More Owners, Fewer Players
The fractional business is strong, but being a provider is difficult business
by John Boyce
eBizjets TheFractional Alternative
eBizjets of Boston sells private jet membership to users who want to fly privately without the commitment to ownership.
Steve Morton’s company has cut a deep niche right out of the heart of the fractional aircraft ownership business. "We occupy a middle ground between fractional and charter," says Morton, eBizjets’ VP for marketing, "and the big points of difference are cost, affordability, convenience, flexibility, and certainly response time. Because of the sheer size of the fleet we have a faster response time than anyone in the industry."
eBizjets has a master services agreement with certified charter companies across the country to provide ondemand charter service to eBizjets customers. As a result, eBizjets has 1,400 jets of all sizes at its disposal. Customers, comprised of sports and entertainment figures as well as business fliers, buy travel membership cards in incre ments of $100,000, $250,000, or $500,000. Each time they use the service, the charge is deducted from their accounts. Billing takes place after the flight and eBizjets has oneway and round trip rates.
"Because of the sheer size of the fleet," Morton says, "we have a faster response time than anyone in the industry. Because we track the 1,400 jets through proprietary software we have the ability to use the best positioned jets in the fleet to fulfill each mission. Ultimately, the passenger is only paying for the time they actually fly."
"It’s nothing more than prepaid flight time. They (customers) make the deposit like a debit card. We deduct from the balance and when the balance gets low they replenish their accounts. They are only paying for actual flight time. The benefits are lower flight cost, fixed hourly pricing, complimentary upgrades to larger aircraft, and earned upgrades.
"...We offer our clients to those jets in five hours or less at any airport in the country. There are no up front acquisition costs, no membership fees, no management fees, no fiveyear commitment." While the number of participants (owners) continues to grow, the number of companies offering the service is shrinking through failure or consolidation. It’s a measure of just how tough it is to fund, manage, and grow a fractional business.
According to Kevin Russell, senior VP at industry leader NetJets, 57 entities have attempted a fractional program over the years and only four majors remain: NetJets, Flight Options, Bombardier Flexjet, and CitationShares. In addition to being the smallest among the four, CitationShares isn’t a national program. It will fly anywhere but it sells only east of the Rockies.
As of midMay, Aviation Data Service in Wichita, KS, reports 653 aircraft in the fractional fleet, up 22 from the end of 2001 and up from 530 in 2000. According to National Business Aviation Association figures, fractional shares increased from 3,834 in 2000 to 4,900 at the end of 2001.
Flight Options is the only fractional company with a used or preowned aircraft program in addition to a new aircraft program. Darnell Martens, assistant to the chairman, reports that during the past two quarters — the fourth of 2001 and the first of this year — business has been "up significantly" but only slightly over what the company projected for itself and the industry. Martens attributes the spike in growth in late 2001 to the events of 9/11 moving prospects to buy who may have been sitting on the fence.
CitationShares, the newest and smallest of the four major fractional companies, doesn’t consider itself in competition with the industry leaders. Business has been phenomenal, but as sales and marketing senior VP John Hall points out, growth is relative
"Our business is growing quite rapidly," Hall says, "but that’s more a factor of our size than it is we’re doing so much better than anybody else. In the last 12 months we’ve doubled in size but today we have 25 airplanes and almost 200 owners. For somebody else to grow 100 percent they would have to have 300 airplanes."
Started two years ago, CitationShares is limiting itself to using smaller jets. "We’re not offering a broad spectrum of products," Hall says. "We’re try ing to offer a program that is the most valueoriented program for the typical fractional flier — typical being one who flies less than three hours (per trip) with four or fewer passengers."
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