Flexjet builds market share in 2005

 - September 20, 2006, 10:29 AM

While its larger competitor NetJets saw profits vanish last year, fractional ownership operator Flexjet is reporting “our best year yet in terms of revenue and profitability.”

Flexjet president Michael McQuay painted a positive picture of the Dallas-based fractional program, saying it welcomed 90 new owners last year. But the real significance of that number, he added, is that “61 percent of them were new to the industry and 36 percent came from a competing fractional program.” The company’s membership now totals 620 shareholders among a fleet of 85 aircraft.

“We were the only fractional ownership program to see an increase in new business in 2005, and at the same time we reduced our exit-customer numbers by 29 percent.”

McQuay said Flexjet’s market share has more than doubled since 2002, from 7 to 17 percent, based on aircraft registrations with the FAA. The position places Flexjet behind NetJets and Flight Options and slightly ahead of fourth-place CitationShares among the four major fractional providers.

While the aircraft average age in the Flexjet fleet is 3.5 years, that number reflects a substantial number of recent aircraft deliveries, said McQuay. Last year Flexjet took delivery of 19 new aircraft. This year, the company expects to add 21 more–about a third of them Challenger 300s and the remainder a mix of upgrade Challenger 604s and Learjet 40XRs, 45XRs and 60s. Deliveries of the new Learjet 60XR and Challenger 605 are to begin next year.

Flexjet has yet to add heavy iron to its fleet. “We’re constantly looking at the Global XRS and Global 5000 market component, but customer interest seems to be in an entire airplane or a significantly larger share percentage,” said McQuay.

The March UBS Business Jet Monthly look at the fractional ownership market showed the Flexjet sold-to-in-service ratio at 72 percent. McQuay pointed out that the numbers were from last October, a point at which the company had just taken delivery of a number of new aircraft. “Over the year,” he noted, “our sold-to-in-service ratio was running from about 88.9 to 91.2 percent.”

McQuay said the growth last year reflects “significant changes to the program and to the way we ran the business, all of which began about three years ago.” The “enhancements” include the Versatility Plus program that allows owners to buy and sell unused hours, a waiver of ferry fees for secondary service areas (Hawaii, Europe and the Caribbean) and a 5-percent-charter guarantee that members will be on a Flexjet fleet aircraft at least 95 percent of the time.

While the incentive programs are important, success in the long term is all about “asset management in an industry of razor-thin margins,” said McQuay.