Private aviation company XOJet today announced that it has raised $143 million in private equity and debt financing, from TPG and Lehman Brothers GPS. It also secured another $220 million in aircraft lease financing from Lehman. So peHUB has 5 Questions for Nick Solinger, XOJet’s chief strategy and marketing officer.
1. What is the basic XOJet business model, and how does it differ from a company like NetJets?
Solinger: Our model is very different from the NetJets model, which is fractional ownership. What we offer is on-demand access for regular business travel, while NetJets focuses more on the 25-50 year-old leisure demographic.
We have two programs. The first one is a guaranteed program, where a company will contract for an airplane – or multiple airplanes – whenever they need it. Over the past year, we’ve built up a marquee customer base of investment banks, private equity firms, large corporations and high-net-worth individuals. They sign a one-to-five year contract for the number of annual hours they expect to need, although they can always extend it if they find themselves needing additional time.
The other program is scheduled/available on-demand, where clients can just call us up an book a trip. About half of our business comes from this model – particularly from large companies that can face corporate governance problems for buying up time they don’t use.
2. You mentioned demographic differences in clientele. Could you flesh that out a bit?
Solinger: Sure. Our goal is to target high-end customers who travel 200 hours or more per year. For these people and companies, it’s a more efficient model than fractional ownership. Thirty percent of NetJets’ trips are unpaid, which raises owner costs. Less than 5% of ours are unpaid, which is a much better value.
3. Prior to this round, how had XOJet been funded? And what are the future financing plans?
Solinger: Our first round was provided by our founder and CEO Paul Touw, who also brought in some additional capital from members of the board. We then did a second round that included some other institutional investors and friends of the company… We’re not disclosing specific dollar amounts. And today, of course, we announced the new funding from TPG and Lehman Brothers.
We don’t see raising additional equity in the short-term. The business we operate basically requires capital for fleet additions, like what we did with Lehman Brothers. So you may see some additional fleet financing down the road, but not another private equity round.
4. TPG is obviously a firm with lots of experience in the commercial aviation space – having been founded to buy Continental Airlines. But they’ve never done a private aviation deal…
Solinger: While this may be the first investment TPG has made in private aviation, they know it inside and our. They have been one of our biggest customers since we opened our doors. So we were first introduced to TPG as a service provider, and it was that experience that brought us together. They saw our level or service and value, and could compare us to other companies and to their own in-house options.
5. I am supposed to be in Jackson Hole next week, but haven’t yet booked travel. Could you send over a jet to pick me up?
Solinger: Sure. I’ll pass you on to our private client rep, and he’ll draft a quote…