XOJet Light & Midsized Jet Outsourcing Deal with TMC

[X-rated]

I will also argue that we're NOT all equal in how our product ("service") is delivered, and that "service" will be a key differentiator in sales.

I couldn't agree with you more, but I didn't want to start a fight.

Otherwise, insightful post. Have you considered when the fractionals began to offer those other products and why??? I stand by my statement that XO is changing the industry. Or, do you think the timing was coincidental?

 

[gret]

gret,

You're a smart guy, and I agree with and enjoy most of your posts. I'm pretty sure if you were a bit more objective, you would have no problem seeing the light.

1. XO IS profitable
2. XO has more than doubled in size since the economic downturn began.
3. XO is gaining market share while most of the fractionals continue to shrink.
4. By operating their own planes as a business, they are able to take full advantage of the tax befits you were talking about on another thread. They can pass those savings on to their customers whether they are flying for business or pleasure even into ASE on weekends and holidays. No need for the customer to open an office near their second home or worry about IRS scrutinization.

They offer a superior (or at least equal so as not to start a fight) product for significantly less cost on the most frequent and profitable routes. They prefer not to actively seek more expensive short and out of the way flying, but they are happy to accommodate those customers for a higher more appropriate cost. They have realized a straight hourly fee punishes the best customer and subsidizes the others. Their target customers are responding, and like it or not, they are changing the industry. It's no wonder you and other frac pilot's don't like or maybe not even understand what XOJET is doing. Your companies will either have to adapt or lose your most profitable flying.

From what I hear from current pilots, it's not nearly the company it was pre 2009. In my opinion, the arrogance of a small few will likely result in a union drive at some point. But, arguing with the business model while working at a true frac is a bit short sighted.

I think you may have misinterpreted my comment.

I don't know if Xojet is profitable or not, but knowing TPG and Bonderman, they aren't going to lose money so my presumption would be that Xojet is profitable, or at the very least has positive cash flow.

My point was that I'm not bright enough to know how you do it in today's economy...they are.

BTW...have they maintained the strategy of having others own the aircraft and paying them for the use, or does Xojet own all or part of the fleet?

 

[X-rated]

Thanks for clarifying.

I'm not sure if any of the few original owners still retain ownership or not, but the vast majority of the planes are now owned by the company.

 

[SDCFI]

There are a few things to consider here. From what little info is out there regarding pay/benefits XO is lower than both Flex and NJA, so cost advantage there. Also as X-rated said XO is able to offer bargain basement prices on high density routes (LA-NY) because the DH is low and utilization is high. Flex and NJA are obligated to take the owner from BFE to BFE and that is expensive and has to be built in to the contracts, so in effect the people that fly "efficient" trips are overpaying while those that fly "inefficient" trips are underpaying. Can't speak for NJA but I know Flex is developing strategies to even out the costs and provide a price benefit to the customers. Through the downturn the owner retention at Flex has been at historical highs, however those owners are flying less. In a lot of cases they're downgrading their share size and going to places like XO and straight charter for the cheap flights, and using the shares when they need multiple aircraft or have an inefficient itinerary. If the true fracs like NJA and Flex can get their pricing more competitive with the charter and XO types you'll see a lot of those customers migrating back I think. There will always be a segment of customer who is loyal to their frac and will stay regardless of price. Then there are those who will always shop for the lowest price and go there. Somewhere in the middle are the folks who are willing to pay a premium for the fractional product, to a point, as long as the value matches the cost. These are the folks they are targeting by trying to reduce their cost of ownership on those efficient trips. I'd bet these innovations would've occurred anyway as the fractional business model evolved, but no doubt the advent of XO and others forced operators to start sooner than they would have naturally.

 

[Fresh Air]

Sounds like XO decided to go with the "major airline" model: Fly the most profitable routes yourself with larger aircraft, and farm out the low profit margin short haul stuff to scuzzball regional outfits.

 

[Hawkered]

I totally agree.

I hear Globals are coming. Only about three so far.

 

[flyzimex]

I totally agree.

I hear Globals are coming. Only about three so far.

At XO? Haven't heard that one yet..well, now I have.

 

[propsarebest]

We can't even get the 605 to fly... no globals here...

 

[X-rated]

We can't even get the 605 to fly... no globals here...

I'm pretty sure that's a conscious decision by management in an effort to limit the hours on the airplane since it's for sale. If you can't sell charter on a 605, you really need to get out of the business.

However, I agree. No chance of Globals anytime soon at XO.