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Must Read/XOJet Sees Opportunity in Crisis

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Must Read/XOJet Sees Opportunity in Crisis

Old 10-08-2008, 04:54 AM
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Default Must Read/XOJet Sees Opportunity in Crisis

XOJet Sees Opportunity in Crisis


Oct 7, 2008
#content td div img { padding-right:10px; padding-bottom:2px}html.ie6 #content td div img { padding-right:10px; padding-bottom:0px; }div.storyContent p { margin-top: 2px; margin-bottom: 14px;}html.ie6 div.storyContent p { margin-top: 0px; margin-bottom: 10px;}#mainNav { margin-top:0px;}a { font-size: 12px; color: #224e9c; text-decoration: none;}a:hover { font-size: 12px; color: #224e9c; text-decoration: underline;}By Rich Piellisch/Show News
NBAA 2008, Orlando, Fla.

There's a crisis on Wall Street but so far there's no crisis in San Carlos. XOJet, Northern California's new on-demand charter and aircraft ownership services outfit, has brought the first of its new Challenger 300 fleet to NBAA 2008 (it's to be the first of 80), and claims that the current financial crisis has if anything brightened its overall prospects. "In bad times, sometimes you can turn them into good times," says XOJet founder, president and CEO Paul Touw. He had expected to wait until the third quarter, for example, to be able to guarantee Challenger 300 availability, but has been told by Bombardier that deliveries can be accelerated so that XOJet will have the eight 300s it needs by the first quarter of 2009.
In May, XOJet trumpeted financing of up to $2.46 billion to expand its fleet of 300s and high-speed Citation X jets, terming the package "the largest publicly-announced business aircraft financing package in history."
In August, XOJet posted fixed-price rates starting at $25,000 for one-way transcontinental flights between "preferred" airports, like Teterboro and Van Nuys, on the East and West Coasts. The firm also lowered a fuel price surcharge. XOJet, which describes its business model as a unique combination of private jet ownership, leasing and on-demand travel, says its goal is consistency, while taking the mystery out of high-end jet travel. The company's "all-in rate" includes ground transport at both ends of the trip, unlimited inflight telephone use, and standard catering. "The model is working exceptionally well," Touw says, noting that XOJet now has about two dozen Citation X jets in service (out of a planned 47). Given the state of the economy, he told Show News, "We are very pleasantly surprised."
"Traditional models of business aviation have customarily required the customer to fund the aircraft, or a fraction of the aircraft," XOJet says. "With this comprehensive financing package, XOJet expands to self-finance its aircraft, removing this burden from its customers and expanding the breadth of its product offerings."
The result, says Touw, is lower pricing--some 20% less than the cost of fractional ownership flying.
"In this kind of a market, people with contract hours tend to fly a little bit less. If you talk to the fractional carriers you'll find that they are flying 20-30% less than they normally would. We have the opportunity to backfill. We are doing that fairly well and finding that in down markets, there is sort of a trickle down."
Companies like Costco and Wal-Mart and discount airlines like Southwest do well in difficult times, explained Touw. In business jets, he says, "People who would normally take a G5 to Vegas now are taking a Citation 10. We, in fact, have a number of deals from customers that have canceled some large cabin aircraft--G550s, another was a Falcon 7X--and instead they are going to buy 300 hours from us at a 40-50% savings over those class of cabin aircraftýýýWe are fueling a tremendous downsizing of what customers are demanding from large cabin and we are picking that up in the super-midsize class."
Charter, Touw says, represents "the other trickle down." Instead of buying a fractional program or buying a jet, "people just do a little more charter, step up their use of charter because it's in uncertain long-term times, it's much easier.
"We are really seeing a lot of customers have a renewed interest in exploring the cost savings they can get through our model."
XOJet says it expects its fleet to reach 127 aircraft worth $3.1 billion by 2012. Of its big spring finance package, $964 million is immediately available, with the remaining $1.5 billion to be available when a joint venture with Tasameem Real Estate, one of its key investors, launches later in the year (it's to be headquartered in Abu Dhabi). Other partnerships may be announced as soon as this week, he says.
Touw insists that XOJet is in "great financial health," and is poised to take advantage of down-market opportunities. "We've got probably two years of cash flow sitting in our checking account," he says, and "many years' supply of credit for aircraft deliveries." Faster deliveries of its Challenger 300s is just one example. "Some of the weaker players in the industry will probably exit the industry over the next year or two, and that will position us well," Touw says. "If you are a strong player in this industry, you will emerge much stronger out of this economic time."--
[ 'A Couple of Scares'
"I've never seen anything like it," XOJet chief Paul Touw says of the current financial mess.
"We had a couple of scares," he told Show News on the eve of NBAA. "We had some leases with Lehman and of course they went belly up. We had 24 hours to reshuffle $120 million worth of financial obligations to another lender.
"Then, if that wasn't enough, two days later, AIG just about goes bankrupt and they have all our insurance," Touw said. "Fortunately, we had a backup plan there."
"Of course they never actually went under, they got sold," he said of the rescued insurance giant. "But here we are, a growing company, and you realize if we were another company that didn't have as deep of financial resources and backup plans in place, my God, this thing could have spilled over, [and we had] nothing to do with this financial crisis."
XOJet's 'Preferred' Airports
The "preferred" airports eligible for XOJet's transcontinental flat rates (as low as $25,000 per flight) are Teterboro (New York/TEB), Northeast Philadelphia (Philadelphia/PNE), Bedford-Hanscom (Boston/BED), Manassas (Washington, D.C./MNZ), on the East Coast, and Van Nuys (Los Angeles/VNY), Henderson (Las Vegas/HSH), Oakland (San Francisco/OAK), Carlsbad (San Diego/CLD), and Deer Valley (Scottsdale-Phoenix/DVT) in the West.
Flights between more than 4,000 additional airport pairs serving designated East and West coast metro areas are also available.
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