In the early 2000s, when Thomas Flohr looked into hiring a private jet to visit clients of his asset finance company, he got frustrated. Private aviation, as an industry, seemed inefficient. The aircraft chartering process was opaque.
“There were no global brands I felt I could trust,” says Flohr, “which seemed remarkable for an industry that sells to the wealthiest and most influential people on the planet.”
Flohr saw an opportunity. He founded VistaJet in 2004, with a focus on convincing executives to ditch their corporate-owned planes in favor of a subscription membership model. That idea has grown into Vista Global Holding, of which Flohr is founder and chairman. With a fleet of more than 360 aircraft, Vista offers clients an alternative to aircraft ownership, with guaranteed aircraft availability on as little as 24 hours’ notice anywhere in the world.
In this installment of Travel Disruptors, Flohr speaks with McKinsey’s Daniel Riefer about the power of strong branding, simple contracts, and high asset utilization rates. An edited version of the conversation follows.
McKinsey: You offer an asset-free model for your clients. Why is that an appealing alternative to the typical corporate aircraft situation, which involves the company having fractional or full ownership of its planes?
Thomas Flohr: I believe that corporations should invest their equity in building their core businesses. At the end of the day, an aviation service is a service you can easily outsource. Why would you have your equity stuck in something that is not your core business? So I believe in subscription models.
We don’t think corporations should invest in their own aircraft because we have proven we can do it for them at a price point that can be less than half the price of owning a jet.
Corporate jets fly only 250 hours per year on average, so there is massive underutilization. Our aircraft each fly between 1,000 and 1,500 hours per year. If you fly as much as we do, you can offer a completely different price point because you make your assets work more. We don’t think corporations should invest in their own aircraft because we have proven we can do it for them at a price point that can be less than half the price of owning a jet.
McKinsey: How do you attract customers to achieve this high asset utilization rate?
Thomas Flohr: Our steep growth path comes from the success that we’re having with the simplicity of the asset-free model that we offer. Think about it: if you opt for a fractional ownership model, you need to sign a share purchase agreement. You need to sign a management agreement. Then there is an operating agreement. Our agreement is simple and only five pages long: we have an obligation to transport, and you have an obligation to pay.
It’s my determination to convert as many corporate jets as possible to a subscription model, which drives a lot more efficiency at a lower price point. When you look at the benefits achieved when people subscribe with us, though, it’s not only the price. Another way we’ve made this attractive is that when corporations buy an aircraft, they’re generally looking at a minimum of a five-year horizon. We offer a three-year horizon, and then you can either renew or exit the contract, which provides more flexibility. Another kind of flexibility we offer a corporation is that it can choose the right aircraft for each individual trip, rather than just buying one aircraft—which, if it’s too small, might not be able to make a certain trip nonstop, or if it’s too big, it creates waste on short hops.
Maximizing use of the plane—and the space inside it
McKinsey: One way to maximize utilization is through shared charters. How do you view the benefits and also the challenges of putting people who don’t know each other on the same plane?
Thomas Flohr: The space inside the airplane is the second most underutilized asset in this industry. First is utilization of the frame. Second is utilization of the space inside. And we believe there is a very big future in it. You could have exponential growth rates, especially in a post-COVID-19 world.
Let’s say you’re in New York, and you want to fly to Aspen. Within our marketplace, you can create your own flight and then invite other members to buy seats on it. So you’re in control of the actual departure time, and you also bring your price down because you’re selling other seats. It’s very technology-driven because it’s too labor intensive to do this through a human interface.
If you’re CEO or chairman of a large company, you might not want to share a plane due to privacy concerns. But it is certainly an alternative to the high end of the commercial aviation side and the business jet. We screen our clients to know everything we need to from a compliance and security point of view, so if you share the airplane with another member, it is someone who has been vetted by us.
McKinsey: We’re coming out of a two-year pandemic. Most commercial airlines have not even reached the traffic volumes they had in 2019. How did this affect Vista?
Thomas Flohr: When we went into the pandemic, I said, “Let’s talk to all of our customers.” So our executives spoke to our clients and asked, “What do you need? How can we help?”
And the main message from our customers was, “The minute the world opens up even a little bit, we want to be out there. We need to see our clients. We need to see our employees. We need to do business.”
At Vista, we did not lay off one single person. We kept every airplane crewed. And after about 45 days, by mid-May, the world slowly started to open up and fly again. Because of our floating fleet model, we were able to follow demand and were not limited to one market. By Q3 of 2020, we’d already reached the same utilization figures that we saw prepandemic. We are now looking at three times our 2019 numbers.
Consolidation and inflation
McKinsey: When you think about how the market will develop, what keeps you up at night? And what makes you optimistic about the future?
Thomas Flohr: One thing on my mind a lot is that we have a massive consolidation process happening right now in this industry. There are thousands of small operators around the world. If you look at the history of any industry over time, there is generally consolidation because it helps with buying power, with reach, with infrastructure, with efficiencies, with technology investments, and so forth.
We’re at the forefront of this process. We were quite active in the last couple of years on the M&A side. In 2022, we acquired Air Hamburg, Jet Edge, and Camber Technologies. We don’t want to miss any opportunities. But at the same time, if something is not strategic for us, we will pass and go for organic growth instead of a merger or acquisition.
Inflation, of course, is another thing we’re all concerned about. I think it’s here to stay for a while. If you go to the commercial airlines, especially on a low-cost carrier, there can be a fuel surcharge that might be half of the ticket price. We have a fuel and an inflation adjustment clause in our contracts. It’s just a fraction of the overall cost—and if you owned your own airplane, you’d face the same cost increases yourself.
If a corporation needs to send an executive out on trips and it’s 7 to 8 percent more expensive compared with the past, the benefits of deploying that unique human capital justify the use of the monetary capital. And our efficiency often lets corporations opt for a business jet versus bringing into play the inefficiencies of the commercial marketplace.
The quest for carbon neutrality
McKinsey: Sustainability is top of mind now for customers, investors, and other stakeholders. You’ve committed to carbon neutrality by 2025. How will you get there, and what are the big stones to turn to make that happen?
Thomas Flohr: It’s a huge issue, and the industry needs to work on it as a collective. After much research and auditing, in the spring of 2021 we announced that we are furthering our commitment to being carbon neutral by 2025.
We do an enormous amount of education with our clients, encouraging them to also contribute to the sustainability of this industry and the goal of going carbon neutral. This has been well received, and the client opt-in to our initiative—which involves paying a slightly higher hourly rate—is now at 85 percent.
We’ve also invested about $1.5 billion in the Global 7500 aircraft, which is the first jet with a sustainable product declaration. It has a lower carbon footprint and is immediately switchable to sustainable fuel. And we work with the air traffic control infrastructure that exists around the world to limit the fuel inefficiencies that result from waiting patterns in the air before a landing approach. So between the asset investments that we’re making, our client communication, and our financial contributions, it all goes hand in hand.
We believe sustainability initiatives should be a fully transparent and collaborative effort. I would guide everyone to our website to study in great detail all the audits and actions we have taken as a company. One avenue is not enough, and companies should explore all routes to higher sustainability.
McKinsey: Do you think that disruptive technologies such as hydrogen propulsion or battery electric propulsion will ever take off?
Thomas Flohr: We’re having continued conversations, but the biggest issue is the timeline. We want to know what’s coming in the next ten or 20 years. The main manufacturers don’t believe that battery power will be an option for the aircraft sizes and ranges we deal with until the 2040s, so that’s a good 20 years away. If you look at hydrogen, it’s something that might be doable with cars, but with airplanes there are huge safety concerns around it.
We do believe greatly in sustainable aviation fuel [SAF] being the future of the entire aviation industry. We are promoting SAF use by working closely with suppliers and the broader aviation community to ensure that the industry can decarbonize together. We’re securing future SAF supply, and pushing demand, through long-term SAF uptake agreements and investments in SAF production.
Personal equity
McKinsey: How did you get where you are today, and what motivated you in the first place to get into the business aviation industry?
Thomas Flohr: In the 1990s, I worked at an American asset finance company. They had a business jet, and I occasionally used it. I saw the business benefits in those years: you could be in three or four different cities on the same day and see your clients.
I saved every penny I made, didn’t live a big lifestyle, and that gave me the initial equity I needed to go out and create my own asset finance company. That was in the early 2000s. At the start, I flew commercial. When I started looking into flying with business jets, I was a very dissatisfied client. And that’s what started this.
I’m a numbers-obsessed person. I try to understand every single financial detail about a marketplace. And as I researched the business aviation industry, I was struck by the inefficiency. It fascinated me to think that I might be able to find a more efficient way. And I have to say, I went all in—with the purest sense of private equity, which was my own equity [see sidebar, “Thomas Flohr’s advice for young entrepreneurs”].
McKinsey: What can we expect from Vista in the next five to ten years? What is your vision?
Thomas Flohr: We are on to something very big. Today, with more than 360 aircraft, we have a small fraction of what we see as the total addressable market of 23,000 existing corporate airplanes. I would like us to have 15 to 20 percent market share by the end of the decade. And I would take any phone call or meeting to convince a corporation that instead of owning a plane, it is much more effective to simply have a subscription that gives you access to the right aircraft for that mission anywhere on the planet.
In today’s world, to build a brand is extremely difficult. And you’ll see us advancing and accelerating because we’ve built a strong brand. I don’t think there is any revolutionary action needed other than providing service at the highest level and doing it consistently over a very long period of time.
