Private jet start-ups hit an air pocket
Transport businesses with heavy fixed costs only work when cabins are fully occupied
For American customers, hopping on a private jet has never been easier. Making a buck on those flights, however, has never been trickier — at least for private jet start ups.
Not every carrier is struggling. Flexjet, a leading charter and fractional jet operator, recently raised $800mn from L Catterton, a private equity firm affiliated with LVMH. The group wants to create a broader lifestyle brand around its private jet service. Its chief rival, NetJets, is owned by Warren Buffett’s Berkshire Hathaway.
There is a long tail of stragglers, however. During the pandemic, at least five private jet companies took advantage of cheap capital to go public. The results so far are abysmal, with the shares of the fivesome down at least 60 per cent since their listings. Over the past two years, they have given investors a bumpy ride.
One reason is that, like virtually all companies during the blank cheque mania of five years ago, the private jet operators offered projections that were wildly optimistic. Wheels Up said in 2021 that in 2024 it would have 20,000 “members” and overall group revenue of $1.7bn; in reality, it only hit turnover of $800mn on 5,000 subscribers.
Transport businesses with heavy fixed costs — think planes, fuel, staffing and maintenance — only work when the cabins are fully occupied. Larger companies like Flexjet may have reached exit velocity. But with capital much scarcer today, look for these other upstarts to either combine or simply drop off the radar.
While demand for private jets continues to rise, the wealthy are no longer dismissive of flying on commercial jets. The big carriers are making the experience much more luxurious for those who want to pay up. At Delta Air Lines, economy class revenue in 2024 was flat versus the year before.
However, premium class was up 8 per cent and accounted for 40 per cent of overall revenue. Comfy seats, decent food and drinks and airport lounges may start to convince the rich and mass affluent that private jets are not worth the incremental costs.
The new group of private jet start-ups was supposed to better harness software to match customers with available flights and simplify the passenger experience. The pitch was something like ‘Uber, but for planes’. It may be that tiny jets for 5 or 10 or 15 passengers are only able to offer reasonable prices if they achieve scale, which is difficult given the number of providers.
The big commercial carriers were notoriously volatile for decades, until they wised up to consolidation as a way to cut capacity and impose discipline. Their smaller, fancier progeny will eventually have to learn that lesson.