Jet cards 2.0: As Mick Jagger advises, “You can’t always get what you want, but if you try sometimes, you get what you need”
Barring some calamity that sends demand for private jet travel into a downward spiral, jet cards and memberships will look very different. You already see the ghost of jet cards’ future via recent changes.
If you want to call it a market correction, that would be fair.
Of course, nobody wants to go back to the airlines. As Seth Myers joked, “Things have gotten so far out of hand, United has added a new section between first class and coach that’s just an MMA-style octagon.”
In fact, 100% of Private Jet Card Comparisons’ subscribers who started flying privately after Covid say they plan to continue post-pandemic. More than 50% will use private aviation regularly.
However, it’s not blue skies ahead. It’s going to be bumpy.
TRAVEL TIPS FOR PRIVATE JET FLYERS: - Book as far in advance as possible. - With on-demand charter, ask what type of volume your broker does with the operator they are booking you on before signing the contract. - With jet cards, stay away from peak days. - In general, avoid flying Thursdays to Sundays if you can. - Be accurate about amount of luggage and pets when you book. - Find out who is doing the catering for your departure airport and if they have experience in private aviation catering. - Limit special-requests for catering such as specific brands of juices, waters, etc. - Book ground transportation at the time you book your flights. (If you weren't able to find suitable ground transportation, chances are your provider won’t be any more successful.) - Track your inbound aircraft for delays. Reconfirm with your provider before you head to the airport. - Have the FBO's phone number in case you get lost. Passenger entrances can sometimes be hard to find at certain private jet terminals. - Arrive at least 30 minutes before scheduled departure and pack some patience! - Get where you are going before Dec. 15 and stay there!
There are significant issues related to supply facing the private aviation industry. The worst is likely ahead.
In early August, I wrote, “Sellers of private aviation – brokers, and operators – have mainly tried to sell and deliver the same (jet card and membership) product as before the pandemic.”
The article was titled “Record Demand Means A New Normal, New Rules For Private Jet Flyers” is worth a read if you will be flying in the next couple of months.
Above I included the same tips that I did in August. They will help you – and your jet card company – but especially you. The last tip about positioning yourself early is new.
Sorry Virginia, there is no Santa Claus
If we look at the period from September 15, 2008, the day Lehman Brothers filed bankruptcy, spurring the worst economic crisis since the Great Depression, and until June 2021, jet cards worked fabulously for both consumers and the industry.
They could keep flying privately. Instead of four-hour call-outs, the lead time to book was 10 or 24 hours. Instead of 10 peaks days, there were 20 or 30.
Most significantly, instead of buying all or part of a depreciating asset, they – and maybe you – could have a similar private flying experience to full or fractional ownership, buying into a jet card 25 or 50 hours at a time, sometimes less.
For new private flyers, one jet card salesperson says, “It was like crack cocaine. They just kept wiring me $100,000. It took them six months to go through the first $100,000. The next $100,000 was four months, and then they upped it to $250,000, so they didn’t have to send money as often.”
For fractional and charter operators, jet cards provided a welcome commitment to at least book multiple flights instead of just on a one-by-one basis via ad hoc charter or none at all.
There were plenty of planes sitting around!
A long, non-recovery
It took until 2016 for Part 135 charter operators to reach pre-2008 levels. According to Argus TraqPak, in 2007, they clocked 1,347,425 hours, which plummeted to just 976,800 hours in 2009 before rising to 1,413,870 hours five years ago.
Fractional operators still haven’t come close to their mark of 739,062 flight hours in 2007, notes Argus.
In 2008, the Part 91k operators flew 683,975 hours, reaching their low mark in 2013 at 521,154 hours, before recovering to 620,288 hours in 2019.
It is the same story for new jets. Deliveries of new business jets never recovered to the high-water market of 1,317 in 2008. Subsequent year totals were 874, 767, 696, 672, 678, 722, 718, 666, 677, 702, 809, and in 2020, 644.
JetNet IQ predicts an average of 853 new jets per year for the next decade – a significant bump up, but nowhere near the peak.
Where is extra charter inventory coming from?
With a decade of fewer new private jets entering the market, more retirements of older aircraft in 2020 due to costly government-mandated ADS-B upgrades, many believe there will be a charter jet shortage for years to come – if demand continues at current levels.
And it very well might. Over 80% of corporate flight departments and operators surveyed by JetNet IQ believe the utilization of charter and fractional services will be sustained at higher than pre-pandemic levels.
That’s what’s referred to as supplemental lift – they need more flight hours beyond the aircraft they already have!
New fleet management approaches
Kenn Ricci, principal of Directional Aviation, which includes Flexjet, the second-largest fractional share provider, Sentient, a major seller of jet cards with over $450 million in hours sold last year, and brokers FXAIR and PrivateFly, describes how he plans to manage the life cycle of the airplanes he’s buying for Flexjet.
“We’re not going to be selling airplanes anymore,” he says.
Traditionally, after exiting the Flexjet fleet, they were sold. The new owner often puts them on a Part 135 certificate and into the charter fleet inventory available to all brokers.
For the first 10 years, Ricci says they will still serve their shareowners at Flexjet. In the next decade, they will be inventory for Sentient customers. After that, they will serve the on-demand charter market for his brokers.
Inventory of used aircraft is at record lows, according to JetNetIQ. Brokers say demand is high. Used aircraft are sold off-market before they can be listed. Four million dollar aircraft are being flipped for million-dollar profits in days.
NetJets, Flexjet, VistaJet, PlaneSense, and Airshare are gobbling up as many of the new jet positions from OEMs as they can.
Except for VistaJet, which only offers charter, this new aircraft capacity will be roped off for flyers willing to make a five-year commitment.
Even VistaJet is now firmly requiring a three-year and 50 hours per year commitment, says its president Leona Qi.
Charter operator consolidation
Eight of the 10 largest Part 135 operators at the end of 2019 have been bought, sold, or merged.
Consolidation of charter operators led by Vista Global, Wheels Up, Directional, Jet Edge, and others means companies that used to serve the broad market now have their capacity mainly utilized, if not exclusively, by their new owners.
New fleet building models like joint ownership and triple net leases employed by Jet Linx Aviation and FlyExclusive to expand their reach are slurping up used aircraft that used to be available for charter via the long-tail of independent operators. Now they are dedicated to serving the customers – jet card and wholesale – of their new masters.
June 2021 set a record for private flying, according to Argus TraqPak, which has been tracking such things for the better part of two decades. July set another record. August was second only to July. Even though things were supposed to slow down in the Fall when kids went back to school, early October has seen three of the 10 busiest days on record!
At the same time, private aviation is struggling with the same Covid-related logistics and labor issues as everyone else.
You can still buy fixed-rate jet cards
“The last store selling toilet paper,” an executive of one jet card provider that hasn’t halted sales told me when I asked how he felt these days.
Another said the first thing callers ask is, “Are you still selling?”
While there are around 40 companies still selling jet cards that offer guaranteed availability with fixed or rate pricing, you’ve seen numerous changes in recent weeks.
NetJets, Flexjet, Sentient, Jet Linx, Priester, Executive Jet Management, Velocity, operators, and brokers large and small have stopped taking new jet card customers.
While Wheels Up and Vista Global’s XO believe they can use technology to unlock latent supply in the existing U.S. private jet fleet, it’s a bit like the Titanic. Based on the current demand curve, whatever help is on the way won’t be coming fast enough.
So sorry, Virginia, the chances of getting a jet card on the terms you are used to are slim.
A mispriced market
Jet card pricing should be at an equilibrium or even a premium to on-demand charter.
A recent analysis found jet card pricing lower than on-demand flights in 25 of 30 scenarios. There was an average difference of $5,693 per segment.
Dynamically priced charter flights represent the market at that moment. In that case, this analysis indicates a severe tilt towards cards and memberships with fixed rates and guaranteed availability. It’s something that quite frankly is unsustainable.
“You can’t always get what you want, but if you try sometimes, you get what you need,” advises Mick Jagger.
The good news is that you won’t need to go back to the airline experience.
The 1990s were the heydey of frequent flier programs with triple miles and plentiful free upgrades. The reality is jet card programs are destined for a significant restructuring – soon, now, as you are reading this.
Without a doubt, you will be able to find programs that meet your needs.
Jet Cards 2.0
Yes, I did say, you will be able to find a program to meet your needs. There will be a much stronger segmentation.
There will be fewer one-size-fits-all programs. You’ll need to spend a bit more time paying attention to the details before you wire your funds.
Okay, that’s a plug for a paid subscription. And yes, we are taking both new subscribers and renewals. Our JET CARD DECIDER 2.0 enables you to receive a custom analysis. We’ve updated our comparisons 115 times this year since our annual top-to-bottom update in January.
Just as you astutely respond to changes in your business – new regulations, your suppliers, and so forth, it will benefit from taking a similar approach in buying private aviation.
A fresh look
The provider that served you well for years may no longer be the best solution.
The company that you never really liked may now be a better solution.
You may find that you are better off splitting your buy for strategic reasons – something that many jet card customers were doing anyway.
Fractional or full ownership may now be more attractive. Shared private flights could be the way to go.
Jet Card segmentation
I spent the last five days in Las Vegas for the annual NBAA convention speaking to operators, brokers, and others in the know, CEOs, and salespeople, listening to various research presentations. Here are my top-line projections of Jet Cards 2.0:
- Milktoast jet cards will have longer call-outs, higher hourly rates, more peak days, higher peak surcharges, while blackouts will become standard.
- With limited supply for the foreseeable future, programs will cap memberships at a level they know they can serve, which had never been an issue, since there was always a charter jet to be found.
- Some cards may limit demand by setting higher entry levels, say $500,000.
- There will be incentives to be flexible in moving your departure time – maybe by even a day or two. The same with booking a week or two in advance. These are the two most important valves that can relieve the pressure.
- There will be card programs that still offer those 10-hour callouts, but they will be priced accordingly. Perhaps they will be branded as corporate travel solutions. The key is you won’t find those $5,500 per hour light jet rates with 60-minute minimums nationwide for one-way flights. $6,750 or more on a light jet will be the new black and 90-and-120-minute minimums will be en vogue.
- When it comes time to renew, you will have to renew into a very different program – or find another home. If you want a glimpse of the future, take a look at FlyExclusive’s jet card revamp. Interestingly, Wheels Up, which started with a clean sheet in 2019, probably gives a good glimpse of a well-structured program.
- Because of the changes, full and fractional ownership will become a stronger option for those of you who need availability at 24 hours or less and aren’t flexible to avoid high-demand dates.
- On-demand charter rates will again become competitive with jet cards when booking in advance. Alternately, they will offer a high-cost, low-commitment solution for those of you who need last-minute or very specific aircraft types.
- The on-demand charter market will see a bump as the decision between card and trip-by-trip charter becomes more nuanced.
- Fractional ownership will enjoy a renaissance after a decade of stagnation.
- Jet sharing and by-the-seat offerings will become the stylish way to trade down for folks who don’t want to go back to the airlines. While it may not be your first-choice, avoiding the airline terminals will be enough of a reward.
All of the above doesn’t mean jet cards are going away. It’s simply a rebalancing of the market that had been shifting towards fixed-rate cards since the financial crisis more than a decade ago.
The bad news – Force Majeure
I expect some providers to invoke their Force Majeure clauses to implement unilateral changes. One midsize provider tells me over a recent four-week span; they lost around $500,000 on jet card flights.
In other words, like the jet cards versus on-demand charter pricing analysis mentioned above, the guaranteed rates of cards sold are consistently below the cost of buying the flights.
While the whole idea of fixed price cards for providers is to win on more flights than they lose and make some money at the end of the day, for some programs, the house is now losing every time you fly – at least if you book on short notice.
If you want to help your provider – which you should – book as far in advance as possible. One CEO told me, if clients cancel later per the terms of their agreement, he can then repurpose the jet for another late booking client or an on-demand client.
Responding to changes
If you are a consumer of jet cards, you can view the changes in different ways. One is to get angry. They promised you a rose garden. You paid a lot of money. You have it in writing. It’s a legally binding contract. Screw Force Majeure. The second is to know you’ve had a good run.
It’s going to be a new game with new rules. My best advice is to study the rules of the new game so you can play to win.
While the proposition could be less compelling, you will still get value out of the private jet memberships. You’ll have to be a bit savvier about how your play the game.
Jet card details matter
That means paying closer attention to the rules. It also means taking a more considered approach to your flying.
This is all based on the assumption that strong demand will continue to outstrip inventory.
The jet card will go back to what it was supposed to be – part of the market, not a way to game the market, which has been the case since June.
Private flyers will need to choose. Pay a significant premium for on-demand lift during those peak periods their cards are blacked out, dive into the deep end of the pool with fractional or full ownership – or adjust their schedules accordingly.
In some cases, it may mean – cover your ears – flying commercially if the premium to have an entire jet is too steep for your stomach.
Interim Grade = F
How jet card providers deal with the transition – assuming I’m correct – will be interesting and probably painful to watch.
I imagine providers will waive the expiration of funds, offer refunds, or do both if they impose new rules unilaterally.
Most of the anger and disappointment I hear from jet card members has to do with how delays and cancelations are communicated. They understand the actual incidents.
I suppose it’s because, until May or June, private aviation was a 99.9% excellent experience. If there was a last-minute mechanical, a replacement aircraft could usually be had in a couple of hours at most.
There are no statistics on delays. Twenty percent of Private Jet Card Comparisons’ subscribers report having a service letdown in recent months.
That’s not every flight. So, the chances of a delay or cancelation may only be five percent. However, I expect the holidays to be worse – possibly much worse.
Staying at home – what a good idea!
Not set up for a deluge of complaints?
Still, if you were 99.9% perfect, you may not have been set up to have a complaints resolution system in place to deal with, say, a hundredfold increase in upset customers.
Yes, we all understand that hiring and training customer support staff in the current environment is complex- difficult- impossible.
Yet, the stakes are enormous. Chances are you won’t be going to the airlines. But, if you feel unloved and neglected, you will likely enter the free-agent market.
CEOs at card companies need to have a war room focusing on getting ahead of advising delays. They need to have an Office of the CEO response mechanism to deal with your complaints.
I know they have their hands full – not only with logistics but retention. Not all customers are as understanding as you.
One CEO tells me his customer service reps daily end up in tears – from being screamed at and letting you down.
As I was interviewing Flexjet CEO Mike Silvestro, I was busy typing on my laptop taking notes. As he was talking about not being able to deliver the level of service you expect, he said, “It hurts.” I stopped to look up and could tell being in his chair isn’t fun these days.
The folks I know at card companies have always told me retention and referrals from current – happy customers – are key to their businesses.
Better communications needed
Still, there is time for improvement. Subscribers tell me they understand the situation. They know the service was excellent until recently. We know this caught you by surprise.
Some thought things might calm down when the kids went back to school. Others, who saw demand drop off the table when Covid hit didn’t want to jerk employees around, hiring, then laying off.
Keeping customers updated, so they don’t have to keep calling back to find out what’s happening would be a good target to meet. Currently, there are too many misses.
The Silver Lining
Looking at the future, I think there will be new options where you may see very attractive jet card pricing. That’s if you fly when there is extra capacity. I’ve seen one off-menu offering that I thought made a lot of sense.
Families with kids who need to travel on specific dates may find cards more expensive. They will be in line with dynamic pricing options.
Folks who can go a week earlier or come back several days later will perhaps notice few differences.
Time will tell. One thing is for sure – the law of supply and demand is in full force in one direction.
That, of course, assumes demand continuing the way it is now.
What happens when we have the next Lehman Brothers?
The CEO of the company toying with memberships from half a million dollars told me, “We’d sell to anyone who wants to fly.”
There’s one lesson I think consumers of private travel should take away. Manage your private aviation like your investments.
A dog’s life
Oh, and if you are wondering about the image of the dog in the cargo hold at the top of this story? It’s from the final scene of Barbarians at the Gate.
After RJR Nabisco CEO Ross Johnson is deposed from the corner office, he is shown flying away on a commercial airliner. As his wife wonders about how their beloved German Shepard is doing now that he doesn’t have free run of company Gulfstream, James Garner, who played Johnson, quips, “We’ve got our adjustments to make. He’s got his.”
Too bad there weren’t any jet cards back then.