Vista Global To Acquire JetSmarter

In a deal announced April 9, Vista Global Holding (VGH), the asset-light model business aircraft access provider, acquired what it calls the last “pillar” of its strategic growth plans, and that pillar, charter broker/market disruptor JetSmarter, found a parent/protector to ensure its future and exploit its mobile technology on a global scale. The acquisition marks “an important milestone for Vista Global: accelerating and executing our vision of digitizing the entire private aviation offering,” said VGH founder and chairman Thomas Flohr. “Customers today want speed, reliability, and value...JetSmarter’s technology will digitalize Vista Global’s market-leading customer offering to program members and on-demand customers.”

If approved, the transaction will create a credible global lift provider positioned to offer every form of business aircraft access from per-seat charter (JetSmarter) to luxury large-cabin access programs (VistaJet, Vista Lease), with corporate-style on-demand and subscription-based service in between (XOJet). The deal will also further the reach of VGH’s recently launched TechX technology division.

JetSmarter said it will now “enter the next innovative phase of its history... allowing JetSmarter to fully realize its potential to advance the private aviation travel experience.”

Dubai-based VGH was launched just last August and the following month purchased XOJet, owner and operator (O&O) of the third-largest U.S. charter company, based on flight hours. Flohr traced VGH’s interest in JetSmarter to the purchase of XOJet, for whom the broker/app developer provides an exclusive mobile sales channel, bringing the Fort Lauderdale company to Vista’s attention.

“XOJet had a very close partnership with JetSmarter for a digital front,” Flohr told AIN. “We saw how well this worked.”

The transaction “was conducted on the basis of an equity swap,” Flohr said. “We’re not disclosing the financial terms.”

JetSmarter investors Clearlake Capital and Jefferies Financial Group will gain a stake in Vista Global; Jefferies LLC acted as financial advisor to JetSmarter.

Absent from news of the deal was the voice of JetSmarter founder Sergey Petrossov, whose personality was inextricably linked to the company’s brash style. Founded in 2012, JetSmarter’s per-seat charter model and free seat offering drew thousands of members and large media attention, before changes in program rules and heavy-handed management tactics provoked a backlash among customers and extensive negative publicity. Yet the proprietary booking technology underpinning JetSmarter’s operations has long enjoyed industry respect.

The transaction comes on the heels of JetSmarter’s reported agreement to settle a class action arbitration stemming from members’ claims the company’s rules changes vitiated promised benefits. Several lawsuits have also been successfully filed.

“We’re obviously not commenting on any alleged lawsuits,” Flohr said. “VistaJet and its shareholders, after extensive due diligence, came to the conclusion [the acquisition] will add a lot of value.”

No changes at JetSmarter are anticipated should the transaction close (anticipated this quarter), Flohr said. “JetSmarter was built by a lot of very, very smart people. It’s the intention to keep this great workforce. This isn’t about consolidation of human resources,” he continued. “We’re not looking at layoffs, we’re looking at using the global scale we have to extend the platform.”

Integration Expected This Year

Once cleared to proceed, “We’re expecting a 20-week period of execution” for system integration, Flohr said, after which “the [JetSmarter] technology will be embedded throughout Vista Global Group.” That will bring immediate benefits to online offerings including catering, flight tracking, concierge services, and “future value drivers,” as he called such services. “It’s all going to happen on the first day.” Meanwhile, “VistaJet customers will always have a human interface, a dedicated services person” available,” Flohr said, though “there are elements of fulfillment going very fast and strongly toward the digital” channels.

As for the viability of per-seat charter, JetSmarter’s signature offering, “I had to be educated about it,” Flohr said. “It could have merit on certain routes, it could be an alternative to the airlines. We believe it’s a valid business model. We need to see on what routes this is going to be accepted.”

“From a sourcing and operational excellence point of view, seat-sharing and dedicated charter are not different,” Flohr continued. “One flight has a lead passenger who pays for everything, and if you bring in the crowdsourcing element, you’re basically lowering the cost for the lead passenger. They operate under very similar execution rules.”

As for doubters in the model’s future: “If you would have asked the world five years ago about the Uber pool concept, the world would have said no,” Flohr said, noting a Vista executive in New York City used the service daily. “One has to stay very open-minded in the shared economy trend we’re in,” he said. “I don’t’ think there’s a reverse gear on the shared economy.”

In addition to its own per-seat offerings, JetSmarter provides access to seats on JetSuiteX, the California-centered airline-style per-seat offering from JetSuite that uses Embraer 135s in 30-seat configurations.

JetSuite, an O&O with a light-jet dominated charter fleet (Embraer Phenom 100s and 300s), is marking in 2019 its 10th anniversary since rebranding in 2008. Over that challenging decade, the scrappy low-cost operator, led by founder and CEO Alex Wilcox, a JetBlue founding executive, has demonstrated a formula for success in the low-margin but potentially high-demand light-jet charter market.

Flohr clearly likes the O&O charter fleet model. Unencumbered by owners’ schedules or individual asset depreciation concerns, these fleets typically register much higher hours per airframe than average charter aircraft, and the O&Os don’t pay 85 percent of the revenues to aircraft owners. But like per-seat charter, the charter industry has long viewed O&Os as unworkable, notwithstanding the seeming success of JetSuite, XOJet, and VistaJet itself, all established on the model. Hence, individually owned aircraft operated by management companies comprise the great majority of the on-demand charter fleet. Flohr also likes technology, as does JetSuite; the latter was the first charter company to offer guaranteed online pricing and booking.

With JetSmarter onboard, VGH has all the “key ingredients” for growth, and plans no more strategic acquisitions, Flohr said. But he added that, “If we see in years to come a component of this industry [worth acquiring], we will stay very open-minded.” Could JetSuite qualify as such an asset? That would clearly be a tactical rather than a strategic acquisition, but could make sense for both, particularly in providing a way to accelerate expansion of the JetSuite offering into more regional markets.

Unlike JetSmarter, no whiff of desperation surrounds JetSuite. It appears to have solid foundation with backers including JetBlue founder David Neeleman. But Vista has the global access and likely much greater capital resources to enable JetSuite to expand more aggressively. Gazing into the future, one must wonder how Wilcox envisions the competitive landscape ahead if he had to contend with the technology and will Vista would bring to his market in furtherance of its global ambitions. VGH also owns Vista Lease, offering owner-like access to luxury long-range aircraft without long-term commitment or capital costs. VGH has ordered 30 Bombardier Global 7500s for both VistaJet and Vista Lease customers, Flohr told AIN.

With the expansion of full-service access solvers VGH and Directional Aviation Capital (the latter offering Flexjet for fractional and lease; Sentient Jet for cards; OneSky for on-demand; and PrivateFly for technology and low-cost charter), independents may find growth, if not survival, challenged. Wheels Up, the Kenny Dichter bizav access vehicle, also lays claim to providing full spectrum service through tiered memberships, including a new shared flight product, and outside-fleet charter brokerage, in addition to its core fleet of Beechcraft King Air 350i turboprops and Citation Excel/XLS midsize jets. But Wheels Up currently evinces no interest in the global long-range luxury market, unlike Directional, which in addition to orders for Gulfstream’s new G500s and G600s, has options for 20 Aerion AS2 supersonic business jets, an agreement some derided as a PR stunt when it was announced in 2015, yet that appears more prescient with the passage of time.

The shrinking world of stand-alone O&Os includes Travel Management Company (TMC) and its light jet fleet, which consistently remains under the radar. Vista Global’s purchase of XOJet, which operates Citation X and Challenger 300 super-mid jets, from investment firms Mubadala and TPG Capital made headlines, though TPG and Mubadala announced it was for sale a year before, along with a timeline for its planned disposition. But TPG also owns TMC, and Phil Dobyk, TMC’s CEO, told AIN at the time VGH bought XOJet that TPG had no plans to sell. That was before the reality of Vista Global’s vision was manifest as it is now.

But a VGH/TMC acquisition/sale may not seem as compelling a transaction. TMC remains under the radar because, unlike JetSuite and other well-known providers, it sells primarily to the wholesale market: charter brokers, jet cards, and management companies that need supplemental lift. The charter market depends on this essentially excess capacity. But as long as an operator has access to it, and doesn’t have to worry about slack times, would it make sense for an uber provider to own it, even if one had the wherewithal? Perhaps we’ll find out.