Even in the present financial crisis, VistaJet’s revenues increased in the first part of the year; as if silver planes with red stripes brought luck to VistaJet founder, Thomas Flohr. He explains what is behind the company’s success and what the future holds for the Russian aviation market during a discussion with our reporters at Jet Expo 2009.

Mr. Flohr, this September your company announced results for the first six months of the year, which revealed 25% revenue increase. It seems that you are moving against the trend. What is the main reason for that?

We have a really clear business strategy – never before has anyone in this industry created a consistent, high level of service and a strong brand. From a Learjet to a Challenger to a Global Express, VistaJet offers consistent high levels of service. In Russia, people like consistent levels of service. I like to compare it to the hotel industry. When you go to a Four Seasons or a Ritz Carlton hotel, you know exactly what to expect: the friendliness; what is in the room; the bed sheets; what people are wearing. When you travel a lot you want this reassurance of good service, safety, comfort and always getting an identical product – that was never done in aviation! I think our silver plane with the high level service has more of a European culture than other providers.

By the way, why have you chosen such colour for your planes?

It began when I bought my first plane. I never dreamt of VistaJet ending up to be the number two company in the world behind NetJets. I just was very bored with the business aviation solutions available, where every plane is white and has no emotion. I liked silver and when the first plane was finished with silver – that was in 2003 – it looked great, but was missing something. I said: “Guys, you must do something!” So we put a red stripe on it, and the plane looked happy. Look up there (editor´s comment. points at the aircraft poster). It’s nearly smiling. The silver colour and this red stripe bring some affection. There was no designer, and the colour scheme was my idea. When the second plane came, the designer asked me, “How should we make this plane look?” I said: “Guys, I’m so busy working (this is the true story), please make it look like the first one.” And that’s how it got going.

Does it mean that your aircraft interiors are the same?

Yes, same carpet, same leather. Our jet interiors are all identical because it is not necessary to differentiate between different sized jets within our fleet. For example, a customer may not need to fly a Challenger on every occasion. If they are only flying from Moscow to Nice, they would only need a Learjet. However, whether they are in a Learjet or a Challenger, they will want the same customer experience.

But it’s rather hard to create the same interior, with identical finishing, within different aircraft types…

I’m happy you asked this question. It’s very hard work because the manufacturers won’t necessarily anticipate someone wanting to build an identical experience across a fleet of aircraft ranging from Learjets to Challengers and the Global Express. They say, “Oh! We do not use the same wood or this carpet is not possible”. I went to the chairman of Bombardier and said: “This is the carpet I want – a dark colour with nice dots – and this is the leather I want, please put it in the other plane.” At first, he did not think it would be possible. But after some persuasion, Bombardier allocated a very strong team to VistaJet to get the consistent look with every jet. I’m their biggest client worldwide and they made it possible.

Why did you choose Bombardier?

It was a very long process. I spent a lot of money and conducted extensive market research. I spoke to Gulfstream, Dassault Falcon, Hawker, Citation, Bombardier and I tested the planes. My conclusion was that in aviation you always have to find the best compromise. One plane flies a little higher, another flies a few minutes faster and another the luggage (compartment) is a little bigger. And we are not talking about one individual oligarch who keeps the plane for himself and maybe flies one hundred hours, but about commercial transportation where you need to find the best common denominator and all that – together with reliability because we fly the planes one thousand hours per year. It soon became very clear that Bombardier offered the best value. And that’s not only price, it’s availability, reliability, maintenance services – the overall package. The Challenger is an airplane with the widest cabin – customers love big cabins! It’s quiet and it’s reliable. All that made me choose and work very closely with Bombardier. Every single time we buy new planes we go back into the market and ask: “Is this still the best alternative?”

How many Bombardier planes in total are in you fleet now?

At this moment we have a total of 24 planes in operation and three more coming this year: Challenger 605, Challenger 850 and Global Express XRS.

Year by year VistaJet added bigger airplanes such as Global Express to its fleet. Why have you decided to start operating such large-cabin aircraft?

We see the demand at the top end of the market for non-stop travel. Challenger 605 will fly for eight and a half hours non-stop, so you could fly Moscow to Vladivostok non-stop. However, you couldn’t fly Moscow to New York, Los Angeles, Johannesburg or Hong Kong non-stop on a Challenger 605, but rather on a Global Express XRS. So, clients need the right aircraft for the flights they want to make. We now have one Global Express XRS covering this market, with one more to come. Our core fleet consists of Challenger 605s.

Bombardier is working on a new Learjet 85 – the first all-composite business aircraft. Are you following your tendency of choosing Bombardier aircraft?

We have already placed the largest order for Learjet 85 worldwide. We have ordered ten Learjet 85 from Bombardier. We bought around 20% of their production of Learjet 60s as it is a great product, but four years from now, customers will need a little more range and space, and thus: the Learjet 85 is an ideal product.

You said you have a different vision of the bizjets market. Does it imply fractional ownership?

No this is the main difference between VistaJet and the competition. Our customers were telling us they wanted simple contracts. A fraction of an aircraft is one of the most complicated things you can buy or try to sell. Why is this the case? Because a fraction is not something you can touch: it’s not the wing or the engine. You do not have a physical asset, and particularly in the current crisis, no bank will finance a fraction of an aircraft. In addition, you would have to pay management fees, hourly fees, landing fees and fuel surcharges. Fractional ownership is a very complicated structure, so we said: “You do not need to buy a fraction.” If you want 200 hours, we will draft a very simple contract and sell you 200 hours, but you do not need to own a plane. That is a lot easier and you don’t have to make any physical investment.

And what is included into these 200 hours? Definitely, an operator has some extra charges at such airports like London, Paris...

There are very few airports we have which we call high density airports, such as Heathrow or Charles de Gaulle – the ones where very high fees are requested from us. If we fly to a normal airport, we do not charge extra because it is the normal operating procedure. If somebody wants to fly to Heathrow for a commercial connection, and we are paying £2000, then it´s normal to pass that fee on to the customer. But then, you know there is no surcharge for catering or fuel, at most airports.

So fuel is already included?

Fuel is included, absolutely. People want simple contracts with one price and no surprises. That´s what they are telling us so that is what we are providing.

And how do you calculate these flight hours, in two ways or one way?

One way: we only count when the client is actually flying. Where the plane is coming from and where it goes afterwards is VistaJet’s problems.

And how does VistaJet manage to cover the rest of the expenses?

VistaJet offers two products: one of which is in direct competition with NetJets. 200/300 hour Program which is offered at guaranteed prices and guaranteed availability. The other product is “On Demand charter” where we use brokers. If a potential On Demand customer wants a plane, they receive a price of the day, which can either be higher than the price of the Program or lower. For example, one of my guaranteed availability customers is flying from Moscow to London, whilst another guaranteed availability customer is flying from Nice to Athens. We then put the London to Nice leg onto the open charter market. A customer who signs a one or two hundred hour Program with us is my risk, and the success of the business model depends on how I combine the two programs.

And with the identical interiors it is much easier to combine…

Exactly right, because people know what to expect. If you’re flying to Beijing and then returning home in ten days time, the chances of you being on the same airplane is one percent. With VistaJet, it is just as if you were to fly on Singapore Airlines or Emirates. You do not look at the airplane’s tail number and you have certain expectations of the cabin and service you will receive. That is how we’ve revolutionized the private business jet market, as nobody has ever created such a seamlessly branded product from Learjet to Challenger to Global Express.

Just returning to this picture you showed us. You have chosen a nice introduction for a brand. Nice tablecloth, crystal glasses, a bottle of Ornellaia…

It’s my favourite wine! I insisted that we put that wine there. And again, whether it’s Global Express or Challenger – it is always the same materials.

You have been talking about the personality, the image of VistaJet but does that mean that you have your own VistaJet menu or you usually follow the customers’ requests?

We pay very close attention to what our customers want. We have a certain selection of wine, but obviously on a plane there is very little space so you cannot have a choice of six different wines. If, however, the customer or their personal assistant were to phone us or send us an e-mail saying that they want a different wine, we guarantee it will be there. The service is very, very tailored to the customer. We make suggestions but if, for example, the customer says he prefers Spanish wine – we provide Spanish wine.

Last year you announced the opening of your representative office in Russia. Is it already functioning?

Yes, we have a sales team here in Moscow, and they are active in the Russian market selling our Programs. For the broker sales force, this has been centralized as this does not require going and seeing the broker. But the Program however, still requires a sales manager going to a client making appointments and explaining the Program. On Demand and charter is all done by telephone.

Do you have any figures of how many flight orders are coming from the Russian customers?

I think that in rough terms probably 25-30 percent of our business is coming from Russia and the CIS countries. We have business in Ukraine, Kazakhstan and if you take into account the CIS countries, it is about one-third of our business.

What we like about the Russian market is that they really enjoy the value of a brand. They are very demanding, but very loyal customers. If you bring consistent, great service, they are very loyal and I ask for nothing else. My job is to supply consistent, high level service, and as long as we do this, they are very good customers.

And are there any difficulties in building business with the Russian customers?

No. I think as long as you understand and can deal with very demanding customers who might sometimes have last-minute changes or catering requests, there are no problems. A customer might indicate that only two people will be flying, but then a party of seven ends up arriving and we would have to supply extra food. These are just some of the small operational challenges that you might come up against. Luckily enough, I have a very strong CEO who is the ex-CEO of Swiss Air – Philippe Bruggisser – in charge. He is a logistical genius and was running more than 100 airplanes.

What are the prospects of the Russian market in your opinion?

We are seeing two trends: three or four years ago it was very much centered mainly on Moscow with a little bit of St. Petersburg. Now, we are flying to other cities including Novosibirsk, Krasnoyarsk, Murmansk, Tomsk, Petropavlovsk and Vladivostok. There are also an increasing number of flights into deep Siberia, as more wealth is being created in regional cities. Secondly, we are seeing – and this might be one of the only good things to come out of the financial crisis - that some of what I call “the excesses” are now back to normal. Somebody who maybe had one plane two years ago would say: “Ah, let’s buy a second plane. I use one plane for me and the second can be used by my wife, family and my CFO.” Today, he keeps his first plane and is happy with it, and for the second airplane he turns to VistaJet . Anything which is not efficient will eventually collapse and so, to that extent, I think it’s a healthy trend.