XOJet growth...??

[t-bone]

differences

Anyone who claims that XOJet has a similar business model as the fractionals is mistaken.

While NetJets only flies Netjets passengers, FLOPS only flies FLOPS passengers, and FlexJet only flies FlexJet passengers...we can fly passengers for all of the above, as well as any other straight charter client that wants to fly on us. So while they are deadheading all over the place to pick up their owners, we are able to market ourselves to a much bigger pool of business when we need to move an airplane to cover an owner's trip. Our deadhead percentage is very low, and the percentage of that deadhead that we eat the cost on is even lower.

Another difference is that our airplanes are not owned by multiple different owners. We don't sell 16th shares, or 25-hour blocks through Marquis. Therefore, we don't need supplemental lift during the peak seasons like the true fractionals do. Rather, we backfill our own flying by helping those guys out.

It's a better deal for our owners, they don't pay an obscene hourly rate, and it's a better deal for us because we keep the charter revenue and rarely pay for deadheads.

XOJet is similar to the fractionals because we all fly airplanes. That's about it.

 

[jonjuan]

It's a better deal for our owners, they don't pay an obscene hourly rate, and it's a better deal for us because we keep the charter revenue and rarely pay for deadheads.

XOJet is similar to the fractionals because we all fly airplanes. That's about it.

But they do pay for the entire plane? Take a CX, for example. At $20,000,000, they are now exposed to the ENTIRE cost of depreciation. Say a CX is worth 65% after 5 years and 1,000 hours a year in the airframe. An owner flies 300 hours a year or 1,500 hours over 5-years.
They have lost $7,000,000 or $4,666 an hour of asset value. Now take a 300-hour fractional owner who buys the plane for $7,500,000. With a 35% loss, the total loss will be $2,625,000 or $1,750 per hour. A difference of $2,900 per hour.
Now factor in the cost of capital. $20,000,000 at 8% a year is $1,600,000 for year one or $5,333 per hour. Cost of capital on the fractional owners $7,500,000. 8% is $600,000 during year one or $2,000 an hour for a delta of $3,333 an hour.
Combining these two differences yields $6,233 an hour or $9,350,000 over 5-years.
If you don't think most potential owners won't consider this, you are crazy. Very, very niche market, imho.

 

[skiandsurf]

But they do pay for the entire plane? Take a CX, for example. At $20,000,000, they are now exposed to the ENTIRE cost of depreciation. Say a CX is worth 65% after 5 years and 1,000 hours a year in the airframe. An owner flies 300 hours a year or 1,500 hours over 5-years.
.

Forget the Dollars and Cents, how about owners. If you only have 16 aircraft, and you lose one, thats big. At NJs, if we lose one owner, thats not even a drop in the bucket.

 

[skiandsurf]

But they do pay for the entire plane? Take a CX, for example. At $20,000,000, they are now exposed to the ENTIRE cost of depreciation. Say a CX is worth 65% after 5 years and 1,000 hours a year in the airframe. An owner flies 300 hours a year or 1,500 hours over 5-years.
.

Forget the Dollars and Cents, how about owners. If you only have 16 aircraft (16 owners), and you lose one owner, thats big. At NJs, if we lose one owner, thats not even a drop in the bucket.

 

[Swass]

Apparently the owners are happy with the arrangement. They see their time as a valued asset, much the same as NJ owners, but with the charter biz to add to that value when they aren't using said plane, if I read it correctly.

Sounds like what Beech is doing with their 135 cert. They are putting private owners on their program with benefits such as flying their plane with Beech pilots when it would otherwise not be flying (hence revenue). I may be wrong with my assertion, so tell me if so....

 

[t-bone]

fancy math!

Juan,

That sure was a lot of numbers you threw out there, I'm sorry but I'm not even sure what the point is you're trying to make. Is it that it's impossible for XOJet to be less expensive than the other options out there?

I'm not a numbers guy, and I don't sit in on the sales presentations. I'm just a pilot, and I get to hear the feedback from our owners firsthand. When they tell me that "we love your airplanes, we love the crews, AND you're 40% cheaper than NetJets" I don't pull out my HP financial calculator and ask that they prove it.

If that isn't sufficient for you, then please schedule a meeting with our sales people and find our for yourself. Here's how to find them: http://www.xojet.com/ownership/index.php

I wish I had all the answers, but like I said, I'm just a pilot.

 

[On Your Six]

It's All About the Tax Shield...

But they do pay for the entire plane? Take a CX, for example. At $20,000,000, they are now exposed to the ENTIRE cost of depreciation. Say a CX is worth 65% after 5 years and 1,000 hours a year in the airframe. An owner flies 300 hours a year or 1,500 hours over 5-years.
They have lost $7,000,000 or $4,666 an hour of asset value. Now take a 300-hour fractional owner who buys the plane for $7,500,000. With a 35% loss, the total loss will be $2,625,000 or $1,750 per hour. A difference of $2,900 per hour.
Now factor in the cost of capital. $20,000,000 at 8% a year is $1,600,000 for year one or $5,333 per hour. Cost of capital on the fractional owners $7,500,000. 8% is $600,000 during year one or $2,000 an hour for a delta of $3,333 an hour.
Combining these two differences yields $6,233 an hour or $9,350,000 over 5-years.
If you don't think most potential owners won't consider this, you are crazy. Very, very niche market, imho.

Owning an airplane is an excuse to pay less taxes. Wealthy owners are interested in tax shelters - depreciating assets that will reduce their taxable income. So, a private jet that depreciates at 15-20% per year is a GOOD THING. Why does Jim Carey own a Gulfstream V? Does he use it all the time? Nope (I think Avjet manages it for him out of BUR). The point is that the millions in depreciation expense every year are applied against his movie earnings and it reduces his taxable income (say he earns $20 million this year - he then claims $5 million in depreciation expense on his GV - he is only taxed on $15 million). At the same time, he can sell the GV in a few years at a value near his original purchase value (the residual value of the asset is key - what you can sell it for a few years down the line) - it turns out to be a good investment for wealthy people who are looking to reduce their taxable income. Most of these assets retain the majority of their market value unless they are totally beat up. I am sure XOJet is having no problem finding wealthy Google employees/investors in the San Francisco area who want both nice transportation and an effective tax shield (shiney new Citation X or CL300).

By the way, the Netjets shares are also depreciable assets over a 5 year period - it is the same concept but a smaller dollar amount with the fraction.

 

[NJA Capt]

When they tell me that ...you're 40% cheaper than NetJets".

There is a market for both. Much like the markets for Toyota and Lexus. The Toyota version amy be "cheaper," but the Lexus has more appeal to a certain clientel. NetJets has never advertised as a discount source of air travel. It is what it is.

 

[skiandsurf]

Juan,

When they tell me that "we love your airplanes, we love the crews, AND you're 40% cheaper than NetJets" .

I am confuses. I thought it was THEIR plane, now its XOJets plane?

One of the many benefits of NJs, is they have a variety of planes to choose from.....1 guy going from SJC to LAS can get by with a small plane (less money). The same guy wants to take his family, and nannies, to Hawaii...take a G4. (can you sqeeze 12 people in a C300?).

In reality, XOJet sounds like any other charter or management company, but with 2 aircraft types.

 

[Wiggums]

The same guy wants to take his family, and nannies, to Hawaii...take a G4. (can you sqeeze 12 people in a C300?).

I hope that's not part of the sales pitch at NetJets. If I can afford to buy a whole Challenger 300 then I can afford to charter a Global for the once a year trip that has more then 9 pax.