Commentary: Supersonic Business Jets Will Boost Fractional Jet Ownership

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It’s no secret that the fractional jet ownership business has struggled in recent years, with several competitors leaving the market, and the merger of Flexjet and Flight Options. While Berkshire Hathaway’s NetJets is healthy, NetJets Executive Vice President, Sales & Marketing, Patrick Gallagher, noted on AINonline that “We’re growing our market share of a shrinking pie.”

All that may soon change with the coming of a new generation of supersonic business jets, produced by companies such as the Aerion Corporation. The planes will cruise at Mach 1.4, cutting three hours off New York City to Europe, and six hours or more off long Pacific routes.

The planes will give corporate leaders and other high-end travelers a compelling reason to consider fractional ownership.

Even cross-country travel, which draws additional concerns about sonic booms, will be faster. Aerion claims that its Boomless Cruise(sm) flight is feasible at speeds up to Mach 1.2, depending on atmospheric conditions, principally temperature and wind.

The company hopes that the U.S. will adopt International Civil Aviation Organization (ICAO) standards, permitting supersonic speeds over the U.S. Supersonic flights are currently prohibited.

Aerion claims that at speeds around Mach 1.2 a “sonic boom would, essentially, dissipate before reaching the ground.”

Another fledgling supersonic business jet manufacturer, Boston-based Spike Aerospace, calls no sonic booms the “holy grail of the next generation of aircraft.” It hopes to have its 18-passenger jets in the market by the early 2020s.

Even before these jets debut, NetJets is focusing on the growth potential of its long-haul business.

NetJets is looking to expand its long-haul business by offering new pricing incentive programs developed for Challenger 350 and Global shareowners.

NetJets hopes to capture a portion of the business that is currently going on commercial airlines or ad hoc charter by providing operational savings on 3.5-plus-hour flights for Challenger 350 shareholders who have purchased a minimum of 50-plus hours (1/16th of a share).

NetJets’ cross-country program is aimed at flyers travelling cross-country or to Europe on a super-midsize airplane like the Challenger 350. Currently, the average NetJets flight time is two hours, and the goal is to increase the number of hours of flight time.

NetJets and the Supersonic Market

The new supersonic business jets will fall into an interesting category of jets that will have a decided advantage over other private jets, but will be too expensive for most people to own outright.

While the supersonic business jet market offers opportunity, it also comes at a high cost, with the price of each jet at over $100 million.

That’s the perfect opening for fractional ownership companies to plot their growth.

Currently, Flexjet is the only company to place a firm order for the jets. In 2015, they ordered twenty of Aerion’s AS2 aircraft.

The Aerion AS2 is a three-engine jet and is larger than the originally conceived Aerion supersonic business jet. Fuselage length is 160 feet and maximum takeoff weight is 115,000 pounds. Minimum projected range is 4,750 nautical miles with the intention to achieve a range of more than 5,000 nautical miles.

The aircraft will have a 30-foot cabin in a two-lounge layout plus galley and both forward and aft lavatories, plus a baggage compartment that is accessible in-flight. Cabin dimensions widen from entryway to the aft seating area where height is six feet, two inches and cabin width is seven feet, three inches.

Carrying eight to 12 passengers, the AS2 has an intercontinental-capable range of 4,750 nautical miles at supersonic speed.

While, NetJets has yet to announce any orders, it’s clear that only the strongest of the fractional ownership companies will be able to compete in this market, giving them a clear advantage over smaller charter companies, and a major capability advantage over commercial airlines.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.