Uber-like private jet firm raises S$150m for expansion

NEW YORK — JetSmarter, which operates an Uber-like network that connects travellers to empty seats on chartered planes, raised US$105 million (S$150 million) in its latest funding round, indicating that the start-up has managed to make the concept work where others have failed.

The company, which currently offers about 50 routes between more than 30 cities around the world, plans to use the cash injection to expand into Asia, South America and Africa, said founder and chief executive officer Sergey Petrossov.

His goal is to add another 80 routes within the next year. JetSmarter’s ride-sharing model offers empty seats on privately chartered planes to other passengers, helping lower costs and in theory attract more customers.

Traditionally, 35 per cent of private jets fly empty, according to Mr Petrossov, which made the system highly inefficient and expensive.

Other start-ups with similar models have shut down, with some blaming high costs and onerous regulations.

BlackJet, originally backed by Uber co-founder Garrett Camp, closed its doors earlier this year after running short on cash and failing to win enough users.

Beacon and Airpooler also ended operations and Flytenow was shut down by the Federal Aviation Administration late in 2015.

JetSmarter has managed costs by changing seat prices based on predictions of how popular the routes and flight times are and by increasing the number of available flights according to demand. Of course, raising a ton of cash at a rapid clip does not hurt either; prior to the most recent financing, JetSmarter raised about US$45 million in two rounds in less than a year.

The Florida-based company said the new capital gives it a valuation of US$1.6 billion.

“We do not oversupply the market, which is what some other companies that have come and gone have done,” Mr Petrossov said.

JetSmarter starts a route with a couple of scheduled flights and only when the initial market reaches critical mass — which is a 90 per cent or more occupancy rate — does the company begin letting members charter more planes and open the empty seats to other members, he said.

That way, the customers are the ones determining demand, and JetSmarter uses that data to price the seats accordingly.

JetSmarter now oversees 25 flights a week between New York and Florida, a number that will increase to 50 to 60 within the next few months, Mr Petrossov said.

That route currently has an average 96 per cent occupancy, he said.

Rapper Jay-Z and the Saudi Royal Family — who had previously invested — as well as private jet operator Jet Edge, UAE investment firm KBBO Group, Qatar-based Challenger Universal and London-based KZ Capital were among those negotiating for a stake in the round, according to a person familiar with the matter.

The company declined to comment on the investors.

JetSmarter has about 6,700 members who pay US$15,000 for the first year and US$11,500 every year thereafter and fly with the company about 12 to 15 times a year on average.

They pay no additional fees for seats on flights scheduled by JetSmarter but do have to pay to create a charter flight or to take a member-created flight.

While the start-up does not own any planes and has, similar to Uber, built a dispatch-like system, it has struck a number of exclusive deals with operators and has about 3,200 aircraft in its network.

“Our customers are changing their flying behaviour to fly more on our platform and have a better experience than when flying commercial,” Mr Petrossov said.

“We are creating a new class of travel, we are creating a new segment between private and commercial.”

JetSmarter is profitable in many of its earliest cities, Mr Petrossov said, adding that the cash flow means he will not have to continue to raise more capital from private investors after this round.

JetSmarter will also invest in building concierge services on the ground as well as a more sophisticated tool for members to connect and interact with one another, creating more of a “country club in the sky,” Mr Petrossov said.

In the longer term, the company will also use the cash injection to fund a cheaper service for shorter flights on small private planes, which will charge customers US$1 per mile flown, he said. Bloomberg