This Company Lets You Use a Private Jet for $10,000 Per Hour | At Barron's

Key Concepts

• Vista Jet: A global business aviation company offering a subscription-based program for access to a fleet of identical, super-mid and ultra-long-range aircraft.
• Freely Floating Fleet: Vista Jet's model where aircraft do not have a fixed home base, allowing for greater utilization and efficiency by repositioning to meet client demand globally.
• Subscription Program: A flexible model where clients purchase a specific number of flight hours tailored to their needs, rather than buying a fraction of an aircraft.
• Super Mid and Ultra Long-Range Airplanes: The primary focus of Vista Jet's fleet, including models like Bombardier Challenger 350 and Global 7500.
• Empty Leg: The inefficient practice of an aircraft flying without passengers to return to its original destination, which Vista Jet aims to minimize through its global network.
• Program Members: Clients who sign up for Vista Jet's three-year subscription program.
• On-Demand Product: A service for clients who may not commit to a long-term subscription but can still access flights with a deposit.
• Fractional Ownership: A traditional model where clients buy a share of an aircraft, often leading to depreciation and limited resale options.
• World Endurance Championship (WEC): A global motorsport series where Thomas Flohr competes as a GT driver for Ferrari.

Vista Jet: Revolutionizing Business Aviation

Genesis of Vista Jet

Thomas Flohr, Chairman and Founder of Vista, entered the business aviation industry approximately 21 years ago as a frustrated client. He observed a market that offered either unpredictable charter services or the requirement to purchase an entire aircraft or a fraction thereof. This lack of a clear, consistent, and high-quality product offering, especially for top-tier clients, struck him as illogical when compared to other luxury industries like hospitality. The core problem identified was the inability for clients to know precisely what they were getting unless they owned a full aircraft.

Vista Jet's Innovative Model

To address this market gap, Flohr founded Vista with the vision of creating a fleet of absolutely identical airplanes strategically positioned around the world. This fleet would be accessible to clients through a simple subscription program. The key innovation was the concept of a freely floating fleet, where aircraft are not tied to a home base. This allows them to fly to a city, pick up the next client, and then find another client in their destination city, thus circulating globally.

Fleet and Global Coverage

Vista Jet currently operates approximately 230 aircraft, primarily focusing on super-mid and ultra-long-range airplanes. Examples include the Bombardier Challenger 350 and Bombardier Global 7500. While the fleet is predominantly Bombardier, other manufacturers are also included. The "freely floating" nature of these 230 aircraft means they are not assigned to specific regions, enabling global coverage across all five continents: Europe, the Middle East, Asia, Africa, and Australia. This global reach was deemed essential for a business jet service, ensuring clients could travel anywhere without the costly and inefficient "empty leg" flights.

Competitive Landscape and Efficiency

Compared to competitors like NetJets, Vista Jet's strength lies in its global coverage and its focus on larger, longer-range aircraft. While NetJets may have a larger overall fleet, a significant portion consists of smaller aircraft with shorter ranges. Vista Jet's global network is designed to mitigate the inefficiency of empty legs by having a client base in various regions. For instance, a flight from the US to Japan can be followed by a flight from Japan to Mumbai or Delhi, utilizing the aircraft effectively and reducing costs. This increased utilization efficiency allows Vista Jet to offer a more competitive price point.

Client Base and Security

Vista Jet's clientele is approximately 80% corporate and 20% ultra-high-net-worth individuals. Flohr notes a crossover at the top end, as many ultra-high-net-worth individuals have stakes in companies. Safety and security are paramount, especially given the company's operations in 196 countries annually, including remote destinations. Vista Jet collaborates closely with local authorities and compliance firms to assess flight safety. If any concerns arise, they are communicated to the client, and Vista Jet will refuse to fly if they deem a destination unsafe, even if the client insists.

The Subscription Program: Nitty-Gritty Details

Vista Jet's subscription program typically involves a three-year contract. Unlike traditional fractional ownership, clients are not required to purchase a fixed portion of an aircraft. Instead, Vista Jet assesses a client's flight profile and offers a tailored number of flight hours. For example, if a client needs 135 hours per year, they are sold exactly 135 hours, not 100 or 200. The program is further customized to the client's specific missions. A client might require a mix of domestic US flights and long-haul international trips. In such cases, hours can be allocated to different aircraft types, such as the Global Express for long-haul and Super Mid for domestic travel. This tailored approach is highly attractive to corporations.

The price per hour is generally consistent, whether flying domestically or internationally, with minor surcharges for landing in certain high-cost regions like China or India. As a rule of thumb, the hourly rate ranges from $10,000 to $25,000. This model makes economic sense for frequent travelers, wealthy individuals, and companies whose executives' time is highly valuable. The economic advantage over owning an aircraft stems from Vista Jet's ability to achieve significantly higher aircraft utilization (up to 1500 hours for ultra-long-range jets) compared to private owners (300-400 hours). This lower cost per hour is partially passed on to clients, with the remainder contributing to the company's profitability.

Business Performance and Headwinds

Despite geopolitical challenges, such as the Russia-Ukraine conflict and situations in Israel, Vista Jet continues to grow and gain market share. The company reported significant growth in its Q2 earnings call, with expansion across all continents. While clients may wait for opportune windows to fly during periods of instability, their need to travel persists.

Interest rates are not a significant concern for Vista Jet due to long-term finance contracts and unsecured bonds. The primary cost pressures in the post-COVID era have been related to spare parts and supply chain interruptions, which led to aircraft downtime. However, these issues have largely normalized. Flohr highlights the challenge of a $75 million aircraft being grounded due to a missing $5,000 part, illustrating the complexities of the industry.

Regarding leverage and profitability, Vista Jet is cash flow positive and does not require external capital. The discussion around GAAP net income is attributed to depreciation policies, which are accounting decisions. The company's key performance indicators (KPIs) are driven by EBITDA and cash flow generation, which are satisfactory to stakeholders.

Growth Areas and Market Presence

The United States remains Vista Jet's strongest market, accounting for half of its revenue. Flohr acknowledges arriving in the US market later than some competitors but has established a significant presence with 120-125 aircraft in the country.

Emerging markets, particularly the Middle East, are identified as significant growth areas. Vista Jet recently received the first internal flying license in Saudi Arabia, a testament to a rigorous vetting process and the kingdom's opening market. This is seen as a very significant opportunity, aligning with the country's desire for premium services.

Revenue and Customer Figures

Vista Jet's annual revenue is approximately $3 billion. The company has around 1,500 "program members" (clients on three-year subscriptions), a figure that is growing annually. These long-term members contribute a substantial portion of the revenue. Additionally, there are clients who utilize an on-demand product, leading to a total of approximately 5,000 permanent clients who rebook. The actual number of clients flying with Vista Jet is a multiple of this figure due to the on-demand service.

Aircraft Acquisition Structure

The Wall Street Journal noted a complex aircraft acquisition structure. Flohr explains this as a historical necessity. In 2012, with a vision for global expansion and a company revenue of around $300 million, he could not place an order for nearly $5 billion worth of aircraft. Therefore, he personally took on the order, owning the company 100%, with all transactions disclosed. As the company grew and achieved its vision, Ron Capital became a shareholder, and all dealings were transparent. Transfer pricing was managed to adhere to market principles, with Flohr himself abstaining from voting on these matters to ensure neutrality. He characterizes the discussion around this as populist rather than fact-based.

Value Proposition Against Competitors

Vista Jet's value proposition against competitors like NetJets in the US centers on operational excellence and financial advantage. They invite potential clients to conduct due diligence on their operations, highlighting their safety standards and pilot training. Financially, fractional ownership can appear attractive initially, but Flohr points out that buying an aircraft at $20 million and selling shares at $28 million results in an immediate 25-30% loss on the share value. Furthermore, selling fractional shares back to the original company can be restrictive. When the depreciation of a fractional share over three to five years is factored into the hourly cost, it often proves more expensive than Vista Jet's hourly rate.

Thomas Flohr's Personal Pursuits

Beyond his business endeavors, Thomas Flohr is a passionate sportsman. He has competed in tennis and track and field and is an accomplished race car driver. He participates in motorsport championships, including the World Endurance Championship (WEC), a series that takes him across five continents. He races in the GT category for Ferrari, representing one of their two official cars in the manufacturer's world championship. This weekend, he is racing in Austin, Texas.

The Future of Private Aviation

Flohr foresees a continued strong growth trajectory for private aviation, driven by the increasing importance of time efficiency for leaders across various sectors. Business jets offer unparalleled flexibility, time savings, and a comfortable arrival experience, maximizing individual capabilities. The market is projected to grow at double the rate of GDP, with global expansion into every continent.

Regions like India, with its large population, are seen as significant future markets, where Vista Jet now has a fully operational presence. Flohr's ultimate vision is a shift away from the archaic concept of owning a jet towards using it in the most efficient way, a model that Vista Jet is laser-focused on. He believes customers are increasingly voting with their wallets for this efficient, subscription-based approach.