has been vilified the way it has over the years. Really, it is a business productivity tool.”

The average NetJets customer is said fly 75 hours a year. Like its fractional competitors, NetJets also offers its customers with different options to fractional ownership, such as a 25-hour jet card and a lease programme. “We consciously try to keep the balance,” says Johnson. “We believe ratios will stay much the same after slow and steady growth throughout the market.”


Flexjet

Closer in spirit to Flight Options, Flexjet’s clientele is a little less low-key than NetJets’ Fortune 500 customers. “It’s an eclectic audience,” says Deanna White, who was promoted to president at Flexjet in October 2012. “We have entrepreneurs, former CEOs – we call it stealth wealth.”

Where Flexjet differs considerable from its competitors is that it is a subsidiary of Bombardier and therefore, its aircraft fleet consists entirely of Learjets and Challengers.

The company provides both whole and fractional ownership, as well as aircraft management, jet cards and a charter broker service.

“The business is recovering,” echoes White. “We have seen a higher percentage for our jet cards – our folks have less of an appetite for the fractional risk.”

Flexjet’s jet cards allow customers to fly between 15 and 100 hours and are available as calendar cards, or the more flexible debit cards starting at $100,000. Fractional shares start $1.1m for 50 hours, giving the owner a 1/16th share of an 800 hour Bombardier aircraft.

Since the retraction of CitationAir, FlexJet has sold 36 shares new deflected customers, whilst attracting returning customers who sold their FlexJet share during the recession.

Corporate Jet Investor Staff
By Corporate Jet Investor Staff February 8, 2013 15:23

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