Against a backdrop of tumbling stock markets and the most serious banking crisis in a century, Jet Republic has launched what it bills as the most direct challenge yet to NetJets’ dominance of the European fractional ownership market. The company has committed to buying as many as 110 Bombardier Learjet 60XRs. The first 25 of these are under firm order, with deliveries due to begin next October, at a rate of about one each month.
Jet Republic has financing from Austria’s Euram private bank and a consortium of its clients. CEO Jonathan Breeze claims that Jet Republic’s founders were turning away prospective investors when its launch capital was being finalized over the summer–his point being that, despite the worsening squeeze on credit, some still view business aviation as an attractive investment opportunity.
In addition to selling shares in the Learjet 60XRs, Jet Republic is offering lease terms and block charter through a card program for which flights will be provided by an approved group of undisclosed operators. Card packages will start at 25 hours and will be available for a variety of aircraft categories ranging from light jets such as the Cessna Citation Bravo to “global cabin” aircraft, including the Dassault Falcon 7X.
Shares in the Learjet 60XR will start at one-sixteenth, providing 50 flight hours per year and running up to a half share with 400 hours. Share prices will be calculated on the basis of a $14.6 million price tag for a whole aircraft. Jet Republic’s 110-aircraft deal is valued at $1.5 billion, which would put a price tag of just over $13.6 million on each jet. On top of the share price, owners will pay monthly management fees of U2,000 ($2,940) and occupied hourly rates of U3,500 ($5,145) over the course of their five-year agreement. The aircraft can also be leased for U2,000 per month, plus monthly management and occupied hour charges. According to Jet Republic, most European fiscal authorities will allow aircraft shares to be treated as undivided assets and so allow them to be deductible against corporate taxes. The company has estimated that clients could therefore recoup approximately 30 percent of costs from tax allowances.
The start-up operation will be based in Portugal, which is also the home registry for NetJets Europe’s fleet. Breeze described the country as having “an impressive regulatory environment for fractional ownership.” Jet Republic will have its own commercial aircraft operator’s certificate and will base pilots close to its key European markets.
The company has no plans to offer shares in other aircraft types, and said that the midsize model is best suited to Europe’s fractional ownership market. It describes the Learjet 60XR as the fastest and most fuel-efficient jet in its class.
At the end of the five-year term, Jet Republic will offer to buy back an owner’s share at an unspecified “fair market value” rate set by “independent experts.” Clients can also leave the program after three years under the same terms. This year, previously inflated prices for business aircraft older than two or three years and with relatively high utilization rates have been falling, according to aircraft brokers.
Highly Customized Service
Breeze, who formerly worked in sales for both NetJets Europe and Air Partner’s JetCard block charter program, pledged that Jet Republic will far exceed existing fractional ownership service standards. “The typical private jet client will have a stale sandwich, coffee from a plastic cup and a mobile phone that won’t work in the aircraft,” he claimed. “We will have hot food served on china, real espresso, in-flight BlackBerry access, a cabin attendant on every flight and concierge services [provided by White Concierge].”
Breeze likened Jet Republic to an iPod, while characterizing NetJets Europe as a Walkman. Pressed on what the new service will offer that is not available on its 12-year-old rival, he reiterated the 24-hour global concierge support, BlackBerry connectivity; multilingual flight attendants, hot food, fresh espresso coffee and iPod video systems.
The former Royal Air Force pilot, who at one time served as managing director of Air Partner’s JetCard program, insisted that fractional ownership is “inflexible” and that it “traps people in binding and confusing contracts.” By contrast, Breeze insisted that Jet Republic’s share ownership contracts will be “clear and simple.”
Breeze also argued that Jet Republic’s charter card is better than that of his former employer in that it has neither fuel nor airport surcharges and because prices are fixed for the life of the contract and clients can leave the program at any stage with all remaining credit refundable. However, according to Air Partner, these are all terms and conditions that are already available through JetCard.
“Private aviation in Europe currently isn’t good enough,” said Breeze with the zeal of an upstart girding for battle with established heavyweights. “We need to start from the beginning with an account manager who will be trained as an aircraft dispatcher to ensure the first point of contact is expert enough to know if weather and the airport is all right, and our multilingual flight attendants will be a world first.”
Aircraft availability will be guaranteed with 24 hours’ notice from Jet Republic share owners and charter customers. By comparison, NetJets Europe guarantees availability with 12 hours’ notice, but Breeze argued that having less than a 24-hour cut-off damages customer service levels and encourages customers to book flights late in the hope of getting an upgrade to a larger aircraft.
The block charter card offered by Jet Republic–for which flights will be available ahead of the company receiving its own aircraft–will allow customers to carry forward flight hours not used within the specified period for which they were purchased. The company has also offered to refund charter payments for unused hours but has not specified under what terms this would be permitted.
Jet Republic’s management includes other former NetJets Europe executives, including director of flight operations David Marcus and CFO Andrew Hiscock. The company’s president is Euram Bank CEO Victor Popovic.
The new fractional ownership program expects to attract clients who now feel unable to own whole aircraft. “Typically customers will be entrepreneurs with e2 million annual income or e10 million in investable assets,” predicted Breeze. “Or they will be a key decision maker in a company worth e100 million or more.” The new company expects about 30 percent of its business to come from the UK and Ireland, 20 percent from Russia and Eastern Europe, with the next largest share being 10 to 15 percent from Germany, Austria and France.