Jet OUT is a relatively new provider in the co-ownership or fractional jet ownership space, although they have over a decade of private aviation experience behind them. They are building a fleet of Citation CJ4 and M2 jets, with some interesting elements to their model. SherpaReport recently talked to Joe Crivello, the CEO and founder, to discuss the program and future plans.
Joe Crivello is a cofounder of Phoenix Investors, a national commercial real estate firm based in Milwaukee, WI. The company was started in 2011 to buy real estate in smaller markets around the country, and has grown to have a portfolio of over 75 million sq ft. spread across 29 states. They soon realized the huge logistical problem of getting employees to the properties and this led them to start a corporate flight department of single engine turbo props.
“I was so impressed with what private aviation did for that business” Joe told SherpaReport.
In 2018 they spun off the corporate flight department into a separate company, with Phoenix Investors as the first client, and they also acquired a part 135 charter operator.
After doing a wide assessment of various aircraft manufacturers and different aircraft models, they bought their first Citation CJ4 in 2022, and started to raise their local profile around Wisconsin.
“The Citation CJ4 will be the workhorse of the program” says Joe Crivello, adding that he feels one mistake other operators make is to have too many aircraft types too soon. Jet OUT has a fleet order with manufacturer Textron for up to 25 CJ4’s to be delivered over several years, with four more of the aircraft coming in 2024.
They will also bring in the Citation M2, but Joe says “it will not have the same role as the CJ4.” One key point here is that the M2 is also part of the Citation 525 family and shares the same type certificate as the CJ4, and this commonality makes it easier for both maintenance and pilots.
The current fleet consists of six aircraft at the moment, made up of three CJ4s and three TBM turboprops (a legacy of the corporate flight department), but Jet OUT are currently replacing the turboprops with late model M2s and CJ4s. Once the turboprops are phased out, they will be a single 525 operator.
The Citation CJ4 Gen 2 light jet has a range of up to 2,000nm and has seating for up to 9, although it would be normally used for 6-8 passengers. There are two baggage compartments, one with a capacity of 600 lbs. and 56 cubic feet, and one with a capacity of 400 lbs. and 15 cubic feet. The plane has a max cruise speed of 451 kn (835 kmh) and can takeoff from 3,410 ft (1,040 m) fields.
The somewhat smaller M2 has seating for up to 7 passengers and a range up to 1,500nm.
Fractional Co-ownership Model
Jet OUT operates under a part 135 (charter) certificate and the shares are structured as tenants-in-common co-ownership interests in each plane. This is different to many of the larger fractional aircraft operators who fly under a part 91 k certificate. Each share of ownership also comes with fleet access to all the Jet OUT aircraft.
Each of the aircraft has a designated base of operations, so a specific home airport and FBO, and most are encouraged to return home each night. Joe says this gives enormous benefits for pilots, who are largely local residents, and can return back to their own homes most nights. For the company this means the overnight, travel and hotel costs for the pilots, are minimized and there are equally minimal overnight fees and handling fees for the aircraft parked at other third party FBOs. Joe Crivello notes that it also means the company can invest in base resources, and for instance a sister company has a 10,000 square foot aircraft maintenance facility where “issues get addressed immediately.”
But, the problem this model creates is more empty legs, when an owner flies out on their plane but then doesn't return the same day or within 24 hours.
In order to handle all these empty legs, Jet OUT has developed a significant retail program, and selling aircraft charters is a major priority for the business. Joe Crivello says they sell 70 to 80% of the empty legs that they generate. They achieve this sales level through two broad channels, using online charter marketplaces such as Avinode, and through relationships across the charter world with a density of relationships in their focus markets including in southeast Wisconsin and northern Illinois. The other geographic areas of focus for the empty leg flights are Florida, Arizona and Las Vegas, where several aircraft owners have vacation homes.
A key part of the model is that the owners get to share in the revenue from the sale of the empty legs, so are incentivized to let the planes go back to base and not keep them.
If the co-owner needs the aircraft for say a couple of days, then they can keep the aircraft with them on their trip, so it doesn't have to return to its base, and the owner is charged for that extra day of usage out of their 20 annual day plan.
Using this model, Jet OUT are putting about a thousand flight hours a year on each of the aircraft in their fleet, notes Joe Crivello.
The co-ownership agreement for the CJ4s has a 5-year term and at the end of this period Jet OUT acts as a broker to sell the plane on the open market and the proceeds are divided, out of escrow, amongst the owners. This is different to other large fractional programs where the manager buys back the shares at market rates at the end of the program and charges a fee to the owners.
Talking about this model Joe Crivello says “we built something that we felt was sustainable and that resonated with customers.” And expands on this by saying that they had looked at the history of aviation, including looking at the failures over the years, to design their model and come up with something that is unique and different. It certainly has some unique features.
“We have had success in winning customers who are new to private aviation” says Joe, adding “and some customers we win are folks who may otherwise have purchased a used aircraft, but we've made it 10 times easier, and it means they don't take on the risk of owning a whole aircraft.”
For a 16th share in a Citation CJ4 Gen2, the initial capital cost is $859,000. The other fees are a fixed monthly cost of $6,385 which amongst other things covers pilot salaries, hangar fees and insurance, then the hourly rate is an estimated $1,800 including fuel. The hourly rate includes a flat rate maintenance fee of $840, but the total hourly rate will vary as the fuel cost is a pass through for each trip.
The overall aim for Jet OUT is to build a national business and Joe Crivello tells SherpaReport that they are already profitable and are planning to add additional bases.
Some of the potential areas that they are looking at for other base locations include Southern Florida around Naples and Fort Myers, which is an area where many customers fly into, another area is around the Upper Midwest. And, while a related company developed their new FBO in Milwaukee, they are more likely to partner with established FBO’s in other locations. Joe feels the company can sustain 80% growth rate and they have a good process for opening new bases
“No one has arranged the pieces in the way we have” says Joe, finishing with “this is a premium experience with brand new CJ4s.”