Originally Posted by Johnny Redd
Surely a floating fleet is just an amalgamation of how ad-hoc charter and fractional work.......
Yeah. Netjets already floats their fleet. The idea is that netjets sells way too much guaranteed availability per plane (in terms of users and hours) but not as much total revenue flying as they could accumulate per plane. So they have way too much deadhead and charter outsoucing needs, and don't reduce fixed costs as muchas they could.
Since reading the article I've been trying to read up on XOjet and they really do seem to have an interesting model. They are betting that they can significantly reduce the deadhead experienced by the managed charters by owning their own planes. They can also have much less deadhead than Netjets because they're going to price their products efficiently: lower prices for flights to and from popular airports (where they are most likely to be able to pick up another flight without having to reposition). Reduced prices for longer flights (lower proportion of positioning to revenue flight time). Reserving most guaranteed availbility to users who are going to provide them with consistant business throughout the year, not just during peak periods. Selling their excess of peak capacity at a premium. Etc.
The are focusing on the Citation X and Challenger 300 because they want to focus on transcontinental flights where positioning will be a lower proportion of total flight, so they believe that the transcontinental market is where they will have the largest competetive advantage versus managed charter and fractional.
So far they have supposedly averaged 1200 hours/yr per plane with some months where they have gotten up to 1500 hours annualized.
Here's my question to those in the business:
Using the XO jet model or something like it, is it so inconcievable that when the market firms up, they might be able to get 2 transcontinental flights per plane per day? 3000+ hours of utilization per year?
Being able to dillute the fixed costs per hour so much would be huge for the business jet industry. My understanding is that capital expenses and depreciation together already account for the majority of the total cost of flying business jets, and there are other significant fixed costs that could also be dilluted.