JetSmarter aircraft

Vista and JetSmarter To Tie The Knot

A deep dive into the details of an unexpected sale.

What do luxury charter programs that operate the newest business jets have in common with per-seat brokerages that rely on well-worn aircraft to help them offer bargain prices? They will both be available through Vista Global Holdings (VGH) in the wake of its planned purchase of U.S.-based charter brokerage and booking-app developer JetSmarter.

Founded in 2012, JetSmarter employed a per-seat charter model and free seats on shared shuttle flights that came with memberships to draw thousands of customers and extensive media attention. But changes in the company's program rules—particularly the elimination of free seats a year ago—and heavy-handed management tactics caused a backlash among customers, negative news articles, and flagging sales, reportedly reducing the one-time unicorn’s value to as low as $20 million on the eve of its sale. Thomas Flohr, founder and chairman of VGH and VistaJet, told BJT the transaction will be conducted “on the basis of an equity swap,” with JetSmarter investors Clearlake Capital and Jefferies Financial Group gaining a stake in VGH. The value of its charter brokerage aside, the proprietary technology and booking app underpinning JetSmarter’s operations have long been considered industry benchmarks, and VGH plans to exploit them aggressively.

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“Customers today want speed, reliability, and value,” said Flohr. “JetSmarter’s technology will digitize Vista Global’s market-leading customer offering to program members and on-demand customers, accelerating our vision of digitizing the entire private aviation offering.”

JetSmarter customers can buy individual seats on a handful of scheduled shuttle flights operating on high-demand routes in the U.S. Alternatively, they can propose a crowdsourced flight that others can buy seats on, or buy seats on a crowdsourced flight another customer has proposed. If a minimum number of seats aren’t sold, the crowdsourced flight is never confirmed and funds are returned to customers. JetSmarter no longer requires memberships, but they are still offered and provide discounted per-seat rates and other perks.

VistaJet, founded in 2004 and based in Malta, features on-demand and guaranteed-access block-charter programs on its owned and operated fleet of late-model, ultra-long-range Bombardier Globals and Challengers.

Flohr launched Dubai, UAE–based VGH last August to acquire and manage an amalgam of companies that could provide a complete spectrum of “asset light” access services to meet evolving global charter demand. Last September, VGH bought XOJet, owner and operator of the third-largest U.S. charter company (based on flight hours). JetSmarter was XOJet’s exclusive online sales agent, which brought the company to VGH’s attention. “XOJet had a very close partnership with JetSmarter for a digital front,” Flohr said. “We saw how well this worked.”

The planned purchase comes on the heels of JetSmarter’s reported agreement to settle a class-action arbitration stemming from members’ claims that the company’s rules changes vitiated promised benefits. Several lawsuits have also been successfully filed. Flohr declined to comment on JetSmarter’s legal issues but said, “VistaJet and its shareholders, after extensive due diligence, came to the conclusion [the acquisition] will add a lot of value.”

No changes at JetSmarter are expected to follow the transaction's close, which is expected by the third quarter of this year. “JetSmarter was built by a lot of very, very smart people,” Flohr said. “It’s the intention to keep this great workforce. This isn’t about consolidation of human resources. We’re looking at using the global scale we have to extend the platform.”

JetSmarter founder and CEO Sergey Petrossov, who seemed to personify the company’s brash style, went unquoted amidst the transaction announcements.

Once cleared to proceed, Flohr estimated, it will take about “a 20-week period of execution” for system integration, after which “the [JetSmarter] technology will be embedded throughout Vista Global Group.” That will bring immediate benefits to online offerings, including catering, flight tracking, and concierge services. Meanwhile, “VistaJet customers will always have a human interface, a dedicated services person available,” Flohr said, though “there are elements of fulfillment going very fast and strongly toward the digital” channels.

As for the viability of per-seat charter, JetSmarter’s signature offering, “I had to be educated about it,” Flohr said. “It could have merit on certain routes. It could be an alternative to the airlines. We believe it’s a valid business model. We need to see on what routes this is going to be accepted.”

“From a sourcing and operational-excellence point of view, seat-sharing and dedicated charter are not different,” Flohr continued. “One flight has a lead passenger who pays for everything, and if you bring in the crowdsourcing element, you’re basically lowering the cost for the lead passenger. They operate under very similar execution rules.”

As for doubters in the per-seat model’s future: “If you would have asked the world five years ago about the Uber pool concept, the world would have said no,” Flohr commented. “One has to stay very open-minded in the shared economy trend we’re in. I don’t think there’s a reverse gear on the shared economy.”