Is The Corporate Jet Business Pointing To The Future Of How We’ll Drive?
Owning a corporate jet used to be the ultimate sign of success for a company—a sky-streaking signal that a business has truly arrived (and doesn’t even need an airport gate).
But some large companies have found that having their own dedicated private plane can be an albatross around the neck of their bottom line. As a result, a number of companies are passing on the idea of owning one at all. And while having your own jet carries some truly next-level demands that cars obviously don’t (even if you skip the in-galley caterer), the trend is yet another signal that the concept of owning the machines that transport us is becoming less of a priority for both businesses and consumers alike.
Back in 2014, British supermarket giant Tesco was, perhaps unwilling, an early adopter in the ongoing trend of companies losing their wings when it sold or returned its five company planes as a reaction to shareholder protests over the image of excess they represented in the aftermath of an overstatement of the company’s profits. That same year, three separate restaurant chains—Bloomin’ Brands, Darden Restaurants, and Bob Evans—either sold their jets or eliminated their corporate aviation divisions.
Other major companies have also abandoned their planes in an effort to cut costs. General Electric announced a plan to wind down its corporate fleet of jets in 2017 as part of a plan to slash $2 billion in costs. And last summer, JC Penney—that pillar of practical wear—announced it was selling its three private jets, expecting to save between $5 million and $10 million per year.
In place of owning their jets, companies are increasingly turning to a number of hangar-based subscription services designed to simplify and shrink travel costs while providing similar levels of on-demand flight.
“Younger decision-makers are looking at ways to take the a la carte method they use in their daily lives and apply it to travel,” Keith Plumb, President and CEO of Executive AirShare, told Forbes. “They’re experienced cord-cutters and now looking for other ways to implement pay-as-you-go methods.”
While subscription services are a newer development in auto, the concept has been in full flight for years in the world of corporate aviation.
Charter service Private Fly has been in the business since 2008, boasts a global network of 7,000 aircraft, and has no shortage of competitors. To the corporate elite, options like Wheels Up, Flexjet, and NetJets offer customer itineraries and killer perks for a fraction of the price of ownership. Other sky-bound subscription-style options include Blade, Jet Suite, Jet Smarter and VistaJet, making for some awfully crowded airspace.
“The confidence in On-Demand type services is growing, and leaving ownership behind,” Thomas Flohr, Founder and Chairman of VistaJet, told Forbes in January.
In the same Forbes article, Wheels Up Founder and CEO Kenny Dichter reported the company expected to hit 6,000 active members and a $400 million run rate with over 100 aircraft at the end of 2018, with a continued annual growth rate of 35 percent. Jettly announced its member base has more than quintupled over the course of one year, while PrivateFly grew over 50 percent in 2017.
“The private jet charter market is on fire right now," Ricky Sitomer, CEO of Star Jets International, told Forbes.
While an auto customer has a vastly different set of needs and considerations than a multi-national corporation considering buying a jet, both are pondering transactions that represent pricey, often multi-year financial decisions—the exact kind that a number of modern consumers are looking to avoid.
“The millennial generation grew up in a world of subscriptions, and they don’t feel it’s odd at all to consume an automobile in the same fashion,” Peter Wexler, director of mobility solutions at Volvo, told CNBC.
In other words, the growth of aviation subscriptions is just one example of an industry that’s adapted to suit the low-commitment preferences of its customers. And whether those customers are looking to access a jet, a car, or a music playlist, the trend away from long-term financial commitment and toward more contained, experiential-based access is proving absolute across a variety of industries.
“Our experiences are a bigger part of ourselves than our material goods,” Dr. Thomas Gilovich, a Cornell psychology professor, told Fast Company. “You can really like your material stuff. You can even think that part of your identity is connected to those things, but nonetheless, they remain separate from you. In contrast, your experiences really are part of you.”