Comment on this story
Comment
Fed up with having his private jet tracked by climate activists typing on Twitter, Bernard Arnault has sold the capacious Bombardier 7500 aircraft belonging to his luxury goods company LVMH Moet Hennessy Louis Vuitton SE. But the world’s third-richest man isn’t about to join the masses flying commercial (quelle horreur!). Instead, Arnault plans to rent private aircraft: “The result now is that no one can see where I go,” he told LVMH-owned Radio Classique this week.
Test Tube Round Bottom Plain 12 X 75 mm 5 mL Without Color Coding Without Closure Glass Tube
![Test Tube Round Bottom Plain 12 X 75 mm 5 mL Without Color Coding Without Closure Glass Tube]()
Arnault’s riposte was a public-relations gift to private jet operators including NetJets, Flexjets and Vista Global, who have long touted the privacy advantages of alternatives such as fractional ownership and pre-paid blocks of flying time.
Happily, an until-now rather opaque industry is poised to subject itself to more transparency, not less. Two of the biggest private jet operators, Flexjet Inc. and flyExclusive, confirmed this month they plan to go public via special purpose acquisition companies. With Wheels Up Experience Inc. completing a SPAC listing last year, three of the industry’s five biggest companies will soon be publicly traded.(1)Tapping the public markets for cash will help private aviation grow faster — but it will also bring welcome scrutiny of its climate record.
So far, the threat of a global economic downturn has yet to puncture the industry’s optimism. Health concerns prompted many rich folks to board a private jet for the first time during the pandemic. The delays, cutbacks and crowded airport lounges that have beset commercial aviation lately have made them reluctant to give up their new habit.
While industry claims about a “democratization of private aviation” might be taking things a bit far, wealthy travelers certainly have more options these days, especially if they don’t wish to be tracked.
“Anonymity and discretion have always been key benefits of our program,” Patrick Gallagher, NetJets president of sales, marketing & service, told me via email. “Passengers cannot be tracked back to any tail number or flight.” Whereas “if you have your own jet…you can be tracked,” Vista’s billionaire founder Thomas Flohr told the Sunday Times last week. “With us, it’s completely anonymous.”
Chartering or fractional ownership can also be more cost-efficient than whole aircraft ownership. Even if you fly frequently and are hellbent on customizing your jet with a bespoke leopard-print cabin, a jet card — akin to a debit card for private flights — can make sense as a back-up. For the even more cost-conscious, discounted one-way tickets are available on so-called empty-leg flights when aircraft are being repositioned.
To be sure, the private-jet operators have had their share of issues. NetJets and others were forced to suspend jet-card sales last year to preserve service quality. Pilot shortages remain a problem; some private jet companies relied on US government handouts to retain pilots during the pandemic, which made it seem like taxpayers were subsidizing the travel habits of the super-rich.
Yet Flexjet forecasts $2.3 billion in revenue this year, more than 70% better than in 2019. One-third of private aviation users surveyed recently by Honeywell International Inc. expect to fly more next year compared with 2022; 64% expect to fly at least the same amount, while just 4% expect to fly less.
Wealthy fliers are better able to withstand inflationary pressures, but private aviation remains the ultimate discretionary purchase: NetJets, for example, lost more than $700 million in the 2009 recession.
Fractional-ownership customers commit capital upfront to pay for the jet, and agree to pay management fees for several years. So companies like Flexjet are “a little bit insulated from the ebbs and flows of aviation activity,” co-Chief Executive Officer Michael Silvestro told me. Dubai-based Vista often finances aircraft itself with debt but customers commit to multiyear contracts for a set amount of flight hours, and make regular prepayments. Businesses reliant on ad-hoc chartering could be more challenged.
“If fractional ownership is like a marriage and jet cards are a committed relationship, on-demand charter is like casual dating,” notes Doug Gollan, founder of Private Jet Card Comparisons.
Loss-making Wheels Up’s track record as a public company — the shares have declined almost 90% since going public — suggests investors now want to see profits, not just whizzy growth. In August, Wheels Up committed to become profitable on an earnings before interest, tax, depreciation and amortization basis by 2024. Flexjet and flyExclusive are already profitable.
Chartering and fractional ownership make more efficient use of private aircraft that otherwise sit unused on the tarmac. Most operators are investing in sustainable aviation fuels and/or have committed to become carbon neutral via carbon offsets. But there’s no escaping how private jets pollute far more per passenger and mile traveled. Until battery-powered planes become a reality, there’s a danger more demand just results in increased emissions.
Climate activists annoyed they can’t track Arnault can console themselves that while plutocrats have found ways to avoid environmental scrutiny, publicly traded private jet companies can’t.
More From Bloomberg Opinion:
• What Economic Clouds? Private Aviation Sees Blue Skies: Thomas Black
• Airlines Keep Gouging Passengers. Regulate Them: Adam Minter
• Don’t Cancel Private Jets. Here’s a Better Idea: Chris Bryant
(1) NetJets, is owned by Warren Buffett’s Berkshire Hathaway Inc. and doesn’t disclose much financial information. Vista also remains private having elected not to pursue a SPAC listing.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.
More stories like this are available on bloomberg.com/opinion
Source link: https://www.washingtonpost.com/business/the-private-jetboom-isripe-for-publicscrutiny/2022/10/20/e0056910-5034-11ed-ada8-04e6e6bf8b19_story.html?utm_source=rss&utm_medium=referral&utm_campaign=wp_business