Sergey Petrossov, the founder of JetSmarter, believes that the future of business aviation is about sharing. Removing the private from private aviation.
He is convinced that most of the people who charter business jets are happy to share flights in order to fly for less. Mr Petrossov is also confident that there are thousands of people able to pay. And JetSmarter has already signed up more than 10,000 members and aims to finish 2018 with 25,000.
“Some 75% or 80% of flying, within the next five years, will be in some sort of shared format,” says Mr Petrossov. “It is the future. It is where everything is diverging. The mass amount of private jet travel will be shared. Then, you will still have, probably, 25% solo outside of owned.”
He knows that many people reading this will be sceptical. Very sceptical. And he knows that many people enjoy attacking his company. “You probably think that 75% shared is crazy – but I am convinced of it.”
Mr Petrossov can show that it is already working on routes between New York and Florida. JetSmarter already hits 65 flights some weeks on that route – beating American Airlines which flies 60 times (although obviously with much larger aircraft). And this is just the start. “We believe that New York–Florida can grow to as much as 250 flights, maybe even 300 flights, a week in the next two years,” says Mr Petrossov.
They aircraft are usually pretty full, with a 92% average load factor on that route – so usually just one empty seat. In total, JetSmarter is already carrying up to 15,000 people a month – the vast majority sharing aircraft.
Most significantly, just three of these shuttle flights are scheduled by JetSmarter, the rest are scheduled by customers who then make spare seats available. JetSmarter calls these custom shuttles.
JetSmarter now offers four different kinds of products: traditional whole aircraft private charter; shared charter – where a customer books a charter flight and offers spare seats for sale, but takes the risk of the whole charter when initially booking; JetSmarter shuttles – where it schedules flights on key dedicated routes and takes the risk (this is done solely to seed routes with flights); and custom shuttles, where customers can add other flights on key dedicated routes where there are already shuttles and share the risk with JetSmarter; these flights are core to JetSmarter’s business model and growth on key routes.
An example of a custom shuttle would be people wanting to fly their family from Miami to New York at a certain time (Jet Smarter calls these creators). In return for committing to four seats, Jet Smarter would commit to the rest of the cost.
“The frequency of jet shuttles is directly correlated to custom shuttles. It is actually not us making the shuttles,” says Mr Petrossov. “Whenever we go into a market, we realize that there are no initial creators, so we’re the first creator, so to speak. We make the market by having JetSmarter sponsor a few flights. Then, the frequency of the flying is determined by the community of members through custom shuttle creation.”
Custom shuttle is only available on routes where JetSmarter believes there is enough demand. A customer flying, for example, from Miami to Azerbaijan could offer seats on an aircraft – through Shared Charter – but would be unlikely to find many people wanting to travel on that route so would have to be prepared to pay for the whole aircraft. As Jet Smarter grows, Mr Petrossov hopes to change this.
“As we evolve in more routes, there will be more custom shuttle routes, which then relieves risk from the passenger in comparison to shared charter,” says Mr Petrossov. “You can do a shared charter between any two points on the globe and, as we get bigger and expand to more places, the customer will not have to take the full economic risk on those routes. They will be able to make custom shuttles versus shared charters. Right now, about 25% of shared charter seats actually get filled, which is not bad, but the customer is taking the risk and we do not have the volume on every route.”
When JetSmarter guarantees routes for its JetSmarter shuttles it is taking the risk. Mr Petrossov says that the company can manage this. “You take more risks to make the higher margin, and we can do that because we have the demand,” he says.
JetSmarter also believes that it can get the cost of flying down. “We believe that within the next six months, on our high-volume routes, we can reduce our costs by as much as 35%,” says Mr Petrossov. “We can do that by using dedicated airplanes and FBO partnerships, which shows that these economies of scale play a big role. Our unit economics are going to look much better.”
JetSmarter already has dedicated FBOs at White Plains Airport – with Ross Aviation – and at Opa-Locka Airport in Florida with Fontainebleau Aviation.
“This is our whole argument on the supply side. The average aeroplane is flying 200 hours a year, 30% deadhead and the load factor is about 25%,” says Mr Petrossov. “Whereas, we have some airplanes that are dedicated to doing volume, flying about 1,100 hours a year, 0% deadhead and a 92% load factor. We are making use of these assets that are highly underutilised.”
JetSmarter roughly splits its members into two groups – creators (or initators) and finders.
Creators are people who have typically chartered whole aircraft before and are prepared to underwrite whole aircraft and try and sell seats so as to lower costs. Finders are often people who don’t fly private regularly or have never flown private. They are typically moving over from business and first class on scheduled airline flights.
“What we see is that the top end consumers are existing charter flyers and jet owners who are realising, that first, they want to book digitally, and, second, the savings and the economies of jet sharing,” says Mr Petrossov. “They are transitioning into this and they’re getting way more bang for their buck. The way that we have set up our business is that we only need about 10% or 15% of our customers to be creators. The other 85% can be finders.”
“If you look at some of our economics, our top 10% of customers are spending about $144,000 a year, our top 5% of customers are spending about $250,000 a year, and our top 10% of customers represents half of our revenue,” says Mr Petrossov.
JetSmarter also works hard to make sure that all of its customers are happy. It cancels memberships if passengers behave badly and everyone – both creators and finders – have to turn up on time. Flights do not wait.
“We just want everyone to be respectful, and that’s the only way this works,” says Mr Petrossov. “If you want to create a little more privacy and buy out a few more seats, you don’t have to talk to anybody. We have celebrities that will book LA–New York. They’ll buy out four or five seats and they’re just flying by themselves because they want to create a little bit of privacy. But what you will discover is that the community is very respectful. These are not just strangers from the street. These are the vetted members. People go through background checks.”
Having targeted the largest charter customers, JetSmarter is now planning to allow jet owners to sell seats on their own aircraft – both when they are flying on them or when they know that they do not need their aircraft for shuttles. Mr Petrossov sees this as being like Airbnb.
“An owner is going to be able to sell seats to our community whenever they are flying for personal use,” he says. “We are going to have lots of owner programmes to dedicate their aeroplanes to shuttle routes and things like that when they are not using them. So, we see mixed utility across them all the way from the jet owner to your existing first and business-class customer.”
A target for attacks
JetSmarter has evolved its business model since it launched in 2012. It initially started as an online charter company before launching a membership system and then expanding into jet sharing. It has taken a lot of investment and has had competitors questioning its business model.
Mr Petrossov – who is 29 years old – believes the company sometimes get picked on unfairly. “I would say it is because we are the most disruptive. People are terrified about customers learning about it,” says Mr Petrossov. “If a fractional owner or jet card customer really learns how the custom-shuttle product works, that is dangerous. What the competition is telling everybody is false.”
He adds: “At the end of the day people target success.”