Is XOJet killing your business?

[cherry20's]

double post

 

[hyflyin]

Just FYI, XOJET isn't operating at a loss, or so I hear.

From a reliable source no doubt.....

 

[cherry20's]

You wouldn't know him if I told you his name anyway. Don't shoot the messenger... Why do care anyway? Don't you work for Netjets?

 

[Webslinger]

Good point OCR

You hit the nail on the head with your analysis of XO.. Although I do wish them the best, there business model will be tough to uphold with the Charter market in the toilet. I will say that they have been "underbidding" EJM flights just to "get the trips". EJM doesnt have to underbid because,
1. They dont own the aircraft.
2. They recieve a management fee regardless of flying Charters or not.
3. Have the support of Berkshire Hathaway.

 

[hyflyin]

You wouldn't know him if I told you his name anyway. Don't shoot the messenger... Why do care anyway? Don't you work for Netjets?

Lighten up Francis, it was sarcasm. To many folks on the street as it is. Hope you are operating at a profit.

:beer:

 

[cherry20's]

:beer: Roger that, don't need anyone else on the street...

 

[OCR]

XOJet has marketed their airplanes as being available for fractional ownership (1/2 share, 1/4 share), and from what I can see they did successfully sell some shares. Based on the perceived demand and continued growth in the market place two years ago, they made a commitment to purchase a large block of Challenger 300's. By purchasing a block, the OEM was able to give them a discount off a single purchase price, although even Netjets receives less than a 10% discount off MSRP for their purchases, so the actual value of the discounts was small.

At the time this commitment was made, aircraft positions that were near their delivery date were selling for a premium, sometimes as much as $4M over their contract price, since the lead times on airplanes was three years. So if they were able to buy the plane for $22M (MSRP was $24M), and then mark it up above MSRP to reflect the fact that they were immediately available, it could have been a great business model.

The problem now is, aircraft have fallen in value so much that there is basically no demand for new aircraft, unless they are being sold at fire sale prices. A two year old Challenger 300 just sold for $12M last month. Given this, nobody will pay anything close to $11M for a half share on a new Challenger 300. To make matters worse, cancelling an order with an OEM has a huge cancellation fee, typically around $2.5M for a plane of this value. So the decision one has to make is whether to take a loss on each contract of approximately $2.5M, or take the airplanes and try to do something with them until the market turns around, and then presumably try to sell fractional interests in them again. How long this may take is anybody's guess though, and until it happens, the losses associated with carrying this much capital cost on these aircraft is tremendous.

As far as someone saying XO is profitable, I suppose it all depends on how they define profit. If they want to refer to an "operating profit", this would not factor in capital costs. Even still, I can't imagine how they could be profitable under the current arrangement. In any case, that is their business, and not ours. The purpose of my original post was simply to try and understand if other charter companies have been impacted by falling prices, and if so, if they thought that XO's latest marketing initiative of the $19K one ways had anything to do with it.

I wish XO well, and certainly hope they can find a model that works. When any company in our industry fails, it has potentially negative effects on all of us, and I certainly would not want to see anyone fail.

 

[X-rated]

OCR,

My God Dude, let it go. You've written paragraph after paragraph getting into minutia about why we will never be profitable. The problem is you really have no idea what you're talking about. You have simply jumped on a tiny part of our business because it makes it harder for your company to compete. Every argument you put forth is filled with speculation, estimation, and flat out inaccuracy. Would you actually have us believe you know more about our finances than the expert analysts at TPG one of the most respected and successful global capital management companies? That would be a good trick considering you've never even seen the books, or been made aware of the business plan.

I've sincerely wished you and your company well, and all you do is talk smack about mine. Many pilots are out of work right now, and the hard truth is probably many more will follow. Some companies will go out of business and some will get stronger due to the current economy. Ultimately it comes down to this: I've bet my career and livelihood on XOJET, you've bet yours on someone else. I feel very good about my bet, and sleep like a baby at night. I hope you do as well. However, It's in very poor taste to go on a public website these days and tell people their company will fail because of a flawed business model especially since you don't even know what that is. What the hell is wrong with you? Good peoples ability to put food on the table is at stake.

I've tried to be civil with you, but some people just don't take hints well. So, do us all a favor. Grow up, have some respect, and keep your mouth shut about things you don't understand. You're an embarrassment!

 

[Whale Rider]

Is XOJet killing your business?

answer: No

Hope this helps. :beer:

 

[fob727]

http://www.forbes.com/feeds/ap/2009/03/25/ap6212480.html

leaving the titanic, or a bad move?

no flame.