When Jet Republic, a start-up offering fractional ownership of business jets, announced last September a record-breaking, $1.5bn order for no less than 110 Learjet 60 XRs, the aviation industry was stunned. After all, the financial world was in a meltdown, and commercial aviation in a nosedive. And the kind of investors who could back such a venture were supposedly in full retreat.
Surely, Jet Republic had got its timing completely wrong, and would never get off the ground. But now, some six months later, nothing has changed. This summer as planned, albeit with leased aircraft until the first of its new jets come off the Learjet production line in Wichita, Texas, in the autumn. The debut 60 XR should be in the air over Europe some time in October as scheduled, the company says.
Jet Republic’s youthful Chief Executive, 37 year-old Jonathan Breeze, remains as confident as ever about the prospects for this bold start-up. Indeed, he sees the financial meltdown as a boost for the business. “We have very fair and realistic targets in terms of breaking even,” he insists. “In fact, we are benefiting from the difficult economic environment. A growing number of businesses and governments that own private jets are looking to save millions of pounds by selling them and switching to fractional ownership or a jet card scheme.” In short, exactly what Jet Republic is offering.
Breeze, a former RAF Hercules pilot, could be right about the fire sale of private jets. In late January, Citigroup cancelled an order for a new aircraft, in this case a Falcon 7X made by France’s Dassault. Admittedly, the bank did so under pressure from President Obama’s new administration, but it is surely a sign of the times.
Jet Republic says it began signing up members as soon as it revealed its plans, and is still doing so. By late winter, all the shares in the first two 60 XRs were accounted for, and the firm was selling the third. Still, there’s another 22 planes to go. The initial order from Bombardier-owned Learjet is for 25 aircraft, with the others rolling off the assembly line over the next several years.
The original funding for the venture remains firmly in place, Jet Republic says. The major backer is Vienna-based European American Investment Bank, widely known as Euram, and a related consortium of private investors. An institution that prides itself on ‘creative financial solutions,’ Euram’s Chief Executive is the multi-lingual former McKinsey partner, Viktor Popovic, himself a frequent flyer.
The numbers bode well for the future of the fractional-ownership model in Europe. In the last ten years, the number of business jet flights in Europe has jumped by 83 percent. The growth was particularly marked in the last five years, with a 52.5 percent increase as Europe began to catch up with business jet usage in America where the fractional ownership concept was launched.
Based on these figures, Europe could well follow in the flight path of America. According to Bombardier, the global recession will drive high value, frequent flyers into the fold. “The Business Aircraft Market Forecast predicts $300bn in [business jet] deliveries over the next 10-year period,” notes Bob Horner, Senior Vice President for sales of Bombardier’s business aircraft division. “We estimate that the worldwide business jet fleet will nearly double in the next 10 years from 12,800 to 24,800. We expect Europe’s share to grow from 13 percent to 25 percent of the market.”
There are two main reasons cited for this optimistic forecast. First, the number of high net worth individuals is expected to continue to grow despite the present economic travails. Western Europe alone is producing another several thousand seriously wealthy people every year. And second, flying by business jet is increasingly considered a matter of practicality rather than of self-indulgence. “It is becoming a business necessity,” argues Breeze.
Jet Republic’s business model is based on saving its clients – or members – time. On the average journey, for example, the company estimates there’s a three-hour advantage compared with flying the same route on conventional commercial aircraft, mainly because there are no delays through queuing or check-in. Other sources reckon on even bigger savings depending on flight time and other factors. US-based studies assume average gains from the sort of bespoke service offered by Jet Republic could amount to four hours in travel time and eight hours productive time per trip. The latter comes about because most business jets are set up to be executive-friendly, allowing users to work efficiently while aloft.
“Statistical studies indicate that business jets are generally more cost-effective than commercial services, even when there are commercial services available between the cities involved”, notes Bailey & Partners, a Santa Monica-based law firm specialising in fractional jet ownership. And still other sources cite substantial savings in direct costs because of foregone hotel nights and related expenses, plus increased productivity for highly-paid executives. “It’s a total waste of time and talent when half a dozen executives are queuing up at an airport to go to Europe for an important meeting,” says one flyer.
Additionally, on the ground, Jet Republic will also offer a concierge service to book hotels, entertainment, cars and other conveniences. “Think of us as your wingman,” the company says.
The principle of fractional jet ownership has been thoroughly tested. First developed over 40 years ago, it was designed to save the expensive but inevitable downtime incurred in fully privately-owned aircraft. And chartering, the other alternative at the time, was both expensive and messy.
In principle, fractional ownership is based on buying a share in a plane or fleet of planes. More flexible than a standard airline ticket, fractional ownership effectively guarantees the member a seat at short notice – Jet Republic promises within 24 hours – in the equivalent of your own airline. As Bailey & Partners explains: “Essentially, you are guaranteed an airplane on demand.”
And a very special airplane at that. The Learjet 60 XR is the latest and, according to aviation experts, much-improved evolution of the iconic Learjet 60 that first took to the air 15 years ago. The 60 XR is certified to 51,000 ft where the aircraft flies more smoothly because of reduced turbulence and faster because of more favourable winds. The overall result is measured in time saved, but the 60 XR is already a quick jet. Bombardier claims it can cruise at up to 20 knots (37mph) faster than its closest competitor at typical cruise altitudes.
And although Jet Republic members won’t get their hands on the controls, it is reputedly a dream to fly. The on-board avionics suite – a Rockwell Collins Pro Line 21 – gives pilots instant, intuitive access to critical flight information. Electronic charts are standard equipment. In practical terms the avionics means pilots can call up approach plates and airport diagrams on the flight display, a huge help when you are flying to any one of 1,000 European airports.
Overall the 60 XR’s avionics are said to make for a more assured airborne experience. According to Business Jet Traveller magazine, it “provides pilots with better situational awareness, integrated weather radar and warning systems for ground proximity and wind shear.”
The redesigned interior has more space with stand-up cabins and a larger galley. Although the standard 60 XR comes with more advanced all-round connectivity than its predecessor, Jet Republic has stipulated that all its aircraft have BlackBerry capability. Noise levels are reputedly down too. According to Bombardier, interior cabin noise has been reduced by ‘several decibels’ compared with its predecessor. Overall, summarises Business Jet Traveller, the cabin has ‘much of the look, feel and function of a super mid-sized business jet for $6m-$7m less’.
As well as speed and convenience, Jet Republic says safety is at the heart of its business model. Captains and first officers are required to meet stringent annual tests including certification in full-motion simulators. And although they have experience of numerous other aircraft, they will fly only the 60 XR. Like the chief executive, many of the flight crew have military backgrounds.