The sharing economy started as a way to fill spare bedrooms and reuse old power drills. It now includes the rich flying around in private jets.
Last week, troubled Canadian manufacturer Bombardier said it would cease production of its storied Learjet before the end of 2021, and would cut 1,600 jobs.
The writing had been on the wall for the light-jet line for some time, as buyers shifted toward heavier private planes.
Ironically, some now see better prospects for the Learjet’s market segment than for most in the embattled aviation industry.
Analysts at Jefferies expect private aircraft deliveries to rise 10% this year, after a 24% decline in 2020, led by light and medium-size jets. Heavy ones are forecast to keep falling.
This is partly because of travel restrictions on long-range destinations, but it could also be an early sign of yet another transformation within private aviation.
Last week, Dubai-based private-aviation company Vista Global said new members for its VistaJet subscription service, in which customers pay per hour flown and have guaranteed access to a plane within 24 hours, increased 29% last year. Its sister brand XO tripled its sales of new memberships.
Business jets are an infamously cyclical part of the aviation industry, but the Covid-19 crisis is different.
Executives have embraced private planes as a way to protect their health and escape cumbersome checks at commercial airports.
Individuals are still traveling less, but private-jet trips have rebounded to around 2019 levels because more people are flying. Even some middle managers are taking private jets for the first time, charter firms say.
XO, which Vista Global incorporated after two 2019 acquisitions, is reminiscent of ride-hailing car services like Uber and Lyft : It allows customers to book seats on private-jet flights through a smartphone application, often sharing the plane with others. While this business model never quite took off before, it is thriving in the pandemic.
“Many corporations now have both types of service,” said Vista Global founder andchairman Thomas Flohr. “The chairman or the CEO are subscribing to a VistaJet membership, then the rest of the organization is on the XO level.”
Other companies with more traditional business models are also benefiting.
Ohio-based NetJets, which offers fractional ownership of private planes, experienced a threefold increase in new customers last year, almost all of them through card services that allow customers to buy flight hours in 25-hour increments.
The firm is owned by Warren Buffett’s Berkshire Hathaway, and famously became a weak spot in its portfolio around the 2008 financial crisis.
Of course, demand could thin out as travel restrictions ease. But a chunk of the new customers are likely to stay. Ride-hailing firms are able to fill and turn their planes around more efficiently, just as low-cost airlines do, reducing costs and even some of the onerous environmental impact.
Because operators aren’t publicly listed, investors don’t have easy access to them, but they should still pay attention to their broader impact. If lower-ranking executives start hitching rides for smaller distances, light and medium-size jets could stage a comeback at the expense of other offerings.
“The new entrants we welcomed in 2020 are definitely more skewed towards the lower end,” said Patrick Gallagher, NetJets’ chief salesperson.
The average Joe may not be getting in a flying taxi any time soon. For the rich and their private jets, though, the Uber model may be the new reality.
This article is written by Jon Sindreu from The Bangkok Post and was legally licensed via the Tribune Content Agency through the Industry Dive publisher network. Please direct all licensing questions to [email protected].