In conversation with Steve Varsano, founder of The Jet Business, the world’s first street-level corporate aviation showroom for pre-owned and new business aircraft in central London.
The comment was once made that “when you fly private, you aren’t faking it.” The long time preferred mode of transport for the world’s most affluent, the private jet at the heart of the UHNW experience. For many, private travel represents a time saving tool, a moment of privacy, just as much as it does a sign of wealth or luxury.
Yet the market remains incredibly fragmented and lacking the sophistication in marketing and presentation inherent to luxury goods and hospitality ‘power brands’. But Steve Varsano, founder of The Jet Business, is working to change that.
This entrepreneur is of the firm belief that the affluent would rather spend $30 million dollars in a comfortable sales environment, than with a broker – who could be faking it – on the telephone.
In 2012 he debuted the world’s first street-level corporate aviation showroom for pre-owned and new business aircraft in central London, with ‘brand’ as a cornerstone of his retail strategy. At the first edition of Luxury Society Keynote in London, Shellie Karabell, director of INSEAD Knowledge, sat down with Steve Varsano to find out how The Jet Business works.
“ Clients would rather spend $30 million dollars in a comfortable sales environment than with a broker on the phone ”
How do you get people to come into your store? Better yet how do you say “come in, buy a jet?”
The first thing we did was try to create a brand, because there’s no brand that exists in the previous aircraft world. About eighty percent of our business is in pre-owned and about twenty percent is in new, so we had to create a brand to let people know who we were and what we stood for, which was very hard to do because we were basically creating a new space.
Secondly we’re located right on Hyde Park Corner, which I believe is the epicentre of the world as far as high net worth eyeballs go. We’ve picked a location where as many HNW individuals drive by as is potentially possible. And when they drive by, in the front window they see a full-size Airbus corporate jet, holograms of airplanes flying in and out, models of airplanes, it’s a combination of attention grabbing things and they get curious.
They often take another turn of the roundabout and tell their drivers “I have go back in there and see what this is about”. Initially they come in out of curiosity but eventually those people turn into customers. It takes a while to get in that flow of buying and selling mode, because most of the people that come in actually own a jet already.
Lastly we track and target individuals flying into London on their corporate jets, and when we see who is coming into the airports we call the owner or the pilots to invite them into the office. We don’t actually tell them that we know they are here already, we simply suggest “next time you’re in London”.
So it’s a combination of these things. There is the advertising channel also, but word of mouth has been very important too. Most of the people who do come in always go tell one or two other people about their experience, and that kind of viral marketing has been successful.
The Jet Business London showroom
So what is the thinking behind this concept? Why did you believe in the retail model in selling private jets?
I really believed that there was a real void in our industry and that the world was changing. 15-20 years ago most of the private jet market was in America – about 80% – so it was easy to fly to see a client in America as I was based in New York.
Now the world has changed drastically. The demographic and location of UHNWI’s and corporate executives interested in private travel has shifted, and now America represents 45% of the market as opposed to 80%. Not because demand in America has diminished, but because the rest of the world has created new demand.
So growth is coming from emerging markets and even beyond that the frontier markets which really have grown. So physically I couldn’t go to places like Mongolia, Nigeria, India, Ukraine every day or every week to, so I decided I want to try to build a place that I can get people to come to see me. That was really the whole idea of creating a physical location and aviation showroom to get people to come.
“ Growth is coming from emerging markets & physically I couldn’t go to places like Mongolia, Nigeria or India every day ”
So what do you offer that’s different?
Well the whole business model is different. First of all, you get an experience. We want to educate the client because we think if the client is completely 100% educated, he’ll make a decision to move forward. If you don’t have all the answers to your questions, you may never make a purchasing decision.
So we built an iPad app that takes the client through the whole learning process, on an incredibly easy to use, user-driven interface where the client feels like he is teaching himself. The client is not being told what to buy or being ‘sold’ something in the traditional sense. He’s actually taken ownership of the decision. That’s one of the main things we do.
The second is that we build a video wall, which is the size – to scale – of the largest corporate jet, the Gulf Streamer Global business jet. So on the wall we can physically compare the size of different floor plans, the cross sections of aeroplanes, you can actually stand up on the floor and see if you’re would hit your head.
You can see with your own eyes how wide the airplane is – we can do all kinds of modelling and performance charts and on a gigantic video wall it just takes them through an experience that educates them quicker.
Airbus Corporate Jet interior within the London showroom
So how much do jets actually cost?
An average in our market – because we really focus on the ultra-long range or large cabin airplanes – is somewhere between $25-30 million. All airplanes are priced in dollars, so but the complete aircraft market really goes from the smallest jet, which is probably about $3 million, up to the larger Airbus or Boeing business jet that is about $80 or $85 million.
There are Boeing and Airbus that go for $200, $300, $400 million but it’s a matter of a dozen airplanes so really below $100 million, above $4 million is about the range of the average price of an aircraft that’s actually sold today It’s probably in the high teens.
At the top, top end, the Airliner VIP end – the Airbus and the Boeing business jets – there’s about 250 of those in the world. About half are heads of state, I’d say about a quarter are individuals or entrepreneur-type corporations and the other 25% are probably spread between charter companies.
The next level, which is probably the most popular, is called the ultra-long range aircraft – that’s the market we really focus on, the large cabin airplanes – that’s Gulfstream, Bombardier and Falcon, manufacturers that really control the large and ultra-long range aircraft.
“ China, if you include Taiwan, Hong Kong & Macau, still only has say 300 jets out of 20,000 globally ”
And who is buying jets today?
It’s an interesting question, I think that the emerging markets are very important and are growing at the largest percentage of any category. However, they’re growing from a very small absolute number, so you might hear that China’s growing at 25% a year for the last few years but it’s starting at such a tiny, tiny number.
China for example, Mainland China probably has about 150 jets in the whole country. If you include Taiwan, Hong Kong, Macau area, it might be about 300 jets. That’s out of a total of 20,000 jets in the whole world, so it’s a fraction, a tiny fraction of the world.
But it is definitely an important market because they’re buying the larger jets for the most money and they buying newer jets so they are very important to the manufacturers. We’re finding that most people in countries that have natural resources, energy and technology, so you’re looking at places like Nigeria, you’re looking at Russia, Ukraine, Angola.
You’re looking at now agricultural places are starting to pick up. The economy is getting better in a lot of places in the middle of the world. You’ve seen in America where people weren’t buying new aircraft, but these agricultural type companies, they’re starting to buy now.
I think if you look at where the people are starting to buy new aircraft, it’s really a great indicator of where the economies are starting to grow. So we’ve got a really good advanced look at the economy.
The back office in the showroom, modeled on a trader’s floor
And what about the customer demographics?
Well, a large percentage are of course men that are actually buying. However I would say that a larger percentage are the women who are behind the men, who tell them I like this one instead of that one, but the man will ultimately sign the cheque for the corporation or for themselves.
I think that as far as age it’s a rough guess, but I would say in the last 15 years the average of the buyer has decreased by 15 years. I would think back 15 years, the average buyer was somewhere in the 60-65 area. Today it’s really in the 45-50 area. Customers are definitely getting younger.
What are some of the key challenges your business is facing?
Whenever you’re in the midst of a transaction you always worry that something unfavourable could happen, it’s a very complicated business. There could be fifty things that go wrong when dealing with buyers and lawyers in different countries, with planes registered in different markets. So what really worries me is really closing the transaction that we’re working on.
I don’t really like to look in the rear view mirror so I sort of look forward – I don’t look at what’s going to happen with the economy. Instead I try to find the next buyer. And since we are the most global business probably of any industry you know, one client might be in Mexico, one might be in China, one might be in India, one might be down the street from me in London so really we’re actually cherry picking or looking for those clients and trying to find out how we find that next one.
“ You might hear that China is growing at 25% a year for the last few years but it’s starting from such a tiny, tiny number ”
Let me finish by asking you what advice you might give to entrepreneurs…
Well you have to have very tough skin – it’s a very lonely process because you want to think out of the box. You have to be adventurous, you have to be convincing to other people and to yourself. You have to have passion that there’s no definition for – it has to be over the top.
Of course follow through of anything is more important than an idea, so you can have the passion and you can think about it, but if you don’t have the follow through and the commitment to actually create then there is no point.
You have to be willing to walking over dead bodies to get to the end result – you really have to have that laser focus to do whatever it takes to get there, and I think it’s not always a pretty journey but this is something that’s very important.
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