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Discuss this article (0 Comments)Where are all the high-fliers?
by This email address is being protected from spam bots, you need Javascript enabled to view it on Friday, 02 October 2009
zoomVistaJet CEO Thomas Flohr is eyeing innovative business models to finance his firm’s fleet expansion.
VistaJet boss Thomas Flohr believes that the economic downturn has lined the clouds his planes navigate with silver. Is he right?
When speaking about private jet customers, there is a certain way of referring to people worth a couple of hundred million dollars. It seems they need to sound like a community that is somehow privileged and unfortunate at the same time.
At an average net worth of $200m, these people are not quite among the ultra-rich who own their very own private jets, for example Tiger Woods, Larry Ellison, Mohammed Al Fayed and several dozen Middle Eastern princes.
The $200m brigade is certainly rich, but they are also almost certainly poorer than they were a year ago. Privileged, but also unfortunate.
These people will travel first class when it is convenient, but also need flexibility and sometimes privacy for their travel. They also want a consistent level of quality whether they are flying long haul on business or short haul for a skiing trip.
They are the target market for VistaJet, a relative newcomer to the private aviation business, but one that intends to reel in the market’s largest player, NetJets, with what it claims to be a combination of better prices and a better all-round service.
When Thomas Flohr, the founder, 100 percent owner, and chief executive of VistaJets, refers to his $200m customers, there is an almost imperceptible dip of the chin, and a breezy wave of an open-palmed hand. These are not just customers to Flohr, they are friends and colleagues, the types of people he meets on his 42 metre luxury yacht in Monaco every day of the hot summer.
He is not in the business of listing his celebrity customers, but Formula 1 world champion Lewis Hamilton and his Pussycat Doll pop star girlfriend Nicole Scherzinger are known to be regulars.
Even race car drivers are not quite in Flohr’s wealth league. The 47-year-old owned three planes of his own, paid for by his successful IT financing company, before stumbling onto the idea of building a business around his passion for private aviation.
It wasn’t just a passion for private jets, it was also a frustration at the failures of operators in the sector that drew Flohr into the private aviation sector. He chartered out his own planes when he did not need them for his own use, and also chartered planes from other owners for flights at other times.
But as a customer of other operators, and an owner of his own small private fleet, he realised that private air travel was not always as luxurious or professional as he would have liked.
Planes weren’t available. They weren’t in the right place at the right time. Some were brand new, others were older, and showed it. Some were cramped, some were luxurious. There was never the consistency that he had come to expect from other parts of his life: Four Seasons or Mandarin Oriental hotels, for example, which deliver identical levels of quality wherever they are found in the world, and irrespective of the kind of room or suite you select.
“That concept does not exist in private aviation,” suggests Flohr.
The VistaJet solution is to sell programmes that give customers a number of hours flight time per year in whichever aircraft is most suitable to their needs.
The company’s fleet is designed to offer programme holders flexibility to match the needs of a particular trip to the correct aircraft for the job. Two people hopping from Dubai to Bahrain for lunch need the smallest Learjet in the fleet, a Doha football team travelling for an away match in Riyadh can fit into a Challenger, while a large family from Jeddah heading for a holiday in Geneva might use the Bombardier Global Express.
No matter which plane is used, it will have the same luxurious look and feel both outside and throughout the cabin.
Used aircraft prices in freefall
The price of used aircraft has been on a rollercoaster over the past 15 years. To an extent, the market is driven by the wealth of its target market, so you see an almost perfect correlation between the performance of major stock markets and the price of planes.
But the calculation is a little more complicated than that. It is not possible for the largest manufacturers to instantly expand and contract production as demand rises and falls.
The fit out of a medium sized cabin, alone, can take up to a year, and that comes after the plane itself is built.
The Aircraft Bluebook has charted the price of used aircraft for decades, and provides valuable historical data on the market.
A study of the price of a wide range of aircraft, from helicopters, to small propeller aircraft and mid-size jets — would reveal that prices have typically risen slowly over long periods during the past 15 years, but have sharply dropped during the downturn — around the time of the dot com crash, and nosedived during the current crisis.
Mid-size jets have fared even worse than the overall market, with used aircraft prices for planes such as the Hawker 800, Cessna Citation, Lear 31 and Gulfstream G-IV, built in 1994, dropping from a price of around $7m at the end of 2008, to under $4.5m today.
There is evidence that the worst might be over for owners of aircraft looking to sell or at least improve the value of their aircraft on their balance sheets. The most recent three months have seen a levelling off in the fall of prices, particularly at the mid- to upper end of the market.
Analysts are expecting 2010 to be a big year for used planes, as demand increases, and manufacturers are unable to ramp up production to satisfy it.
The price of used aircraft has been on a rollercoaster over the past 15 years. To an extent, the market is driven by the wealth of its target market, so you see an almost perfect correlation between the performance of major stock markets and the price of planes.
But the calculation is a little more complicated than that. It is not possible for the largest manufacturers to instantly expand and contract production as demand rises and falls.
The fit out of a medium sized cabin, alone, can take up to a year, and that comes after the plane itself is built.
The Aircraft Bluebook has charted the price of used aircraft for decades, and provides valuable historical data on the market.
A study of the price of a wide range of aircraft, from helicopters, to small propeller aircraft and mid-size jets — would reveal that prices have typically risen slowly over long periods during the past 15 years, but have sharply dropped during the downturn — around the time of the dot com crash, and nosedived during the current crisis.
Mid-size jets have fared even worse than the overall market, with used aircraft prices for planes such as the Hawker 800, Cessna Citation, Lear 31 and Gulfstream G-IV, built in 1994, dropping from a price of around $7m at the end of 2008, to under $4.5m today.
There is evidence that the worst might be over for owners of aircraft looking to sell or at least improve the value of their aircraft on their balance sheets. The most recent three months have seen a levelling off in the fall of prices, particularly at the mid- to upper end of the market.
Analysts are expecting 2010 to be a big year for used planes, as demand increases, and manufacturers are unable to ramp up production to satisfy it.
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