After growing to be the fourth-largest charter operator in North America, FlyExclusive is now moving into fractional ownership, targeting market leaders NetJets and Flexjet. Launch of the shared ownership offering this morning follows an order yesterday with options for 30 Citation CJ3+ light jets from Textron Aviation. The Kinston, North Carolina-based company plans a follow-up order for Citation XLS midsize jets before the end of the year. New super-midsize aircraft will follow with Textron’s Longitude and Embraer’s Praetor 500 and 600 under consideration, although that move is less definite, Founder and Owner Jim Segrave tells Forbes.
Fractional ownership, which languished since the Great Recession, is hot again. Flight hours by fractional operators increased 49% to 751,712 hours last year, according to Argus TraqPak, their highest mark since 2008. A survey by Private Jet Card Comparisons in February found 28% of frequent private flyers are considering shared ownership.
This week’s order, valued at over $300 million, is FlyExclusive’s first purchase of new jets since launching in 2014. Segrave started the company after selling Segrave Aviation to Delta Air Lines in 2010. It currently has a fleet of 85 owned and leased aircraft acquired on the used market. The company then repaints and refurbishes them at in-house facilities it opened last year at its Eastern Carolina base.
He says the decision to buy new jets reflects the scarcity of used aircraft that fit its criteria and the relative price of new airplanes compared to the overheated pre-owned market. However, he adds a fractional share program was under consideration before the spike in demand for private flying that began last June.
The first of the CJ3+s will be delivered in Q2 of 2023. By that time he expects his existing CJ3 fleet to number 20, up from the 11 currently flying. He intends to exercises options to take up to 10 of the type each year for three years and would have ordered more if possible. Inventory not sold to fractional customers will be used to expand the jet card program, which is marketed under the Jet Club banner.
FlyExclusive’s fractional program will be different than current offerings. Instead of charging a monthly management fee, owners will pay a daily access fee when they want to fly and then, like other providers, pay for occupied flight hours.
The format means customers won’t have to pay fees when they aren’t flying. The model seemingly transfers the risk of a downturn to FlyExclusive. When travel, including private flights declined at the outset of Covid, share owners continued to pay the monthly management fees to their providers even while they stayed on the ground.
In FlyExclusive’s new program, customers will also be able to carry over unused hours, and can fly additional hours beyond their shares at slightly higher Jet Club hourly rates.
Share programs start at 40 hours per year, according to marketing material. While pricing hasn’t been released, implied acquisition cost at the entry-level would be around $500,000.
Segrave says the tweaks alleviate the “pain points” of traditional fractional programs. “Our intention is to compete head-to-head with NetJets and Flexjet,” he says.
According to Argus TraqPak, FlyExclusive clocked 45,617 hours last year, a 76.3% increase from 2020, ranking it fifth in combined charter and fractional flight hours. Berkshire Hathaway-owned NetJets, including its management and charter arm, Executive Jet Management, flew 542,831 hours, while Directional Aviation’s Flexjet tallied 178,327 hours.
Until 2020 when FlyExclusive launched Jet Club, the operator focused on the wholesale market. Currently, it has 450 members or about 5.3 per airplane. Over 98% of their flights are handled by company airplanes or on-fleet in industry jargon. Segrave says the intention is to continue that way. He estimates that his larger rivals, which follow a similar model, have 20 to 25 customers per tail between jet card and fractional clients.
“With 30 more airplanes coming, we have an incredible capacity to grow. We can grow to 1,500 members and still have a smaller member to airplane ratio,” he predicts. Revenues last year were around $230 million and are expected to rise to $350 million in 2022.
Others have similar growth aspirations. Last week Vista Global Founder and Chairman Thomas Flohr said he wants to increase the number of new $75 million Bombardier Global 7500s delivered this year from seven to 10 as membership in VistaJet’s jet card, called The Program, continues to surge. He also agreed to buy Jet Edge, the seventh-largest charter operator in North America, with a fleet of super-midsize and large cabin jets projected to hit the century mark by yearend. Vista already has stakes in charter operators XOJet, Red Wing Aviation, and Talon Air. The group ranks fourth in North America based on combined fractional and charter hours.
Wheels Up Experience, which is in the third spot, last week said it had taken a minority stake in seaplane operator Tropic Ocean Airways as part of a last-mile strategy. NetJets and Flexjet have signed letters of intent to order hundreds of eVTOLs, and Directional bought two helicopter operators in 2021. Earlier this year, Wheels Up acquired light jet operator Alante Air Charter, its fifth operator acquisition since June 2019.
While FlyExclusive has focused on organic growth, in March 2020, it bought Gulfstream operator Sky Night, LLC. It currently has six of the large cabin aircraft in its fleet. Asked about possible acquisitions, Segrave responds, “We prefer acquiring aircraft over operators.”
FlyExclusive’s entry into the fractional segment comes as both NetJets and Directional are still trying to digest the influx of new private flyers. Earlier this week, NetJets confirmed it would keep its jet card program on hiatus for the remainder of the year, despite taking delivery of around 70 new airplanes. Last Fall, it even halted interim leases for new share buyers that cover their flying needs between when they sign up and when their aircraft is delivered. For now, it is catering to buyers with three-and-five-year leases giving 25 flight hours per year and its typical fractional and lease programs that begin at 50 hours per year. It is also back to providing interim flight solutions, and is working through a waitlist of several thousand current customers seeking to renew programs and prospects wishing to join. Flexjet’s jet card program remains closed to new customers. However, fractional sales and leases continue with much of its upcoming deliveries already sold. It too, added restrictions for new buyers. Sister Sentient Jet, one of the major players in the jet card market, is only allowing a limited number of new customers into its membership program.
On its website, under a section titled, “Immediate Fleet Access,” the new entrant is touting, “Fly now with full access to the FlyExclusive fleet – Light, Mid, Super-Mid, and Large Cabin aircraft for any type of trip.”