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At desert airports across the American west, scores of used Embraer E135s sit unattended, retired by American Eagle, United Express, and Delta Connection. Today, even regional airlines prefer airplanes twice as big as the 37-seat E135s.
But that makes them cheap to buy. And for one company, that means opportunity. Last year, JetSuite, a Southern California-based private jet operator, said it was buying 10 planes to start a business that operates more like a traditional commercial airline.
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It’s called JetSuiteX and it’s been flying for about a year. JetSuite has five airplanes and they generally fly from two airports in California — Burbank, near Los Angeles, and Concord, near Berkeley. Besides flying between the two airports, JetSuiteX destinations include Bozeman, Montana and Las Vegas.
JetSuiteX has one major advantage over traditional airlines. Its planes have 30 seats, allowing them to operate under different rules than aircraft with 31 or more seats. Importantly for customers, that means no Transportation Security Administration screening. Having 30 seats allows JetSuiteX to operate from private terminals and passengers may arrive 15 minutes before departure.
JetSuite bills the experience as “everyone’s private jet,” but that’s probably misleading. While ground service is close to what private jet passengers experience, up in the air, JetSuite more closely mimics first class rather than a private jet. Seats have 36 inches of pitch, roughly equivalent to what United, Delta, and American offer up front. On JetSuiteX, booze is free, as is Wi-Fi.
For now, JetSuiteX is still a small portion of JetSuite’s business. Since its 2006 founding, the company has focused on traditional private jets, with a fleet of four- and seven-seat airplanes. Private jets remain the company’s strength, but CEO Alex Wilcox, a former JetBlue Airways executive, is intent on building his airline-style business. JetBlue made an investment in JetSuite last year and Wilcox said it will help the company grow JetSuiteX.
We spoke to Wilcox recently about JetSuiteX and why he believes the airline can grow its fleet to 100 jets.
Note: This interview has been edited for space and clarity.
Skift: You’ve had JetSuiteX for about a year. What made you decide to start this segment of your company? How is it performing?
Alex Wilcox: It’s good. We’ve been flying for a year now. April 20th was our official anniversary date of revenue operations. It’s going fantastically well. Customers absolutely love us. We have a [net promotor] score of 90 which is 10 points higher than the next highest brand that we’re even aware of, which is Nordstrom’s. People love the product. The only thing that they are dissatisfied with is that we don’t fly everywhere. The number one request is to add more markets.
We started JetSuiteX because we were frustrated regional travelers. We hated flying commercially with all the indignities that it offers. We thought it was ridiculous that you had to show up two hours early to an airport whether you’re flying for one hour or to the other side of the planet, and we knew there was a better way. We also saw two data points. One was that our customers on the light jets — the Phenom 100s and the CJ3s — were paying us $6,000 to fly at the same time in the same markets as the major carriers, just because they didn’t want to deal with the terminal.
We noticed that regional travel has diminished pretty dramatically in the last 10 years, we think largely because it’s turned into such a hassle. We know personally that it’s a wash whether you drive or fly now and that’s not what the Wright brothers intended, so we started JetSuiteX to put the speed back into aviation and make short trips what they’re supposed to be. Short.
Skift: How many aircraft do you have?
Wilcox: We have five airplanes currently.
Skift: On your way to how many?
Wilcox: Probably a hundred or so in the next five years. That’s the five-year plan.
Skift: But you do not have that many firm orders, right?
Wilcox: We have firm orders for 10 airplanes.
Skift: So five more?
Wilcox: Yes, but airplane supply is not the challenge in this business. The Embraer 135s we’re operating are in plentiful supply in a desert near you.
Skift: Big airlines hated the E135s because of the operating economics. Their regional partners eventually retired most 37-seaters in favor of larger jets. You’re taking the same planes and putting 30 seats on them. Why do the numbers work for you?
Wilcox: They don’t hate them. It’s just compared to, what else do they have now?
There has been consolidation where we’re down to three or four major airlines now. And then there was a change in pilot union rules with what are called the scope clauses. It used to be that any airplane that had more than 50 seats on it operated under a given brand, say American Airlines, had to be operated by an American Airlines’ pilot.
In the course of all the consolidation in the marketplace … new deals were struck with the pilot unions. Now the aligned regional carriers, like SkyWest and ExpressJet, can fly [larger] airplanes.
The markets responded. You now have the CRJ700 and 900 and the Embraer 170 and , and they pay those pilots a lot less than the mainline pilots are paid. As soon as the [union contracts] allowed those lower paid pilots to fly much bigger airplanes, the value of the smaller airplanes disappeared. The economic value.
The [big airlines] basically either abandon markets like Carlsbad, [California] or they switch them to bigger airplanes, 70-seat airplanes with the regional carriers. That means that all of the 37 to 50 seat airplanes like the ones we fly become un-economic and therefore much easier to buy.
Skift: What does a used E135 cost?
Wilcox: It all depends on how much time’s left on the engine, and how much time is left on the airframe. But I will say that you can buy a very nice, used Embraer 135 for considerably less than you would pay for a four-seat brand new Phenom 100 [private jet], which would be four million bucks.
Skift: How much money do you have to put into an airplane to take it out from the desert and put it in your configuration?
Wilcox: We budget about $1 million for the improvements. We take out all the airline plastic. We take out the overhead bins into which you really can’t fit anything besides a coat. We add a coatrack. As you pointed out we take out two rows of seats, plus that one seat by the front door. So we remove seven seats. This allows us to fly under Part 135 as well, which is essential to our business plan.
Then we add W-Fi. We add 110 volt power to every seat so you can charge your electronic devices. We add some sound insulation. We take out those gross old yellow fluorescent lights that make every cabin look like you’re back in the ’70s and replace them with brand new white LEDs which makes it feel like a modern airplane. It’s a huge, huge change. But for those LEDs, because they’re on an airplane … We actually have to go and spend $40,000 just on LED lights. [It’s not like] buying the Christmas lights at Home Depot.
Skift: From Concord and Burbank, you fly several places but there’s a lot of frequency to Las Vegas. Why does Vegas work?
Wilcox: Vegas is a bottomless market at some prices and it’s where we’ve gotten the most traction the fastest. Fridays and Sundays we’ve got five flights a day from Burbank to Vegas and two flights a day from Concord to Vegas, so Vegas is certainly nexus for us.
One thing that we found is that the more painful it is at one end or other at the journey, the more likely people are to choose us. And McCarran airport on the peak days is not a very pleasant place to be. So I think people are voting with their feet and coming to us. And it’s an easy market to market because we know the property owners there, we know the hotel owners. A lot of them are our customers now.
We’ve seen best success in that market but we did add seasonal service and we expect we will again next winter from Burbank to Mammoth Mountain. It’s very popular with the skiers, especially this winter with all the snow. And we will also fly from Burbank and San Jose to Bozeman, Montana. That’s actually prominently for the members of the Yellowstone Club but also Spanish Peaks and other people who have ski places up in the Bozeman area.
But our bread and butter is the major markets. Providing a better solution for the major markets. Concord is an interesting story too because it’s an airport that hasn’t had service in 28 years, until we got there a year ago. That market has been building very nicely so both to Burbank and our weekend service to Las Vegas.
Skift: What’s your pricing strategy? Are you roughly competitive with walk-up fares from major airlines or do you do your own thing?
Wilcox: When we’re in the market we kind of ignore with what other people are charging. One thing we don’t want to do is gouge people so you’re not going to see $600 fares for 45 minute flights like some of our competitors do — where it’s the last seat and they’re going to charge you through the nose for it. Our last seat will be more expensive. It might be $300 or maybe $350 on a short flight but it’s not going to reach the same heights that our competitors do.
Our target yield is pretty simple. We want to make $189 per seat. Our average flight is one hour, so we want to make $189 per seat per hour with about an 80 percent load factor. You can back into our economics from that. Whether it’s one guy spending $5,000 for one ticket or 30 people spending say, $150 each on a full flight, as long as we get that average yield, that’s what we’re shooting for.
Skift: Is the $189 referring to total revenue or profit per seat?
Wilcox: That’s total. That’s the gross, except for the taxes. It’d be a $200 ticket basically and Uncle Sam will get his $14, $15 on the 200 and we’ll keep the rest.
Skift: Why are you sure this strategy is scalable and you’ll find routes for 100 airplanes?
Wilcox: Lots of evidence that flying commercially sucks. There are a lot of markets that are either being abandoned [by large airlines] or they’re just really inadequately served. If we can go to a market and give you a 45 minute flight that’s a 90 minute total experience versus a 45 minute flight on our competitors that’s a three or four hour total experience, I know people are going to spend the $30 premium. And that’s what we’re looking. That $30 premium [allows passengers] to buy back those two hours of their lives.
Skift: What markets interest you? And are they all on the West Coast?
Wilcox: Yeah, the next year or two is probably going to be on West Coast. You’ll see more markets coming out of Las Vegas. We hope and expect to be out of Orange County later this year. You’ll see more West Coast markets initially but then our East Coast plan is probably a year and a half away. Airports like New Haven and Bridgeport. Places that have very little if any service. But also larger places and alternative airports like maybe Manassas, Virginia and Morristown, New Jersey as opposed to Dulles and Teterboro
Skift: What about security? Your big draw is that passengers on JetSuiteX don’t have to go through TSA checks, because you operate under FAA Part 135 regulations, not Part 121, like the big airlines. It saves time, but is it less safe?
Wilcox: First of all, it’s not no security. We do 100 percent [explosive residue] detection on every single bag that goes in the airplane, every single customer that boards. If you’ve handled explosives we’re going to know it.
There’s a layer of physical security as well. Then we also have the same cockpit door you have an Part 121 transport airplane that all the major airlines fly so if you’re a bad guy and you’ve got a weapon of some sort, you’re not going to be able to get in the cockpit.
I should also point out that we go well beyond the security regulations that TSA requires. And the TSA administrator has been personally briefed, by me actually, as to what we do, so they’re very aware of it. TSA is aware of it. DOT is aware of it. FAA is aware of it. It’s not like we’re doing this until somebody notices. We actually have all the major regulating agencies and local law enforcement totally OK with the way we’re operating and don’t see a lot of risk in it versus other forms of transportation.
Skift: But not having the TSA must be a huge draw for JetSuiteX, right?
Wilcox: I would think so, yeah. Even if the worst thing happened and we were required to invite TSA into our private terminals, it’s still only 30 people at a time, not 150 people at a time, every time an airplane takes off. Even if it happened it would still be an easier process, but I certainly hope that does not occur.
Skift: Earlier this year, JetBlue made an investment in JetSuite. Besides money, what do you hope to gain?
Wilcox: JetBlue’s a great strategic partner to have. Obviously have a lot more customers than we’ve got. We came out of the gate even before the investment with the True Blue [frequent flyer] program. JetBlue is going to be doing some marketing help with us. You’ll be seeing JetSuiteX announcements onboard JetBlue, [and] on some of the products that they’ve got, in the seatback pockets.
They’re helping with some distribution as well, making jetblue.com available to some means of communication from us as well.
That partnership will continue to grow. They’ve been very helpful strategically as well. They help us source things like maintenance and fuel and supplier deals in the way that we couldn’t do on our own because of our scale.
Skift: Is the deal mostly focused on the JetSuiteX product or your private jet business as well?
Wilcox: They’re invested in the parent company. They’re invested in both the JetSuite Inc. and JetSuiteX business. It’s both but I would say that the comfort zone and what they see is the highest potential for them is certainly the X product.
Skift: Would you expect a future JetBlue passenger to fly from New York JFK to Burbank and then hop on a JetSuiteX plane to a smaller Western city?
Wilcox: I’m not sure where we’d take them from Burbank, but maybe Las Vegas. They could fly on JetBlue Mint to Vegas and then jump on a JetSuiteX flight to a smaller community like Concord or potentially Burbank.
Skift: What about selling a JetBlue customer a segment on a private jet? A JetBlue passenger might fly to Las Vegas on Mint, and then, perhaps to Jackson Hole on a private jet. Would that work?
Wilcox: Yeah, we pioneered that I think eight years ago with Singapore Airlines. That’s exactly it. You can buy a through ticket. Buy, say Singapore to LAX and then last mile would be JetSuite Inc., a light jet onto Las Vegas.
Skift: Could JetBlue strike a similar deal with you for that “last mile” connectivity via a private jet?
Wilcox: Yeah, I think it’s possible but the volume’s so small and these are mass market businesses that [fly] millions of people a year. It’s a lot of work to make those things work and I think the market finds it on it’s own. There’s only so many people that will spend six thousand bucks an hour for a private jet and those people can figure out how to make it work with themselves.
It’s nice in theory. We’ve tried it a few times. It drives a little volume but it doesn’t make it worthwhile for the airline. They barely notice it to be frank.
Skift: JetBlue said the investment was not material for the company. Was it material for JetSuite?
Wilcox: It was very material for us, yes.
Skift: How much did JetBlue invest?
Wilcox: Millions and millions. But we have not disclosed it.
Skift: How are you using the investment?
Wilcox: It’s something that’s allowed us to continue to operate, to continue to grow our product.