The Most Expensive Way to Fly Private
NetJets has paused jet cards sales and leases.
This is the second time in 5 years, and the first time since post-covid demand was the cause. About a year ago I wrote about The Flee to Fractional, showing how fractional ownership is really the only segment growing rapidly year-over-year, and as we move into a new era of wealth generation many are predicting that will continue.
When someone achieves material wealth, flying private is high on the list. I have had many DM exchanges with now-liquid founders or early employees, many driven by some sort of AI tailwind, and they want to experience the Time Machine. Their default is often a jet card with NetJets, but for right now that’s no longer an option.
Where These Jet Cards Come From
I recently interviewed Kenny Dichter, founder of Wheels Up and co-founder of Marquis Jet (what is now the NetJets Card) for my podcast The VIP Seat. Their invention created a secondary source of revenue for excess capacity at a higher margin. A low commitment product that started at 25 hours of flying, designed to give a taste of NetJets without committing to 50 hours per year and a 5 year contract. In exchange, jet card users give up “peak” travel day access, so you can’t fly the Wednesday before Thanksgiving or Masters Weekend for example. You still get the QS tails, the pilots in uniform, the safety standards, and the same equipment that fractional owners fly on.
While Marquis Jet may have created the jet card on the fractional fleet, imitation is the highest form of flattery.
FlexJet, AirShare, PlaneSense and most fractional providers now offer a jet card product that is very similar. In a business where you want your assets flying as much as humanly possible, you have two options.
- Put your fleet on the open market for charter, allowing volatile price movements, unpredictable fill rates, and a potential “cheapening” of the product
- A jet card product with higher pricing, predictable demand, and lower SLA’s than your fractional program (albeit still a commitment to fulfilling lift.) It also acts as a customer acquisition tool.
The Reality of a Fractional's Jet Card
The reality of the fractional’s jet card is that it’s a supplement, not the core product. Many fractional sales people will tell you at a cocktail party that they don’t like selling jet cards. Probably because they get smaller commissions and the customers are less sticky. Jet card fliers tend to be more price sensitive, and on a per-hour basis the fractional 25 hour jet card is one of the most expensive ways to fly private.
The fractional model is the most capital efficient way to grow a fleet for operators. It takes an asset heavy business and makes it capital light, because your owners are paying the acquisition capital cost and carrying the depreciation.
What a wonderful business!
You now become a country club instead of a hotel, collecting your margin on monthly subscription fees net of costs. Adding jet cards is “found money” because you already have the infrastructure, fixed costs don’t change, and the jet card revenue is much higher margin.
Oh, and it has Warren Buffet’s favorite mechanism… float! (No wonder he bought NetJets…)
Let’s do the math.
A fractional owner pays ~$4100 per hour on a Phenom 300 (depending on fuel surcharge) and their monthly shared expense covers airplane overhead (hangar, insurance, pilots, etc.) and corporate overhead. The company also make a bit of margin on selling the shares themselves.
Assuming a target of 1200 hours per year per tail, and 800 per year for the fractional owners, there's additional capacity for the jet card. Not only this, but the fractional players also have what’s considered “core fleet” which is technically owned by the company and is used during surge demand or mechanical recoveries.
A jet card on the same Phenom 300 fleet costs $11,200 per occupied hour (credit: Private Jet Card Comparisons). With direct operating cost per hour is around $2600 per hour according to AviaCost, there is a slight margin on the fractional flying, and much higher direct margin for the jet card flying, all things being equal.
Leases are a Bit Different
A lease is a bit different than the jet cards. It looks more like a fraction. It’s great for those who don’t want to commit large capital costs up front, and don’t need the chunky bonus depreciation that a fractional can provide.
The lease creates ~17% unleveled IRR for the provider, and has a slightly higher hourly cost as well (+25% ish). The monthly fixed costs are the same. So, while less capital efficient for the operator, the leases have better economics.
Why is NetJets pausing Jet Cards and Leases?
In what world would a business give up their highest margin flying hours?
The obvious answer is that demand for fractional is off the charts. The thesis around significant wealth creation from AI/tech and generational wealth passing down is proving out quickly. I have heard anecdotally that a few of the airframe fractions at NetJets are sold out for 6-9 months, giving them enormous pricing power and limited discounting.
The not-so-obvious answer in my opinion is new airplane delivery timing is making servicing net-new customers difficult. When you get a quote on a Citation Ascend, for example, you can’t actually “take delivery” of your airplane for several months. In the interim period, fractional companies have a mechanism where you can still fly while you’re waiting on your actual share of the aircraft to be delivered. This eats up the excess capacity in the near-term traditionally fulfilled by jet cards.
The second order cause is there’s essentially zero slack in the new aircraft delivery book. When NetJets placed an order for 100 jets per year for 15 years from Textron, the OEM can properly ramp up production. Multiply this across manufacturers and providers. Yet, OEMs are experiencing massive demand in the non-fractional order book as well so there’s little to no room of “pulling forward” orders for fractional. The OEMs continue to stay disciplined in not expanding capacity too much. They’re also still blaming a lot of COVID supply chains, which in my opinion may be an excuse nearing the end of its useful life.
What are your Alternative Options?
Flying on a NetJets jet card is one of the most expensive ways to fly private, period.
But, it’s a premium product at a premium price.
I was talking to a friend recently who was telling me about how much he loves his NetJets Latitude Jet Card, but is always amazed at how much of a premium he is paying when he looks in the open market.
If you are picky on quality, safety, reliability, and a unified experience, then a jet card or lease on a fractional fleet is the way to go.
Your alternatives today for a similar quality and experience level is FlexJet (still selling as of now), VistaJet, Airshare (in the CL3500 and Phenom 300, so not perfectly 1-1), JetOut in the CJ4 (comparable to the Phenom 300), and PlaneSense in the PC24. These fleets are bought new from the factory, maintained to a high level, and have a high level of consistency.
I spoke with another friend who was complaining about constantly being flown in older, ragged out airplanes on his jet card.
I asked him why he chose that provider.
He said it was the cheapest.
Well….
Until next time,
Preston Holland
P.S. send this to a friend who has a NetJets Jet Card that they can renew, and tell them you want to go on a ride with them because you can't buy a new one.
Preston's Links:
Financing Business: Prestige Aircraft Finance
New Empty Leg App: FastJets
Follow me on X: @preston_holland
Listen to my Podcast: The VIP Seat
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