Home Business Insider The founder of private jet charter company VistaJet reveals why a recession...

The founder of private jet charter company VistaJet reveals why a recession will be good for his business

The founder of private jet charter company VistaJet reveals why a recession will be good for his business

  • With the specter of the next recession looming, various industries, businesses, and individuals are preparing for potential impacts.
  • It might seem obvious that the private aviation industry could suffer during the next recession, but Thomas Flohr, the founder and chairman of the global private-jet charter company VistaJet, thinks a recession could actually benefit his business.
  • Flohr says he’s now focused on the possibility of attracting customers who currently own their own jets and are looking to downsize their travel expenses without giving up the luxury of private-jet travel.
  • In an interview with Business Insider, Flohr explained the reasons behind his optimism.
  • Visit Business Insider’s homepage for more stories.

There are a handful of industries that enjoy the dubious distinction of being viewed as recession-proof.

Health care will always be a necessity regardless of how the market is performing. Consumer staples like groceries and household items — and even candy— typically weather the ebbs and flows of the broader economy.

One industry seemingly on the opposite end of that spectrum: private aviation.

When the 2008 recession struck, corporate jet travel fell worldwide — the UK noted a 20% drop, for instance. It was a particularly abrupt decline because private jet travel boomed in the pre-recession years, pulling in high net-worth individuals and busy executives whose time is often better spent with a client, poring over deals, or visiting a supplier, rather than slogging through the bowels of a commercial airport.

Supporting the boom were nascent online charter-booking services, making it easier and more convenient then ever to charter a plane, rather than flying one you or your employer owned.

More than 10 years later, parts of the industry have recovered, and while plane-makers are delivering fewer jets than they once were, interest is on an upswing, the charter and fractional ownership markets have been thriving, and access to private aviation has increased through online and app-based marketplaces.

See also: Apply here to attend IGNITION: Transportation, an event focused on the future of transportation, in San Francisco on October 22.

However, late August saw significant volatility in the markets, and there are lingering concerns that the next recession is imminent.

Thomas Flohr is the founder and chairman — and de facto chief executive — of VistaJet, a global private aviation company founded in 2004. The company offers long- and short-haul chartered flights to subscription members.

Flohr bought the on-demand charter flight company XOJet in 2018, and the online flight-booking platform JetSmarter in early 2019, merging them with VistaJet under the holding company Vista Global.

VistaJet offers long-range private jet charters that subscription members can book, while XO allows instant booking for nonmembers, and booking shared flights, or requesting to fill an empty seat on an existing shared charter. JetSmarter does not own aircraft or operate flights, but its backend technology helped Vista Global develop XO, a unified online marketplace for the company.

Vista Global’s investors have expressed concerns about how a recession might impact the company, but its bond prices fell drastically when commodity prices bottomed out in 2016. Still, Flohr is confident about his company’s prospects during the next recession, whether it’s imminent — or already happening — or still a year or two off.

That’s because in his view, private jet charters are, in most cases, not an extravagance. Rather, he sees them as a cost-cutting tool for individuals and corporations who would previously have owned their own jets and eaten the cost of maintaining them when not in use.

“Average utilization [of corporate-owned jets] is 250 hours a year. That’s corporate waste,” Flohr told Business Insider during a recent meeting. “Commercial airplanes fly 4,000 per year. We’re currently at a utilization of about 1,000-1,100 hours per year. That drives the unit cost down [compared to a corporate-owned jet].”

While one concern would be that excess spending is reined in during a recession — so private jet use would be curtailed across the board — Flohr says that since founding VistaJet in 2004, the pattern he’s seen is that users tend to move down a level.

“In a crisis situation, people say ‘you know what? Let’s get rid of this airplane,'” Flohr said. “And then we see a trickle-down effect from ownership [of their own jets] to people coming to Vista. And we may see a trickle-down from some Vista customers who had guaranteed availabilities saying ‘look, it’s too expensive, let’s just fly on demand.'”

Vista’s acquisition of XO would help in that scenario, providing the next step down for users who would have otherwise left the company altogether during the belt-tightening periods.

Read more: Take a tour of the private jet that a billionaire chief executive flies around the world

The obvious counterargument would be that, while VistaJet may be able to capture business from corporations and users looking to give up their owned jets, the loss of users at the lower end who go back to flying commercial would offset that.

Flohr says he doesn’t worry about that risk.

“[Current VistaJet customers] may go to the XO marketplace and say ‘I don’t want to have a 200-hour commitment anymore, I only need to fly 80. I don’t need a program, but let me fly XO,” he said. “What might happen at the low end of the XO participants that they might go commercial for a while, but before they go commercial they would go for seat sharing.”

“And usually these things come back after a year or two,” he added, suggesting that the company would be rewarded eventually for weathering rough skies.

Flohr warned that he is not speculating about what the next recession will look like, nor when it will arrive; he said that his confidence is based on his observations of past crises that VistaJet has weathered.

“I look at the data of what happened in 2008-2009, the European debt crisis in 2011…the 2012 Arab spring, the 2013-2014 Russian Ukrainian Crimea invasion,” he said. “We went through every single one of these crises, and what happened was that you see an acceleration of waste elimination.”

“We don’t know what the next recession will look like, but we believe that we have the levers in place to do exactly the same thing again,” he added. “And that is: benefit from waste which exists, and be an alternative, rather than the CapEx being OpEx, and being a simple subscription model, and be prepared to lose some customers at the low end.”

Flohr said that he’s also optimistic because the size of the potential untapped market that could transition from owned-and-operated flights to VistaJet charters is significantly larger than the market he already serves. Overall, he said, the global market for larger long-range private jets — the type that VistaJet offers — consists of about 7,000 airplanes.

“Sixty-six hundred of that 7,000 are corporate airplanes, and the other 400 are spread between [the major subscription and on-demand charter companies]. So that’s 6,600 we can still address in a downturn,” he said.

Ultimately, Flohr said, that suggests that the stronger the economy is — and the less that corporations are actively seeking to cut expenses — the harder it is for Vista’s salespeople to convince corporations that they’re better off with a charter company than owning, maintaining, and operating their own planes, even if the planes are underutilized.

“A well-tempered, normal, relatively slow-growth environment is the best for us,” he said. “Slow growth means people look at efficiencies. The minute deficiencies are on the table: we [become the more attractive] choice.”

“Do I want a downturn? No,” he added. “But in booming economic times, things are not that easy for us.”