A number of companies are implementing the same strategies that have turned low-cost airlines into success stories in the exclusive private jet business.
Air transport is a merciless business. It’s capital and labor intensive and, while an airline might enjoy load factors nearing 100 percent, a spike in fuel prices can wipe out any profits.
Airlines flying above the turbulence, however, are low-cost carriers. Companies such as Dallas-based Southwest Airlines and EasyJet in Europe have expanded their fleets and raked in profits as full-service competitors mothballed aircrafts and filed for bankruptcy.
Alex Wilcox, a pragmatic Vermonter, who moonlighted during college as a baggage handler at Burlington’s quaint international airport, has taken a page out of the low-cost playbook and applied the industry’s focus on costs to the high-priced private jet business. Three years ago Wilcox convinced a group of A-list investors, including JetBlue founder David Neeleman and shoe salesman extraordinaire Tony Hsieh, who founded online retailer Zappos, to bankroll his vision of a low-cost private jet company called JetSuite, which is based in Irvine, California.
“We’re not about champagne and chateaubriand steaks,” explains Wilcox. “What we offer is a service, a transportation service.”
Wilcox is not the only entrepreneur eyeing profits in the relatively new low-cost private jet segment. Another is Massachusetts-based Linear Air, which aims to offer a “business jet service for less than first class.”
A Photo Tour of The World’s Cheapest and Priciest Private Jets
Linear Air charges roughly $7,000 to charter one of its jets for a round-trip from Boston to Toronto. That works out to be about $1,750 a seat, making Linear’s Toronto round-trip, on a per passenger basis, significantly cheaper than the $2,500 paid on average for the same flight on a commercial airline.
Linear Air chief operating officer Peter Schmidt tells The Financialist that these prices will “broaden the number of potential customers who can afford to book a private jet flight.”
As for JetSuite, its members pay between $2,950 and $3,150 an hour to travel on one of the company’s 13 jets. Customers can also charter a whole plane for $499 to $1,500 in last-minute deals posted every afternoon on Facebook and Twitter. JetSuite’s Wilcox says this is a good way to fill up jets flying empty. “At the very least the last-minute deals help pay for gas,” he explains.
Popular JetSuite routes include the virtual highway between Los Angeles and Las Vegas and San Francisco. It also flies in Texas and earlier this summer expanded its East Coast service, starting flights between New Jersey’s Teterboro airport and Nantucket, as well as to Toronto, Boston and Chicago.
Linear and JetSuite can afford to charge these competitive prices because they use some of the same strategies that turned Southwest from a modest airline that bridged a few Texas cities into one of America’s largest passenger carriers. Like Southwest, both JetSuite and Linear use a single type of aircraft, which, according to Wilcox, “saves money across the board: in pilot training, fuel and aircraft maintenance.” While JetSuite uses the fuel-efficient Embraer Phenom 100 jet, Linear operates 15 Eclipse 500 aircrafts – a very light, twin-engine jet that can fly 800 nautical miles.
While Embraer’s Phenom 100 costs about $4 million, the Eclipse 500 retails for $2.1 million. These are relatively cheap jets compared with the $65 million price tag for the Rolls-Royce of the industry, the Gulfstream G650.
Wilcox is adamant that JetSuite’s toy-looking planes, which sport large red stripes on their tops, aren’t just catering to the platinum set looking for a quick Vegas getaway.
But well-crafted business plans and first-mover advantages don’t always shield private jet operators from the pitfalls of the air transport industry. Take the case of industry pioneer DayJet, a low-cost operator which in 2007 set out to connect small airports throughout the US Southeast by selling individual seats on one of its four Eclipse 500s — the same jets used by Linear Air. For five years the company executed a detailed business plan, raised growth capital and was poised to order up to 270 Eclipse jets. But DayJet stumbled during the Great Recession in 2008. Unable to secure financing, it was forced to file for bankruptcy less than a year after it began flying.
Linear and JetSuite are confident that their low-cost prices will appeal to a large enough customer base to help them overcome the sluggish economy. “We are faster, better, in some cases cheaper and nicer than commercial airlines,” Schmidt explains.
This year JetSuite expects to generate roughly $14 million from its charter and retail business. To increase its load factor, the company has also struck partnerships with major carriers such as the deal inked earlier this year allowing Singapore Airlines passengers to connect in California and Texas on JetSuite planes. Linear says that in the past two years it has sold about 600 trips. As the economy improves, Schmidt says he’s confident it will be able to charter up to 3,000 trips across the US annually.
With private jet operators like JetSuite and Linear transforming private jets into a viable option for business people, yet another segment of the airline industry is being reinvented from the bottom up.
Photos: Eclipse Aerospace, JetSuite, Cessna Aircraft Company, Honda Aircraft Company, Gulfstream, Bombardier, The Boeing Company, Airbus