The Private Jets Business Could Grow at Twice the Rate of GDP, This Executive Says

Thomas Flohr, founder and chairman of the private aviation company Vista Global, says he is on a mission to rid the planet of what he calls the “archaic concept of owning a jet.” Instead, he wants world’s wealthy to sign up for Vista’s membership model, where customers buy a block of flight hours in advance on his company’s private jets.

For the vast majority of us, deciding how to fly private isn’t something we have to trouble ourselves with. For CEOs, government leaders, the superrich, and the accountants who advise them, it’s a big deal with big dollar implications: A midsize private jet runs about $20 million.

Flohr, a Swiss billionaire**,** founded VistaJet’s predecessor in 2004 after being a “quite frustrated client” of the private jet industry. Vista, which flies to some 296 countries, competes with the likes of the Warren Buffett-owned NetJets, the industry-leader that employs a slightly different, fractional ownership model.

Flohr and Vista have had their foibles and critics. The company carries a significant debt load, and Flohr confirmed to Barron’s press reports about unconventional strategies used to purchase aircraft, but says that was “a thing from the past and disclosed to the Nth degree.” He also says the strategy was necessary, as he was an entrepreneur in growth mode with little capital.

I spoke with Flohr recently about Vista and the wide world of private aviation as part of our At Barron’s interview series. Below are excerpts from the interview, which have been edited and condensed for clarity.

Barron’s: What kind of jets do you fly? And how many aircraft do you have at this point, Thomas?

Thomas Flohr: Today we have about 230 aircraft. We’re focusing mainly on what is called super-mid and ultra-long-range airplanes, that would be Challenger 350 from Bombardier, or Global 7500 from Bombardier. The fleet is mainly Bombardier product, but we also have other manufacturers.

It’s a freely floating fleet around the world, so these 230 airplanes, they don’t have a home base. […] For me, it never made sense that an airplane has to have a home base, because it should be flying to a city, picking up the next client, and finding another client in the city of destination.

Are your customers corporate or high net worth individuals, or both?

That’s a very good question. I would say it’s about 80-20 corporate versus ultrahigh net worth individuals, with one reserve I would like to make—and this is that ultra-high-net worth individuals very often have a stake in a company, and therefore […] very often there is a crossover at the very top end.

Let me ask you about the nitty-gritty of the actual subscription. I want to become a customer—how much do I have to spend? How many years do I have to sign up for, et cetera?

So it’s typically a three-year contract, but what we do different than anybody else is we’re not saying you have to buy a quarter of an airplane or an eighth of an airplane. We’re just, learn what flight profile you have, and we would offer you exactly the number of hours that you need. You might per year [need] 135 hours, so why do I need to sell you 100 or 200? I’ll offer you 135. And then we would tailor it to the missions that you’re actually planning.

And the price points say of flying overseas is different from domestic?

No, the price per hour is more or less the same. There might be surcharges if you land in China or in India that are significantly higher than the landing costs in New York or Miami, but it’s fractionally slightly more expensive. But other than that, it’s a fixed hourly rate.

What is it approximately?

Well, it could be—of course, first of all, it’s different paragraph type. The size, et cetera. But I think as a rule of thumb, it’s probably somewhere between $10,000 and $25,000 dollars an hour.

How is business going? I mean, you’ve got some headwinds in terms of, you know, higher interest rates. You’ve got this globalization thing that seems to be going backwards. How do you see it?

Well, look—and first of all, the company continues to grow. We continue to take market share, which I said on our earnings call, the [second-quarter] earnings call. Again, we offered and we reported significantly growth in the company on a global scale on every single continent.

Geopolitically, of course, we have you know, certain war situations, we have interruptions. We had, you know the last couple of months, the situation in Israel, and you know, when some days you can fly in, on other days you can’t. So it’s very tailored to these [situations] obviously. Russia, Ukraine, is a absolute no-go. And I think that’s part of operating a global business.

But the client base that we have […] when they need to go, they need to go, and so they’re waiting for the right window. We had this specifically with Tel Aviv over the last six to eight months, where they might be standby, saying, ‘Okay, let’s wait until it’s safe to fly in and fly back out.’ So that’s, in general, a headwind, but our clients still fly. They just wait for the right window.

I think interest rates are not really of a concern to us. We have long-term finance contracts in place and we have unsecured bonds in our capital stack. And our cost of funding is very, very attractive to us as a company with—obviously a capital-intensive business needs to carry a balance sheet with a significant amount of airplanes, but we don’t see the cost pressure from that side.

I think the cost pressures in a post-Covid world came from, you know, spare parts, from supply chains that were interrupted. And at times you just couldn’t get your hands on certain spare parts and airplanes were down, but most of that is really back to normality.

You mentioned leverage. I mean, the company does have a fair amount of leverage on its balance sheet. And it’s not profitable on a [generally accepted accounting principles] basis, net income. Are those things you plan to address going forward, or can the company sustain based on those levels right now?

The company is absolutely cash flow positive, so we’re not—we’re not in a situation where we need to raise capital to continue the business. I think if you look at the GAAP net income, it’s an endless discussion around your depreciation policy, and that is an accounting decision you take or you adapt.

[None of] our stakeholders, neither the bondholders nor the shareholders, give us any pressure whatsoever to have a net income figure to a certain target. It’s really [earnings before interest, taxes, depreciation, and amortization] and the cash flow generation of the company that’s driving the [key performance indicators], and it’s to that extent, how we manage the company.

And going back to the traffic and where you fly—is the bulk of the business in the United States and North America? And I understand you’re flying to KSA, the Kingdom of Saudi Arabia, more and more. What are the growth areas and what are the strongest areas?

Well, the strongest area is right here in America. We are now a very significant, established player in the United States, Vista U.S. Half of our revenue is in America, which makes us very proud. You know, if you ask me later on what one of my mistakes were, I came too late to America. I only came here in 2014, 15, and there were established players. [They are] still here.

But to become successful in this country as a foreigner—not easy. But here we are, 10 years later, and we have a—half of our fleet is—we have 120, 125 airplanes in this country.

Growth areas—definitely emerging markets is a hot spot. This is where we are very good—Middle East is growing extremely strong. And you mentioned Saudi Arabia—we were awarded last week for the first internal flying license, the right to operate within [Saudi Arabia] and we are very proud of that. It was a long process of being vetted […] and that is certainly a very, very significant market […] we’re very excited about this collaboration.

And what about revenues and customers? What are annual revenues at this point, Thomas, and how many customers do you have? How do you measure that, then?

Well, we’re at about $3 billion of revenue. The number of customers—we cannot mix it with the number of passengers, because of course, that’s a completely different figure. […] You’re looking at about 5,000 permanent clients that are re-booking with us. But of course, the number of clients [who] actually fly with us, because we also have an on-demand product, is a number, a multiple of that 5,000.

What do you think the future of private aviation looks like? What does this business look like 5, 10 years from now?

Well, look—the main driver of this industry is really the time efficiencies of the C-suite, of the people who are leading industries, they’re leading their—they might be sports people, they might be physicians, they might be the best of their respective environment.

And in today’s world, time becomes more and more and more important on how you actually manage your time. And business jets just give you that extra flexibility, that extra time saving, that arriving at the destination, you know, in the most healthy and comfortable way, and maximizing your own capabilities. And I think that trend has a long runway […] the market is usually being judged as growing at double [gross domestic product].

So if GDP grows at 3 [percent], this market would grow 6, 7 percent. And if you then deep dive into this market, the global scale of it will only continue to expand into every single continent.

The U.S. today is of course leading this industry. If we look at trends just like we saw in the Middle East with Saudi opening up, et cetera, I think the concept of business jets will be significantly more popular in some regions in the world. For example, India—we now have a fully fledged operation within India, there’s 1.4 billion people.

And then ultimately, my vision is that the archaic concept of owning a jet rather than just using it in the most efficient way is the trend that will succeed. And hence, we’re laser-focused exactly on this business model, because at the end, the customers are voting with their wallet, saying ‘Okay, who do we give the money to?’ And more often than not, it’s Vista.

Write to Andy Serwer at andy.serwer@barrons.com