Comments on: Is the Fractional Jet Business Model Broken?

By: kevinleversee

kevinleversee — Sat, 09 Jan 2010 10:24:53 +0000

By: Kevin Leversee

Kevin Leversee — Sat, 09 Jan 2010 05:33:24 +0000

Selling a service built around an obvious problem fueled the rapid growth, and your right it just makes a lot of sense. However supply chain and logistics must be insane to manage – its almost like the time share industry- yet the assets are always moving. and yea my head is hurting thinking about it as well.

I do believe your correct in saying the ‘Smart Guys’ will get it- I am thinking in networked terms here and the value of small world networks, so this concept can scale- it just should resemble an organic network rather than hub and spoke.

-Kevin

By: kevinleversee

kevinleversee — Sat, 09 Jan 2010 05:24:53 +0000

Good Read- Is the fractional Jet Business Model Broken? moving from growth to consistency http://su.pr/2rUoAE

By: Adam Webster

Adam Webster — Mon, 07 Dec 2009 16:16:52 +0000

They are all fairly done. It is hard to make money when you can’t sell enough new shares to compensate for the loss in operations. We felt pretty confident in 2006 that it was the beginning of the end: http://adamwebster.com/2006/07/21/telling_a_great_story/

By: Jason DePalma

Jason DePalma — Tue, 03 Nov 2009 04:12:30 +0000

RT @tweetmeme Is the Fractional Jet Business Model Broken? http://retwt.me/1hyML

By: Clint White

Clint White — Fri, 23 Oct 2009 22:43:43 +0000

RT @tweetmeme Is the Fractional Jet Business Model Broken? http://retwt.me/1hyML

By: Clint White

Clint White — Fri, 23 Oct 2009 18:37:24 +0000

The fractional industry problems of the last year were seeded in their own success. You had a business model that from the late 1990s to 2007 had almost exponential growth. It was obvious, though by 2007 that the market had become saturated and most of the shares that could be sold, already had. It simply became a fight for market share. The first sign that something needed to change was the offer of the “jet cards” which did not make fractional owners happy since they now saw “renters” on their aircraft and the next sign was the INCREDIBLY high charter and dead head costs that the fractionals were absorbing. Like your article says, as long as the fractionals could sell more shares the money keeps coming in. It becomes almost like a multi-level marketing scheme. The problem now is that there is very little market for new shares on new airplanes while others are divesting. You also have the issue of rapid falling aircraft pricing which is causing havoc in the fractional business model.

I forsee some consolidation in the industry. I read recently that NetJets may merge or absorb the Maquis Jet business and focus more on charter and jet card model. The other 3 players like FlexJet, Options and CitationShares will either have to merge to have some sort of competative edge, or in the case of CitationShares/Air change their model completely. A more direct relationship with each of the airplane manufactuers may also offer some value, but the additonal lift provided only works when business is going well. As of right now no additional lift is needed with each company fighting for its own survival.

Until used aircraft inventory is reduced and prices for new aircraft stablize or begin to rise. The fractional business model will simply not be viable. The key is to continue to show the value of business aviation travel over the airlines. Only a concerted effort by all players can make that point clear.