Goodbye free empty legs and shared flights. JetSmarter 2.0 is a very different but potentially appealing proposition. Will there be a jet card in its future?

 

JetSmarter’s CEO and founder Sergey Petrossov might debate using the word evolution and certainly feels criticism, including from this reporter, has been unfair. Whether or not the appraisals have been correct is probably one of those YMMV type things. Either way, what’s clear to me is that JetSmarter today and even more so a year from now will be very different than when it took flight in 2013. Back then, you paid a membership fee and then indulged in free seats on shuttles that JetSmarter scheduled. There were also free empty legs where you got the entire plane for as many friends as it could fit. For aspiring private travelers, it was like being a kid in an all you can eat candy store.

 

Screen Shot 2018-05-10 at 4.01.42 PMOne private jet pilot told me he can always tell JetSmarter customers because they’re the ones in the FBO snapping pictures and posting to Facebook or Instagram where the company has over 224,000 followers. NetJets, the largest operator of private jets in the world, where its entry-level product is a Marquis Jet Card that sells for around $150,000, has just over 100,000 followers. Of course, Petrossov’s stated goal is “to globally democratize private aviation” using his sharing economy technology a la Airbnb or Uber. JetSmarter 2.0 as I’ll call it enables its existing 14,000 members to keep many of the benefits they signed up for, however, looking forward, it’s a different approach. Here’s what new members can expect:

 

JetSmarter Aircraft Management

 

By the end of the year, the company expects to be flying some 20 JetSmarter branded jets, a combination of Gulfstream GIVSPs, Bombardier Challenger 850s, and Embraer Legacy 600s. Expensing benefits from the Trump Tax Reform Act means aircraft ownership has a new appeal. Jet Edge, a leading management company, will manage and operate the aircraft. Owners then lease the planes to JetSmarter which will use them for private jet charter to members. Owners receive JetSmarter benefits and gain revenue from their aircraft when they aren’t using them.

 

Transition To Member Initiated Shared Flights

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Petrossov says JetSmarter’s role in providing scheduled shuttles, or shared flights, is to seed markets until members initiate enough shared flights on their own and the company can move on to other markets. Between New York and Florida, over 90% of the 100 or more weekly-shared flights are now started by members. Seats the starter doesn’t want are sold to other members.

 

Focus on Dallas, Chicago and Coast-to-Coast Routes

 

JetSmarter will be “aggressively investing” in Chicago and Dallas scheduling more of its own shared flights to Florida, New York and Los Angeles, plus between Miami and Los Angeles and New York and Los Angeles. The goal is to eventually build up interest and demand from Finders, members who buy single seats on flights. That means JetSmarter will be increasing incentives for Starters, members who initiate the shared flights.

 

An Evolving Model For Private Jet Charter Starters

 

Investing in technology means JetSmarter is getting savvier about which flights it can sell seats to Finders. Petrossov gives the example that on a Friday during the winter where there is high demand from New York to Florida, a Starter may be able to launch his or her own flight with just a single seat for $2,500. JetSmarter takes the risk to sell the rest of the seats.

 

On a Tuesday during the summer when there are already two flights with open seats, the Starter might have to buy four seats for $10,000 even if they just need one seat. However, Starters now are able to market those three extra seats to non-member friends whose cash payment will offset their out-of-pocket costs. Alternatively, if JetSmarter sells those seats the Starter would receive credits.

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In the markets where JetSmarter is focused on building its presence, JetSmarter will underwrite Starters by requiring them to buy fewer seats at lower prices. In a market where there is low demand and JetSmarter isn’t focused, a Starter may have to charter the entire aircraft. Again, he or she can sell the unused seats for cash to their contacts as well as let JetSmarter sell them to members with the Starter receiving flight credits. In this case, the Starter is on the hook for the entire price of the chartered aircraft.

 

Per seat pricing for Starters is dynamic and varies by route and aircraft type, but stays within a range. Mainly, it’s the number of seats the Starter is required to buy that changes based on demand.

 

New Shared Flight Pricing For Finders

 

Finders use the JetSmarter app to buy single seats after reviewing flights scheduled by JetSmarter or Starters. When JetSmarter launched all shuttle flights were free. When it started flights from New York to London there was a charge. Then as JetSmarter evolved memberships, free flights were limited to trips under three hours except for top tier members paying $50,000 annually. With old membership programs discontinued and its elite program now by invitation only, all shuttle flights for anyone joining under the new membership structure has to pay for all shared flights regardless of length.

 

Dynamic pricing is based on supply and demand. Petrossov says from New York to Florida will range from around $350 to $1,000 each way while a flight to New York to Los Angeles will likely set you back between $750 and $2,000. He says these fares compare to the high end of economy class pricing to what you would pay for a full fare first class seat. What’s more, he says there is no pricing difference in the way JetSmarter sets fares for its seed flights versus those initiated by a Starter. At the end of the day, the new pricing approach seems much more oriented to the affluent leisure traveler, business owners, and corporate executives than folks who want a private jet version of Golden Corral. Watching Surf Air stub its toes in Europe using the Netflix model certainly makes me think this is a wise move by JetSmarter.

 

New Empty Leg Pricing

 

Empty legs have gone from getting the entire aircraft to several seats and now to where you pay by the seat. Light Jet empty legs are $3 per minute, Midsize Jets go for $4 per minute with SuperMids priced at $5 per minute, and Heavy Jets at $7 a minute. What it means is if you snag a seat on a two-hour empty leg on a Midsize jet, you will now pay $480.

 

New JetSmarter Membership Programs

 

Goodbye Simple, Smart and Sophisticated, which is now by invite only. Jet Smarter now has essentially three new and different membership levels.

 

Individual Membership is priced at $4,950 per year with a $3,000 initiation fee. If you travel with a companion, you can buy a seat for them, but it will cost two to four times the dynamic price for members.

 

Family Membership is $9,950 annually, plus a $3,000 initiation fee, giving you four members who don’t have to be related, so it works for companies or friends. You can add more members at $1,950 per head.

 

Enterprise Membership is targeted to larger companies and groups that outgrow the Family Membership. Launched last year Petrossov tells Private Jet Card Comparisons he has close to 20 large companies signed up, including investment bank Jeffries. NDAs preclude him from dropping other names, he says. Integrating its systems with SAP Concur, which provides business travel expense management solutions for over 23,000 companies and 25 million users, will supercharge his efforts to gain more business travelers.

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John E. Gularson Named Chief Operating Officer

 

A former executive at various technology companies, including Pomeroy, MICROS-Retail, Jinfonet Software and Bottomline Technologies, Gularson brings depth to JetSmarter’s management team. Petrossov says despite more negative press than he’d like, members are happy and current members give JetSmarter a 4.75 rating on a scale of 5. He says every month it kicks out members who don’t abide by its rules and it does a background checks on new members screening out anyone convicted of a felony or a sex offense.

 

Will There Be A JetSmarter Jet Card?

 

JetSmarter doesn’t currently offer a jet card product, at least in an official sense. Jet cards have evolved from the purely prepaid debit card model that comes in 25-hour chunks. Wheels Up offers a pay as you go option and like JetSmarter you pay a membership fee up front, then pay as you charter each flight, although with fixed one-way pricing and guaranteed availability. Others such as XOJET, StraightLine Private Air, PrivateFly, Paramount Business Aviation and Unity Jets use dynamic pricing for their card products, which simply means market-based rates. Petrossov declined to comment but tells us there is more big news coming.

The PJCC Take on JetSmarter

 

Despite its prolific fundraising the question within the private aviation industry and even various talkboards with its own members has always whether or not JetSmarter had a sustainable model. With used private jet prices at embarrassingly low levels and tailwinds from the Tax Cut and Jobs Act of 2017, there are certainly new opportunities JetSmarter is pursuing.

 

The new membership pricing gives JetSmarter an opportunity to build a profitable business. Dynamic pricing enables it to attract profitable customers to play their roles as both Starters and Finders in the community. The test, of course, will be if the pricing is at a level that both sides of the equation feel they are getting value.

 

The strength of the shared private shuttle proposition for Finders isn’t onboard the aircraft. It’s at the airport. Using FBOs instead of the big and often congested main commercial terminals means from the time you enter the airport grounds until you get on your plane can be 20 minutes or less. Many car rental agencies will bring your rental car to the private jet terminal so gone are those bus rides to a remote lot that can add at least a half hour. On flights under three hours, you can easily cut total travel time in half.

 

For the whole aircraft charter customer who can plan in advance, but wants to travel on his or her schedule and is willing to decrease charter cost by having people they don’t know travel with them, paying $2,500 or even $5,000 for a one-way flight from New York to Florida is quite a deal. At $10,000, or more, they might just bite the bullet and keep the aircraft to themselves, keeping the flexibility to change plans Starters give up.

 

If JetSmarter’s demand history technology enables it to price shared charter flights that are equally attractive to Starters and Finders and profitable for the company, then it’s a winning proposition. Petrossov says, “The community dictates frequency and pricing.” Pricing private jet flights like Netflix or an all-you-can-eat buffet probably doesn’t work. JetSmarter 2.0 seems to be a business model that well could make Petrossov and JetSmarter an important chapter in the evolution of aviation. One way or another, both will either join legendary American Airlines chairman Bob Crandall, who brought us frequent flier programs and advance purchase discounts, or Donald Burr, the founder of People Express, who like Icarus and many aviation pioneers flew too close to the sun and came crashing back to earth. TBD.

About the Author Doug Gollan

I am Founder and Editor of Private Jet Card Comparisons, the only independent buyer's guide to jet card membership programs, and DG Amazing Experiences, a weekly luxury travel e-newsletter for private jet owners. I am also a contributor to Forbes.com