Last September, FlyExclusive and Volato signed a strategic partnership that will take effect in a year. This marked an interesting development in the private aircraft market.
FlyExclusive is one of the leading players in the market, and Volato, a fractional jet ownership company, has been rapidly expanding.
The transaction incorporates an Aircraft Management Services Agreement (AMS), which would drastically alter both companies’ operating goals, allowing them to specialize in areas where they thrive. This could lead to a merger between the two companies in the future.
Before we get started, you might be asking what a fractional jet ownership firm is. Volato, for example, allows multiple people to co-own a single aircraft.
Crew pay, fuel, and maintenance costs are divided among the jet owners; the division is typically decided by the number of flying hours accumulated.
Though each owns a share of the aircraft, the model enables clients to enjoy the flexibility, luxury, and convenience of private jet ownership without incurring the full expense and obligations.
So, let’s start our deep dig. Continue reading to find out what we know so far about the deal, why it was essential, and what it means for the future of private aviation.
FlyExclusive and Volato reached a deal.
The Aircraft Management Services Agreement (AMS) is the most crucial aspect of the connection between these two organizations.
FlyExclusive has announced plans to take over Volato’s operations, including sales, fleet management, and operating expenses.
Volato clients will most likely be required to re-sign their papers with the company in the coming months to simplify the transition and include FlyExclusive’s management of these issues.
- Volato’s fleet includesÂ
- 13 fractionally owned,
- 8 leased, aircraft.
- 4 managed aircraft.
The AMS also grants FlyExclusive access to Volato’s unique technologies, Vaunt. According to a Volato press statement, the arrangement includes digital integration for scheduling, fleet management, and customer interaction. This creates a seamless and efficient experience, making it a valuable asset.
According to the Sherpa Report, the AMS offers FlyExclusive a 12-month option to merge with a Volato subsidiary. While the merger is not yet definite, it allows both corporations to become even more linked with each other and their assets, perhaps having a greater impact on the sector.
Why was this transaction necessary?
While the AMS appears to be a reasonable strategic decision, it is also a reaction to issues confronting both firms. The following are some of the reasons for the collaboration:
- Operating challenges
According to Aviation Week, Volato’s quick growth proved to be both a challenge and an opportunity for scaling their fleet. According to the CEO, supply chain challenges in recent years have made it difficult for them to meet the growing demand for their services.
- Focus on key competencies.
Volato said in a press release on September 4th that they will focus on their strengths, including aircraft sales and software development.
As FlyExclusive takes over operations, Volato will be able to reallocate staff and resources to the areas that helped it develop so quickly, making it more likely to satisfy demand.
- Improved client experience.
For both organizations, the deal represents an opportunity to improve the consumer experience by providing a greater choice of services.
FlyExclusive operates on a greater scale and specializes in the customer experience. Because they would have access to a larger fleet of more diverse aircraft, they will be able to serve more customers and their specific requirements.
When Vaunt is factored in, FlyExclusive’s great service is likely to improve even more. FlyExclusive also provides some interior cabin customisation, as shown in the video above.
- Financial Synergy
FlyExclusive estimates the arrangement to generate around $75 million in yearly revenue, excluding aircraft sales. This significant jump is related to revenue generated by Volato’s operations.
However, by merging their resources, the two organizations will be able to reduce expenses and operations in areas where each is inefficient, allowing them to focus on areas where they are strongest.
Implications for the Private Aviation Sector
The private aircraft business has evolved considerably in recent years. This shift has been fueled by rising demand for flexible and tailored travel choices, which have been demonstrated by companies in other industries, such as Uber.
The FlyExclusive and Volato agreement may alter the competitive landscape in the following ways:
- Other corporations consolidate.
The collaboration between flyExclusive and Volato AMS may benefit both firms by allowing them to leverage each other’s strengths. Other companies may follow this model, resulting in fewer but larger companies that integrate the strengths of numerous smaller ones.
However, there may be an increased danger since by relying on one another, they reduce their own ability to deliver a broader range of services that an aviation-related organization must offer.
- Technological focus.
The inclusion of Vaunt software in the agreement emphasizes the expanding role of technology in the future of private flying. Many modern businesses aspire to provide seamless, tech-enabled experiences that prioritize integration and ease. Companies who invest in this area may get a competitive advantage.
- Diverse service options
The agreement gives existing or prospective clients of both firms access to a broader range of aircraft and services. FlyExclusive offers advantages in terms of operational scale, customization services, and fleet;
however, when combined with Volato’s own fleet, technological expertise, and fractional ownership model, the result is a comprehensive service that can meet a wide range of customer needs while remaining affordable.
Other companies will struggle to compete with such a diverse and inclusive offering unless they make substantial changes.
Challenges and risks of partnership
While everything appears to be going well thus far, the AMS may face some obstacles. Because the resulting service could be so vast, the fractional ownership model may not be compatible with other services, such as cabin customisation.
There may be solutions to this, such as keeping the choice of complete ownership or longer leasing of jets, but careful consideration will be required when attempting to merge the services that both organizations offer.
Mistakes in this procedure may destroy what made either company successful in the first place; if the rafts are tied together, both may sink in the same storm.
The prospect of a future merger between the two corporations may also cause uneasiness among the company’s consumers as well as its employees.
Reassigning individuals from one function to another may cause dissatisfaction, and it remains to be seen whether future expansion in each company’s specialized fields will meet expected demand. There are numerous unknowns that must be addressed to the best of both firms’ abilities.
The uncertainty produced by this transaction may have caused the proposed merger between Volato and Honda Aircraft Company to fall through. This development is discussed in our piece here.
The Way Forward
In broad strokes, I believe the relationship will benefit both organizations and their customers over the next 12 months and beyond. However, final success will be determined by the effectiveness with which both organizations integrate their trademark services.
It is difficult to forecast what will happen next for the companies without further information on how they will change, how they will up-scale in some places while shutting down activities in others.
One example of an increase in a provided region could be Volato’s recent introduction of a new membership category for Empty-Leg flights.
For further information, refer to our December article. An Empty-Leg flight is one in which a plane goes from one destination to another without carrying any passengers.
For the private aviation business as a whole, the agreement serves as a reminder that even success may be difficult, and it emphasizes the significance of innovation, particularly in technology areas.
Demand for private aviation continues to rise, which is undoubtedly a positive thing. However, like staying on a raft in a turbulent ocean, firms must carefully balance their assets to avoid falling short of expectations.
However, this bold approach is sure to make waves, and I am curious to see how it affects other charter providers and private jet sellers.
What is the Aircraft Management Services Agreement between flyExclusive and Volato?
The Aircraft Management Services Agreement is a partnership where flyExclusive manages certain aircraft on behalf of Volato, ensuring efficient operations and service.
What benefits does this agreement provide to flyExclusive?
The agreement allows flyExclusive to expand its operational capabilities, strengthen its fleet management services, and tap into Volato’s customer network.
How does this partnership benefit Volato?
Volato benefits from flyExclusive’s expertise in aircraft management, ensuring optimal utilization, reduced costs, and enhanced service quality for its customers.
Will this agreement impact private jet customers?
Yes, customers can expect improved efficiency, better-managed fleets, and more streamlined services as a result of the partnership.
Where can I learn more about this agreement?
For detailed information, you can visit the official websites of flyExclusive and Volato or refer to aviation news sources covering the partnership.