XOJET pivots to subscription with new products

This month XOJET, the US operator and charter company, announced that it is adding mid-size and light jets to its Elite Access membership. It also added a new product – Select Access, for passengers flying less than 25 hours a year and made adjustments to its existing Preferred Access program, catering to frequent flyers.

These new products – and changes such as savings on transcontinental flights – are not just new options for program members. They also reflect how Brad Stewart, president and CEO of XOJET, believes business aviation is evolving.

XOJET’s Elite Access programme gives customers fixed hourly rates across light jets, mid-size and super mid-size aircraft in return for a fully refundable $200,000 deposit.

The new Select Access programme gives customers a 2% bonus in return for a $50,000 fully-refundable deposit. Preferred Access, requires a $100,000 deposit in return for a 4% bonus and $250 of catering per trip. Although all of the deposits are fully refundable one new change is that XOJET will charge a monthly fee for managing flights.

Corporate Jet Investor asked Stewart to explain more about the strategy behind XOJET’s new products.

Corporate Jet Investor: How should we look at these new programmes? Are you tweaking existing products or are they a game changer?

Stewart: I love those frames! I am not sure if it is either. I would call it a refinement and a pivot. The products themselves are pretty consistent with what they have been. The changes are threefold.

Number one, we’re introducing a Select Access product, which is more appropriate for transactional flyers. Folks who are using us either for supplemental lift or who just do not fly more than 20 or 25 hours a year.

The second big change is the expansion of the Elite Access to include guaranteed availability on light and mid jets. That to me is certainly significant as it puts our sales team in a position to compete effectively with both fractional and jet cards.

Then, the last one I think is probably a bit more internal. It is more of an XOJET message than a market message. This pivot to subscription is pretty powerful for us because what we have concluded is that we are investing relative to our competition. We are investing in safety. Investing in quality pilots. Investing in training. Obviously, we are investing in vendor standards for off-fleet fulfilment. We are investing in programme benefits: the rebate on our fleet and the catering credit. We’re investing in all this stuff that a lot of our on-demand competition is not investing in.

Charging  a subscription fee enables us to keep investing and improving the platform. For people who like working with a national at-scale player like XOJET versus a local mom and pop, they have a decision to make, which is do they want to help fund the platform?

I’m not sure they measure up to game changing but they certainly feel significant to me.

Corporate Jet Investor: Amazon Prime members spend a lot more than non-members. Are you also trying to do a sort of Amazon Prime product?  

Stewart: Yes. Brilliant. I think we already saw that with the introduction of Preferred Access. Over the last three or four years, Preferred Access has been our flagship product.

We have sold thousands of them in terms of new and renewals. I think, and I am obviously clearly biased, it is the best private jet product in the marketplace. What we notice is exactly what you indicated.

When somebody signs on with the Preferred Access programme, clients can get their money back whenever they want. There is not this locked-in deal like you got with fractional or cards, which we like. We think that’s a selling point.

Still, despite the fact that people are not locked in, you have got people who just start using us as their exclusive supplier. I think they see the product for its benefits. It is a deposit product. It is an ease of use product. It has got membership rewards in the form of the bonus credit and catering and other partnership benefits. Yes, 100%. It’s this idea that once you’ve established who your supplier is, you tend to go to them for more than just one off.

Corporate Jet Investor: Is the move into light jets significant?

Stewart: Well, yes and no. Our number one off-fleet vendor is Travel Management Company (TMC). We have been doing $1 million to $2 million of brokerage a month with them for a long, long time. They are not exclusive to our light and mid jet business. It is bigger than just our business with TMC. That business has been there and growing quite a bit for the last two, three years. It is there.

The change is that we are now offering guaranteed availability, guaranteed pricing, flat hourly rate on light jets. That is different than the past. Historically, all of our light and mid jet business has been market or dynamic pricing.

We are certainly now offering two different products or three. Select Access and Preferred Access are essentially the same product just different performance or consumption thresholds. Elite Access is an expanded product that offers guaranteed availability. What we see, and this is a really important point, is that customers come to us. They typically have made up their mind to either go on demand and engage in dynamic pricing or they can engage a guaranteed product. It is really their choice and it is a funnel. Some go left; some go right. And it is important that they choose

Corporate Jet Investor: You are not launching light jets nationally are you?   

Stewart: We are not. The light jet guaranteed product is going to be on the east coast and the mid jet guaranteed product is going to be in Colorado, the Rockies and east. The economics of trying to support a national model just don’t work for us yet as there isn’t the size or demand.

The majority of light jet flying is east of the Mississippi. As you get west, the cabin sizes tend to grow just because the stage length becomes bifurcated. There’s this barbell concept on the West Coast where people are either flying LA – Vegas or they’re flying LA – New York. Right now it just doesn’t make a lot of sense for us.

Corporate Jet Investor: Is this the start of XOJET going lower down the pyramid? Are you going for customers who would never be able to afford flying one of your larger jets?

Stewart: No. I do not think it is discriminating based on cabin size. I think it is discriminating based on how often people fly. What we see in our customer portfolio is some pretty interesting dynamics where people who are flying with us more than 25 hours a year tend to look at us as their number one .

The folks who are flying less than 25 times a year often times are using us either in a temporal sense. It is just for a bit and then they go back to their other operator. For example, they have a roadshow and they just need a larger cabin plane or something like that.

The other very common case is that we are complementing something else they have. It may be someone who owns a light jet and who wants bigger planes from time to time. It may be a corporate flight department that has a plane that is frequently down for maintenance. It may be a corporate flight department that has 10 executives that get to use private and only one plane, so they are constantly looking to find an alternative.

There are a lot of different reasons why somebody might fly less than 25 hours, but the use of the plane, the size of the cabin, tends to be pretty consistent despite how much they’re using it.

Corporate Jet Investor: Is creating new programmes an art or a science?

Stewart: I suppose it is a bit of both and it is really fun. This is my thing. I am a commercial leader strategist as much as I’m anything. My passion is really figuring out how to serve clients, meet their needs and put forward products and services that are compelling relative to our competition. The process is actually fun and I’d go into it as much as you want to hear.

I designed this idea about 18 months ago in studying our industry and others: including Amazon Prime. These subscription models create a different discussion, a dialogue, between a service provider and its clients. This idea of building a platform which clients can either respect or not, some do, some don’t, is the central message.

I started the process 18 months ago. I worked with Gregg Slow [executive vice president, sales and client services], worked with James Henderson [chief commercial operator], worked with our regional heads of sales, worked with other executives. We started putting pen to paper and designing concepts around our objectives.

There were really two. Number one, to be able to create a product that could compete with fractional and jet cards but which would not require the customer to put down a non-refundable deposit. That was the Elite Access.

Then the second big objective was to separate how we charge our clients to a monthly fee, basically platform access, from transactional pricing, which is a hallmark of our business: dynamic pricing, market pricing. That was the origination of the subscription concept.

Throughout the process, we ended up noticing this split in terms of customers around 25 hours and decided that some of them deserve elite benefits. That’s the Preferred Access, and we were probably overinvesting in occasional flyers. That was the impetus for Select Access.

What is cool about doing this product development is you have got to talk to a lot of constituents. You talk to industry partners. You talk to sales reps and solicit their feedback on what will work, what will not. You talk to fulfilment partners. Make sure that you have got the lift to support this. You do a bunch of economic modelling. Then you start working with agencies to brand it. That is when the Access Solutions framing came out. They build collateral. Then you start rolling it out internally. Then you start working on letters to clients and sales training.

It is an art and a science. It is a process as much as anything. What I have learned the hard way is that it is tough to make change inside a company. Advisors are resistant because they like the status quo. Clients think any change is a way to ‘get you’ sometimes, so you have to be really thoughtful about how to present it.

We are convinced on this. I think the changes that we talked about, both the Elite Access and the Select versus Preferred Access are where this company needs to go. I think it is right for our clients. We have already sold something like 50 of them in the first 30 days.

We’re aiming to be at 200 by the end of August. We’re hoping to have 1,000 or 2,000 in a couple of years. It is early days, but I am cautiously optimistic.

Corporate Jet Investor: Are you interested in XOJET being part of the so-called democratisation of business aviation?

Stewart: Yes. The blunt answer is absolutely. I am a strategist. I see aviation in general, business and commercial aviation included, consistently growing for the next decade plus. It is a fantastic service that’s changed humanity.

I think within that, private aviation is only going to grow. Certainly, the rich are getting richer. People who already consume private aviation are consuming it more. I also think there’s new creative ways in which people are figuring out how to slice up and dice up excess inventory. Whether it’s plane sharing, shared shuttles, selling a plane to somebody and then allowing them to market empty seats themselves.

Digital brokerage, I think, can be a game changer. There’s a lot of noise in the brokerage model. I think digital distribution, automated trip management, functionality via an app or website can certainly reduce costs there. Yes. I think there’s going to be a growing market for people who, let’s just say, make $250,000 a year to $1.5 million. Historically, not really traditional private aviation flyers.

I also think what we have noticed in our business and it is has just kind of happened without us really trying is that we serve lots of different customers with lots of different use cases. I think, historically, and I probably deserve criticism for this, I was too rigid on really trying to focus exclusively on folks that were flying more than 25 hours a year.

What we have realised is people come to us in a lot of different ways. Sometimes they have got an embedded solution and they want us to complement that. Some people are just trying us out. They are kind of moving up the pyramid themselves. They have tried Wheels Up. Then they want a jet. The next thing you know, they are a Select Access customer. From there it goes as far as it goes. Yes. That is the short answer.

I do not think in the near term we intend to compete with JetSmarter. I do not think we’ll compete with Wheels Up. I think they are speaking to a distinctly different clientele but I do think we need to be a little bit more flexible up and down the pyramid.

 

Alasdair Whyte
By Alasdair Whyte August 18, 2017 11:34

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