In The Zone Of Turbulence: As Users Became Disillusioned With The “Uber For Business Jets”

What problems is experiencing a startup, a native of Russia JetSmarter. The Verge told about the problems of a startup JetSmarter, founded by native of Russia Sergey Petrossov, as well as the threats of the company against its own customers and journalists. Petrossov founded his company in 2012, and during the four years of its existence managed to attract investments totaling more than $150 million and earned a reputation as “Uber for private jets”. JetSmarter offers joint use of private business jets that often fly empty.

After a round of investment in December 2016 JetSmarter received a valuation of $1.5 billion. Investors startup then became the Royal family of Saudi Arabia and the rapper JayZ, who has invested in total about $105 million. Popularity JetSmarter deserve the stars of show business and politicians, who are the main users of the service.

For example, Kim Kardashian said that just “obsessed” service JetSmarter, a former Director of the Department of homeland security Tom ridge joined the Board of Directors of the company. Governor of Florida Rick Scott personally attended the opening of its office in the resort town of Fort Lauderdale. Recently a start-up more and more problems with reputation and business. The industry of private air transportation attracted entrepreneurs and investors.

“This is a really attractive market because it has so many resources wasted,” says investor bill Gurley (he is known in particular for its investment in Uber and a member of the Board of Directors of the company — approx.ed.). “The market provides a huge opportunity for any startup,” adds Gurley. Most private jets only fly 200-300 hours per year, whereas the aircraft is a commercial airline can perform flights lasting more than 2 thousand hours annually.

As noted by Clive Jackson, founder and Director of Victor company specializing in Charter flights, “a significant proportion of private jets in the air flying a completely empty”. If the aircraft is leased for a flight from new York to Miami, the more often he will have already empty to return to base or on the next order. In industry, these “empty” flights are called empty legs, despite the lack of passengers, they still require huge expenditures. Fuel, crew, aircraft maintenance.

On the use of these free flight and initially built its business JetSmarter. The company was established in 2012. “Our goal is to make private aviation affordable for the masses,” explained in an interview with Haute Living, the head of JetSmarter, Sergey Petrossov. By “masses”, he meant that those who the business class is already small, but for ones own Gulfstream is still a luxury.

The company built a marketing strategy on a promise to fly on the same planes with the stars and entrepreneurs. For example, targets of attracting clients was supermodel Irina Shayk and Chanel Iman, as well as a dozen athletes and oligarchs. The media called JetSmarter it as “Uber for private jets”. Customers pay JetSmarter membership fee — originally it was about $5 thousand.

In return, they receive access to information about empty-legs flights are booked they are interested in flight and covered the operator of Charter flights and the costs for empty flights. These flights were a bargain, but malopitatelna for most customers. It should be a person ready to buy a one way ticket without a clear understanding of how and when hell return. The JetSmarter virtually no control over the flight schedule, so if the owner of the aircraft decided extra day to play Golf and to delay the flight, the client also was forced to fly a day later.

For this reason, in early 2015, the company began to create its own flights to make the offer more reliable. JetSmarter has launched flights between the most popular cities new York, Los Angeles and Miami, where customers who have paid the membership fee, its free to book a place. They also were able to “invent” flight on a specific date and time, but the service costs a small amount.

Other clients JetSmarter saw this flight in the system and could join him for free. Many customers new option relished. Entrepreneur Stephen Badger tells the publication that he flies up to 100 times a year and to just $450 hop on a comfortable private jet more than beneficial. In addition, the passenger of a private jet delivered from the duty to undergo preflight screening with ordinary people.

While the company increased its media glory, her clients have experienced more pressure. From 2016 the bonuses and the cost of the membership began to change rapidly. For example, from client package lost shipping to the airport by helicopter. Lunch on Board, which had previously been free, began to cost hundreds of dollars, and for flights during the holidays had to pay extra.

Moreover, if earlier the client can reserve an entire plane just for himself, but now “single” flight introduced a surcharge. “As my spouse. If I have someone to share the plane, so it is not so private?”, — said one of the users JetSmarter in conversation with The Verge. Customers of the startup was the overall group in WhatsApp, where they talked and agreed on the flights, but at some point it turned into a book of complaints, said The Verge. “We certainly understand that we receive a great service and that companies need to grow, but constantly change the package for which we already paid for, just not fair,” wrote one customer that still uses JetSmarter.

Other adds. “If I pay membership, where is the guarantee that I will get what you paid. Just the wildness of it.”. Many have suggested that the deteriorating attitude to customers — a consequence of the more serious problems with the business JetSmarter. Customers started calling the startup a “Ponzi scheme” (financial pyramid “MMM” Sergei Mavrodi — a classic example of such fraud — Prim.

Ed.). “Only instead of money I get flights,” wrote one customer in the chat in WhatsApp. If in the case of any other company strange attitude to customers and the more celebrities have long become public, customers JetSmarter were forced to be silent, said The Verge. The customer agreement included a paragraph on the non-proliferation of negative information about the company.

Thus, anyone who spoke negatively about the company or its employees, might find his membership revoked without refund at any time. The Verge spoke with two dozen current and former customers of the company and read the correspondence about twenty customers. Some of them complained that the company did not renew with them the customer agreement due to public feedback. Others admitted that even in private chats in WhatsApp are not at risk to Express their opinion.

One of the clients of the company itself addressed to the publication and told about a dispute that broke out after JetSmarter tried to raise the value of the membership subscription. “They were pressing on us from all sides. I had a feeling that I am dealing with the mafia,” he told The Verge. Initially he was willing to speak to the press under his own name, but then refused this idea. “I dont want to get in trouble with JetSmarter, they have great communication”, — he explained his concerns.

The company tried to press on The Verge. According to the publication, following the demonstration of its service to journalists JetSmarter demanded within five working days to publish on the newspapers website a positive report. Otherwise, the reporter will be fined $2 thousand. JetSmarter reputation was shaken in February 2017, when the President of the company Edward Burski was arrested on charges of embezzlement of funds. JetSmarter, the representatives then stated that the case related to the previous job of an employee and has nothing to do with their business.

In conversation with The Verge CEO Petrossov and its Director of business development Ronn Torossian has waived all claims to JetSmarter on quick and aggressive tactics of the company. “This is a fast-growing technology company that really changes anything. Of course, there are always people, mostly among those who joined us a couple of years ago who did not quite fit [the team] today,”. The main challenge for JetSmarter is how to combine luxury services with the economy of collaborative consumption, explains Petrossov.

Director of business development for Ronn Torossian to JetSmarter created one of the fastest growing private PR agencies in new York, 5W Public Relation, about which wrote Bloomberg. Among his clients and major corporations — Anheuser-Busch (maker of Bud), and non-profit religious organizations, for example, The American Bible Society, and famous rappers — Snoop Dogg and others. Often the hero of scandalous publications in Gawker, earned media reputation as a “bad guy”, Torossyan to all customer complaints JetSmarter treats with contemptuous condescension. “Look, its rich, and we are not a gym for residents, where you can pay $12 a month, he explains his position.

Millionaires and rich people cant get on Board food or pay for them on the plane. What a bullshit”. Reputational difficulties could be a reflection of narodivsya economic model JetSmarter. When the company introduced its own flight, this “dramatically” changed structure of expenditures. Unlike flights, empty legs, private flights we had to book the planes for the prices paid ordinary tenants business jets.

If renting empty-legs Board costs about $300 per hour, then an hour flight at the full rate varies from $5 thousand to $15 thousand. JetSmarter said that performs up to 200 private flights per week. If the average flight lasts 2.5 hours, with an average rent of $10 thousand dollars per hour, own flight costs for a start-up company to $260 million. According to estimates by The Verge, it slightly exceeds that supposedly earns the company. According to JetSmarter, on average, each client spends about $29 thousand a year, while by the beginning of 2017 she was allegedly almost 8 thousand customers.

Therefore, annual revenue could reach $232 million. This could lead to an increase in the cost of membership. If at the beginning of the creation of the company for the subscription for the flights empty legs the client paid about $5 thousand a year, from 2015 the annual subscription for the services JetSmarter has increased from $7 thousand to $15 thousand.

The Verge in his article recalls that a large number of successful technology companies are not yet profitable. Service on call taxi Uber because of the faith investors have become the most expensive startup in the world. Snapchat, recently placed its shares on the stock exchange, too, has only losses in their reporting. “Its the aviation version of Uber.

Most of these conceptual fast-growing companies funded by venture capital, in reality, only concerned with what burning cash,” says Bradley Stewart, CEO of XOJet, which sells JetSmarter “empty” business-flights. “The question is how quickly they manage to become profitable. Six months or two years. If they succeed, then they are “in the game”, if not — no one knows what will happen to them,” adds Stewart.

Competitors JetSmarter draw a more bleak prospects. According to them, is simply absurd startup costs are high and the company has to bear serious losses, remaining afloat only thanks to a few big customers and venture capital investors. The recent reduction in the number of services offered to the customers for the same money — trying to cut costs, they say. “Theyre trying to find some light at the end of the tunnel to understand whether they have somewhere on the horizon a profit, but they will not succeed”, — categorically stated by The Verge, the founder of the private business of the carrier Airstream Jets Peter Maestrales.

The blog of the company Maestrales has published several articles about JetSmarter, which argued that the startup is a classic pyramid scheme. JetSmarter, in turn, threatened to sue him in court for defamation of reputation if he deletes his post. However, three weeks later, no lawsuit followed. Instead, says Mestrallet, Petrossov called him personally, asking him to delete the post, and with the offer on business cooperation.


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