By, Abdulah Hussain
Have you ever booked a flight and hopped on the plane the next day? Never mind a plane, but a private jet that serves its own branded caviar alongside a customized Nobu menu, providing amenities such as cashmere face masks and Egyptian cotton linens. Well now you can with VistaJet.
VistaJet, a Malta-based private-jet charter company offers on-demand flights to over 96.0% of countries around the world, leveraging the Uber business model before Uber was even conceived. Founded by Swiss billionaire, Thomas Flohr, VistaJet caters its services to high net-worth individuals and corporate executives. Providing a high level of luxury and convenience distinguishes VistaJet from its competitors.
In 2004, VistaJet revolutionized the private aviation industry by bringing to market a usage-based business model that charges customers an hourly rate ranging from US$6,000-16,000 for the duration of their flight, bringing together pristine luxury and on-demand availability. The hourly price is dependent on the aircraft model selected and hours in the air. This concept was created before Uber existed. As Flohr commented, “In hindsight, [VistaJet] was pretty visionary.”
This business model is advantageous to corporations. It allows them to avoid tying up capital in private jet assets and instead treat flying as an operating expense, a trend that began shortly after the Great Recession in 2008, a time when corporations were quick to sell off large assets such as jets.
The idea came to Flohr when he saw an opportunity, private jets were being under-utilized, flying an average of 250 hours per year compared to commercial planes which travelled well over 4,000 hours a year. Starting with only a few private jets in Europe, by 2008, VistaJet acquired Bombardiers’ private-jet charter subsidiary Skyjet International.
VistaJet now has over 70 long-range jets in their exclusive bombardier fleet. In 2020, they’re launching the Global 7500 fleet, the largest and longest-range business jets on the market, making VistaJet the first private charter to do so.
Other significant acquisitions have propelled VistaJet’s market share and reinforced its customer-centric approach. The acquisition of Jay-Z backed, JetSmarter, last April made possible for the integration of a user-friendly mobile platform similar to Uber in which you choose the date, time, and aircraft model, to instantly book your next flight.
VistaJet’s growth numbers have been nothing short of stellar. Total flights increased globally by 25.0% in 2018, with an increase of 46.0%, 38.0%, and 26.0% in North America, the Middle East, and Asia respectively. VistaJet won the most innovative company award and was crowned Asia’s Best Operator for the fourth consecutive year at the AsBAA aviation awards.
One obstacle for VistaJet is its dependence on global economic growth. High-net-worth individuals are their target customers, so revenues are closely tied with the health of financial markets. This weakness was exposed in May 2019 when VistaJet issued US$550.0 million of secured bonds at an interest rate of 10.5%, a premium well over the average 6.8% for borrowers with similar credit ratings. The reason for this premium was the plunge in stocks as trade negotiations between the U.S. and China broke down and the S&P 500 fell by 6.6% within the month. VistaJet is categorized as an ultra-cyclical business for credit investors meaning any volatility in the market will have an amplified effect on company sales.
The private aviation industry has come a long way from traditional ownership to the modern approach pioneered by VistaJet. As VistaJet has defined itself through innovation and strategic acquisitions, future success will be contingent on how effectively they can mitigate cyclical risks.