JetSmarter attracts controversy—and customers
JetSmarter, the members-only charter brokerage, appears to have helped to resuscitate the per-seat concept, which had been declared dead several times since its arguably premature birth in the last decade. The company is offering shared charter and shuttle flights, the latter on some 50 routes in the U.S., Europe, and the Middle East.
Like some other charter providers with novel business models (e.g., point-to-point pricing, owned-and-operated fleets, all-you-can-fly memberships), it has been the subject of a good deal of skepticism. But it could be that technology and today’s “shared” economy ethos have dramatically expanded per-seat’s potential.
When it launched in 2012, JetSmarter styled itself as a tech-driven discount brokerage whose members also got access to free seats on shuttle flights plying well-traveled routes. Today, about 8,000 people are onboard, Sergey Petrossov, CEO of the Fort Lauderdale, Florida–based company, told us in a recent interview.
To join, you pay an annual membership fee of $15,000 or $50,000. (The latter amount buys you discounts and greater access to seats on flights, among other perks.) There’s also a $2,500 initiation fee, plus the costs of whatever services beyond free shuttle flights you use, of course.
JetSmarter’s per-seat offerings have drawn the most attention among its charter services, and Petrossov claims they are the key to the company’s future. “Traditionally, you have a private airplane with one passenger paying,” he said. “I have 10 passengers paying. I can collect from 10 different sources. That’s the basic economics. I’m charging more people for the same product.”
Per-seat charter skeptics have always contended that the business model can’t succeed because sharing a cabin with strangers is the antithesis of one of charter’s chief calling cards: privacy. Business jet travelers, they’ve argued, would never submit to sharing cabins. So why do companies like JetSmarter seem to be attracting customers? Perhaps some of them are travelers for whom the alternative is an airliner cabin with even more strangers (albeit in business- or first-class), along with security lines and searches; if that’s the other option, sharing a business jet might not seem so bad.
Scheduled shuttles aside, Jet-Smarter’s per-seat charter model relies on three things, Petrossov said: its powerful, user-friendly app; charter customers “willing to pay a premium” to fly when they want; and other members “willing to be flexible to get the private jet experience—a hybrid between on-demand and scheduled.”
Added Petrossov: “The initiator of the flight is setting the time and the airport—like any traditional on-demand charter [customer would do].” The app then provides an instant quote, along with options for making one or more unoccupied seats available to other JetSmarter members. If any of those seats sell, the initiator earns credits that are applicable toward future flights.
“That’s our core business,” said Petrossov. “We call the concept social scheduling. We believe this is the future of air travel. It’s not the aviation provider or the airline operator that’s going to set the schedule in the future, it’s going to be the community.”
While JetSmarter’s offerings and similar per-seat services from other providers are apparently finding a market, some doubters warn not to confuse popularity with profitability. One of the company’s strongest critics is Peter Maestrales, CEO of Florida-based Airstream Jets, a competing charter and aircraft management company, who offered his opinion last year about investors’ presumed hopes of taking JetSmarter public.
“JetSmarter will never be allowed to trade on a public exchange,” Maestrales wrote. After crunching what he considered conservative numbers on its operations and coming up with red, Maestrales concluded that the company must be incurring losses that are offset only by an ever-growing number of new investors and members. “How angry will those investors be once they realize they were actually subsidizing thousands of corporate jet flights for complete strangers?”
Petrossov countered that only a small number of JetSmarter’s scheduled shuttle flights are free. The company’s technology, he said, enables it to identify in-demand routes where shuttle service could prove profitable. It then initiates that service with a limited number of free weekly flights. “We’ll get the market going,” said Petrossov. “[But] the third, fourth, and fifth flight—that is not going to be us [paying for it]. That’s our go-to-market strategy.”
Once free flights are regularly fully booked, members begin creating shared shuttle trips, and the route is on its way to profitability, he added.
“We can create flights on some days for as little as $2,000, and the flight is guaranteed,” Petrossov said, referring to shuttles between New York and Florida, the company’s most vibrant route, with up to 50 round trips per week. “Some days, it’s $4,000, some days it’s $7,000, but it’s by far the most cost-effective solution.”
Meanwhile, the number of investors in the company is growing. Last August, Clearlake Capital Group and Leucadia National Corporation, both multibillion-dollar investment funds, signed on with JetSmarter, bringing the total raised to “upwards” of $200 million, Petrossov said. Other investors reportedly include the Saudi royal family, rapper and businessman Shawn “Jay Z” Carter, and Goldman Sachs Capital Partners.
Petrossov said the company, with revenues of $300 million last year, is “cash-flow profitable,” and the challenge now is “how to grow from a $300 million to a billion-dollar business. That’s why we raise capital.”
JetSmarter has been called the “Uber of private jets,” and whether or not its business model is analogous to that of the car service, it has had its share of Uber-like behind-the-scenes drama. Last year, its then-president was charged with embezzlement (for activities unconnected to his position at JetSmarter). After Kim Kardashian tweeted that she was “obsessed” with the service, the nonprofit Truth in Advertising criticized her for not disclosing her commercial ties with the company. (JetSmarter admits it doesn’t charge dues to some celebrity members or pays for their flights, but at the time of the Kardashian incident, it refused to specify its relationship with her.)
The magazine Verge, meanwhile, requested a demo shuttle ride for one of its journalists, and then reported last year that JetSmarter had said the reporter would be charged $2,000 for the flight if a positive article weren’t published within five business days of it. The magazine also reported that members who use chat rooms to share thoughts on the service suspected that company employees were monitoring the sites, and that some memberships were terminated or not renewed for customers who made negative comments in such chat rooms. JetSmarter has denied this claim.
When we asked Petrossov about Verge’s charges during our interview, a public relations spokesperson cut in, saying JetSmarter would provide written responses about this, as well as about Maestrales’s comments. Two follow-up requests for those responses went unanswered, however.