Learn to Fly Private

Welcome to the 21st edition of "Learn to Fly Private".

Last week we talked about LIFT aviation and their dry-lease brokering service and aircraft management, and it was one of the most opened and most replied newsletters I've written. Seemed to strike a cord! Today, I'll talk about another novel approach to fractional ownership based in Milwaukee (KMKE) that has some compelling numbers.

If this is your first time joining, welcome! You can catch up on how we got here by reading any of the back issues here.

As a reminder, I do free 15 minute consulting calls only available to subscribers. You can book using this link. Totally free, and most people say they find it useful.

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Now let's dig in...

Jet Out of MKE for Under $2,000 an Hour

I recently read an article from Private Jet Card Comparisons about Jet Out's new Citation CJ4 fractional program based out of Milwaukee that caught my attention. It reminded me of the startup VLJ services of the pandemic era that promised at-cost fractional flying to owners, and a few of which have already been victims to the post-ZIRP reality check. Most of the data for this newsletter will come from that article, so shoutout to Doug Gollan for sourcing the information. If you're a long time reader, this isn't the first time you've heard his name.

Jet Out History Sounds Familiar

Jet Out was formed out of the corporate flight department of Phoenix Investors, an industrial commercial real estate development firm out of Milwaukee. Having a pretty significant corporate flight department themselves, Jet Out spun out to offer a similar service to their local community. The secret sauce: they own an FBO at MKE so they're not wholly dependent on revenue from the fractional program.

Just by looking at this map, you can see why a corporate flight department would be necessary to manage the acquisition, leasing, and operations of over 80 million square feet in their portfolio. They should be a guest on the @fortworthchris podcast.

Many of the readers of this newsletter are in the real estate business, as it is a natural fit for private aviation. The complexity of the physical world and often times, properties are located in areas with limited commercial air service, makes a perfect use case for private aviation.

The Aircraft: Cessna Citation CJ4

Look at the map above, then look at the map below (the range map of the CJ4 departing from MKE from Textron's website). The Venn Diagram is a circle. This makes every property accessible, and with a takeoff runway length requirement of 3,400 feet, the CJ4 is the perfect aircraft for the mission. It makes sense why the CJ4 was, because if it works well for Phoenix it will work well for others. There is an advantage to being based in the midwest and not in a coastal city, because you have unlocked essentially all of the contiguous US, Mexico, and most all of Canada (sorry if there's any readers in Yukon Canada or Alaska).

We talk about aircraft mission fit a lot, and another reason the CJ4 is a no brainer is the amount of passengers that it can carry. For most business aviation trips, there is often fewer than 6 passengers on any given flight. Oh yeah, it passes the bathroom check too (those that follow me on X are familiar with the bathroom check.)

There are currently three CJ4s under management, with another 4 on the way in 2024. They also operate three TBM 900 series turboprops which are slowly being replaced by Citation M2's.

Pricing and Fractional Model

Here's the piece that you're probably wondering: how much is this going to cost me? You know I always come with the numbers.

Acquisition Cost and Management Cost

As in all fractional programs, you are purchasing a piece of one aircraft with a five year contract. Jet Out allows you to buy as small as a 1/16th share, which puts them in the same league as Volato or Airshare.

• Acquisition Cost: $859,000
• Monthly Management: $6,385

The management fee is much cheaper than their floating-fleet counterparts by a long shot. The acquisition price is what it is, and the purchase price is around $260k more than the 1/16th on the Airshare Phenom 300 fleet. The monthly management, though, is significantly less expensive ($4200 a month cheaper) than Airshare or Netjets. You'll make up the delta on aircraft purchase price simply on your savings on the monthly management fee, not to mention how much you save on a per-hour basis. As a reminder, in fractional programs at the end of the 5 year contract, there is a residual value of the aircraft.

Days Based Model

Jet Out operates on a days based model, which means when you buy 1/16th of the airplane you get access to 20 days on the aircraft and can fly as many hours as the pilot duty hours allow. You can also keep the plane with you overnight if you need to. One caveat you do have to pay repositioning hours to get the airplane back to MKE unless Jet Out is able to sell the empty leg or there's another owner needing to take your empty leg.

Hourly: The Big Difference

You're basically flying the airplane at cost. Remember in a past issue on The Real Numbers Flying the CJ3, we estimated the direct hourly operating cost at $1,706 per hour including maintenance reserves and fuel. At Jet Out, they're charging $1,800 per hour. That's awesome. Here's how it breaks down.

• $840 per hour fixed, covers maintenance
• $65 per hour that covers FBO fees etc.
• Fuel is a direct pass-through cost, currently at $895 per hour

This is an awesome hourly rate compared to what it costs to operate the plane. Jet Out only flies newer, more reliable aircraft which is how they're able to charge so little to the owners for the direct operating cost. They also have maintenance in house, so they're able to save on the maintenance costs as well.

As a fair comparison to the earlier point, the Airshare equivalent hourly rate is $3,079 for the express rate, which means the aircraft stays with you for the whole day and returns to starting location. Averaging 3 hours per day of use, thats $76,740 per year less, or $383,700 less over the life of the 5 year contract.

Availability Not Guaranteed

There were a lot of reasons why Jet It failed, and Craig Fuller (our CEO) wrote about their woes here. A big reason for the failure was that they guaranteed aircraft availability to their owners, even if it wasn't their aircraft, which meant that they had to charter off-fleet aircraft when they had one down for maintenance. If you're charging $1800 an hour and paying $4000 an hour, the "math don't math."

At Jet Out, they don't guarantee availability but instead its on a first come, first serve basis. This allows for predictability for the company and a stable business model. It means a bit of unpredictability for the customer. Its a trade off and aligns the business for the long term, which is ultimately good for the customer. We had to scramble to sell off the HondaJet fraction when Jet It told owners to find a new home for their aircraft. You don't want that.

Who is this right for?

Currently, the selling radius covers norther Illinois (Chicago), as far north as Green Bay, and Western Michigan. Apparently, there is a West Coast Florida base coming at some point as well. If you reach out to them, let them know you read about them in my newsletter. This isn't a sponsored post and I didn't get paid to write this, but I do know a few people on their team and they're good folks.

Why the Comparison to Jet It?

I know I'm making a lot of comparisons here to Jet It. They're the most recent legitimate market player to have gone out of business. The contrast that I'm trying to paint is that many of the mistakes that plagued Jet It are not being made by Jet Out. I think it is a sustainable business, as long as there is margin built in to the management agreements and there is some margin built in to selling the fractional shares. Discipline hard in business, but the executive team is giving the right indicators that they're building a sustainable business.

Speaking of Light Jets and Very Light Jets

Here's a cool chart on new deliveries of VLJ and Light Jets that the research team at Firecrown (the media company that we're a part of) put together.

There's a lot to unpack in this report, but my quick take on it is that the Phenom 300e continues to grow and outsold the CJ3/CJ4 by 2 aircraft. Textron's ramp-up in a post-pandemic world hasn't been as quick as Embraer's, which allowed them to squeak past the CJ3/CJ4 market. The Vision Jet continues to dominate both categories in sheer number of aircraft delivered, as they're primarily selling to owner flown pilots that are stepping up out of SR22T's.

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Until next week,

Preston Holland

p.s. If you love this newsletter, it would mean a lot to me if you forwarded it to a friend that also needs to learn more about private aviation. I want to help as many people as I can confidently fly private.

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