Aviation special: VistaJet and highlights from the Paris Air Show

0:11Hello and welcome to the Entrepreneurs on Monocle Radio, the show all about inspiring people, innovative companies and fresh ideas in global business. On today's program, we look to the skies. It's an aviation special. First up, we'll meet the founder of a business aviation company that he started due to his dissatisfaction with the private jet industry. There was no quality product available at a predictable price level, and it was highly complicated. And I kept on saying, how is it possible that we're selling to the wealthiest, most influential people in the world and not having a simple business.

0:49And later, Monocle's Paris Bureau Chief Simon Bouvier joins the show with some highlights from this year's Paris Air Show. What caught your eye at Le Bourget, Simon? Hello, Tom. It was all about defence drones and Boeing. More from Simon landing a little later in the show. This is The Entrepreneurs with me, Tom Edwards.

1:16You're listening to The Entrepreneurs. Thomas Flohr is the founder and chairman of VistaJet, a leading global aviation company with more than 70 mid - and long-range jets connecting every continent and flying people to over 180 countries. Thomas himself jetted into London to meet with Monaco at Midori House, and he began by telling me the start of the VistaJet story. I was basically a very dissatisfied consumer in the industry of private jets. I chartered airplanes, and this is early 2000s. You never knew what you got until you arrived at the airport, and that's what happens in the charter market.

1:53I analyzed the market, and I looked at, you know, what are my options, et cetera. I could never get my head around the fractional ownership model because a quarter of an airplane is, for me, not an asset. It is a fraction. And I always want to be able to either buy or sell an asset when I want to. And with a fraction, you're depending really on the company that is distributing those fractions. So ultimately, I ended up buying an airplane out of frustration that there was no branded quality product available at a predictable price level. And it was highly complicated. And I kept on saying, how is it possible that we're selling to the wealthiest, most influential people in the world and not having a simple business where we're guaranteeing to fly you and you're guaranteeing to pay you?

2:42And that's basically the proposition, a guaranteed availability of an aircraft against a guaranteed payment stream. That's all what you need. And if you can't get it in a three to five page contract, I'll look for another lawyer to contraft that. It's funny because so many of the entrepreneurs we talk to make their ideas sound so simple and obvious even. And yet we know they're not, right? Because then everyone would have done it before you and you wouldn't have created what you've created. What was the biggest impediment in those early days, though, Thomas? Was it people's scepticism? Did people say potential partners?

3:18Listen, if it did work, someone would have done it. Is that the kind of pushback that you got? You come straight to the shareholder structure, right? For the first 14 years, I owned the company 100%. You know, there was so much skepticism. There was doubt. And what is this guy doing in this industry? He's not a pilot, doesn't understand what he's doing. An asset finance guy. And yes, lots of skepticism. And kind of like the educational drive from the industry trying to tell me how the industry works. And I said, I don't want to know how the industry works because I'm not happy with the industry.

3:54So let me do it my way. And, you know, this can come across as knowing it all. This can come across as being constantly skeptical to the industry. But at the end of the day, I think it needed that fresh set of eyes to completely change and offer something that was actually exactly meeting what the users wanted. Because I was a client of this industry. I am a client. I'm a user. So I think I know what I want. I just couldn't get my head around the under-industrialized, and this is a word I want to introduce here, the under-industrialized level that this industry was facing back in the early 2000s.

4:35And Thomas, do you think that that attitude, a bit of fearlessness, maybe some naivety to a degree, but this idea of challenging received wisdom, you kind of retain that now, right? Because if we look at what the sort of industry says about your business, you know, whether it's, you know, it's a bit of an asset heavy model or whatever, there's always somebody queuing up to take a swing. Do you think it's because you've retained that, I don't know, appetite to be disruptive? Tom, make it very simple. That's who I am as a person. If something doesn't make sense, I will challenge it. And whether that's inside the company, with any other industry, at home, with the family, it has to make simple sense.

5:15And if it doesn't, then I will question it. I'm that simple, right? I try to boil it down to what is needed and how you best serve it. And that's sometimes not liked by certain recipients of this message. But frankly speaking, then let's argue it and then agree or disagree and move on. I like that. It reminds me of Nigel Clough, the football manager, Brian Clough, I should say, who used to say, we talk about it and then decide I was right. Is that the Thomas of Orange? No, I think if somebody has a valid opinion, I'm a very fast learner. I love to learn. I love to listen and adapt, but it has to make sense.

5:56I will not give in just to make you feel good. It has to make sense because at the end, it's my entrepreneurial spirit and my entrepreneurial dedication on the line to get it right. Let's talk a bit about where the business is today. Just give us some headlines in terms of, obviously, yeah, there is the sort of the membership program, but you also operate, this is right, sort of charter services. How does that kind of break down in terms of how the business functions, the nuts and bolts of the day-to-day? Sure. Well, look, there is, in basic terms, there is two products. The key product, the leading product is our program, the VISTA program, guaranteed availability against the guaranteed three-year contract.

6:36And it's an alternative, the full alternative to full aircraft ownership. And that is what the company is being built on. Now, think about that. Why is there in addition to... So that's typically for a client flying 50 hours or more per year. Could be some clients fly 800 hours per year. If you were just to offer this product, there are two downsides, two simple downsides. One, there are people and very influential people around the world that fly less than 50 hours per year, and they might be growing, and we want to offer them a service as well. That's what you call an on-demand short-term need.

7:14And that's what our on-demand offering constitutes. But there is a second element. If you have an infrastructure and had all your clients being offered guaranteed availability, then there are peak days where everybody wants it and there are rough days where not much happens. Now, that's not very efficient because in peak days, you've got to make an excessive size of an infrastructure available just to cover the peak days. So hence what we do, we are only selling about 70 % to 75 % of our infrastructure to guaranteed availability that gives us headroom percentage-wise up to 40%. If you percentage-wise upsize from 70%, 75 % to 100%, it's about 40%, is available for peak periods.

8:04and on the trough days we open that tab more and say well why should this fleet stand still we're allowing more people to occasionally try on an on-demand basis our product with the hope that they love it they get addicted to it and they buy a program of minimum 50 hours that's the business reason behind our model. It works extremely well and hence guaranteed availability program on demand for the occasional flyer is a perfect match in what we're offering in the marketplace. And let's just talk quickly about geographies. Obviously Monocle, our audience is global, like your client base, right? Primarily in English speaking markets, the US amongst them.

8:54North America, still around half. Thomas, is that about right? Rest of the world about half? Is that still where you are? Absolutely. 50 % in North America, 50 % in the rest of the world. That's the split of our revenue and flight hours. And what's the thinking about the direction of travel with those markets? Five-year time horizon. I think that percentage will pretty much stay the same. The depth of the North American market is huge. Hence, you might be growing slightly slower percentage-wise, but of a bigger base. We see other continents around the world, such as India or Africa, huge promising markets.

9:32We just recently launched our Indian Inside India operation, so transport rights within the country. And Asia is a very big focus for us. Long distances, underserved market. Middle East, of course, one of the highlights of global traffic these days. And since we took the global 7500 aircraft, 18 of them over the last couple of years, we see that connectivity of the Middle East to West Coast of America going one way or East Coast of America going the other way around the globe and really connecting parts of the world that before weren't really connected. I was going to ask you a sort of trite question about the typical customer.

10:14And in a way, if we go back to your remarks at the beginning about starting something that is exceptional, the whole point is you don't treat people like a typical customer. You treat them all as unique. But allowing me that turn of phrase, typically, what are the customers? You would typically look at the most influential few people in medium to very large corporations that are very much business-driven and looking for efficiency of their scarcest commodity, and that's time. And in today's world with how we're connected, unfortunately, we're working 365 days a year. We cannot switch off anymore.

10:59and hence the business that allows you to optimize your time, be more efficient, being in more places in shorter periods and arrive completely fresh and conduct and fly back and hopefully be with your family. So I think this is really the, if there is a typical client, but it could also be maybe, you know, the same extremely successful surgeon in the world. It could be a sports star. All of them have that one thing in common, and this is time is scarce. Their biggest value is themselves and their personality. And I think that's what we enhance and thrive for to give them more of themselves. um bring us up to speed lots of headlines in the last kind of year or so about equity investment and you know what does that give you in terms of resource or debt restructure in terms of moving forwards already mentioned the sort of asset intensity of a business like yours where are you at at the moment tell us tell us well that's let's say so there is a there's an equity investment in the company just recently we were very picky in terms of who to choose i always see money as a commodity.

12:16What is most important is who stands behind this money and what are they contributing to the growth of the company. And we found a wonderful investor in Asia. Hence, I mentioned earlier that we have a big focus on Asia and they are actually helping us to find new customers, reach out, bring the name Vista onto a product platform where we maybe have been underrepresented so far. So we're very excited about that. We did a term loan B is a institutionalization of the balance sheet. So I want to clarify this, if I may, Tom, you use the word debt restructuring. That is a very dangerous word. It's about a million miles away from what we did.

13:00We made the logical next step into institutionalizing our balance sheet. So if you buy aircraft, If you have an asset-heavy industry, we achieved, we were the first company that had unsecured bonds out there. That's an institutionalization. You're not on bilateral loans. We did WTC, which is enhanced equipment financing. We brought that from the commercially aligned space to the private jet market. Again, a leader in the financial markets for that. And then lastly, we were still having a fair amount, probably 40, 50 aircraft in bilateral loan agreements. as a heritage from the past when we didn't have the institutional recognition.

13:43And that is extremely cumbersome because we might see that India needs five more airplanes and then you need to talk to five banks whether they allow us to move you from the U.S. to India and what it means. I mean, this is a six-month process. But the industry today is you've got to react within a week or two, okay? So that really did away with the typical bilateral loans when you were a small company and institutionalized that last bit into what is called a term loan B and a successful execution. And again, we were into the market with 500 million. We had 1.7 billion in orders within 48 hours, and we upsized to 700 and executed.

14:25So very successful capital market transactions, and it puts the company on a growth trajectory for the second half of the decade. That's what we're really off to. We believe we take more market share with what we believe is a simpler, less expensive, and more transparent business model than any other solution in this industry. Thomas, what are the biggest challenges you face? Apart from over-enthusiastic journalists misrepresenting the facts, what are the biggest challenges that you face on the day-to-day level? I think there's still a fair amount of work to be done by the manufacturers around parts.

15:03In the post-COVID world, we saw a complete break of the supply chains. And airplanes are extremely parts dependent and really dependent on a global supply chain. Because these airplane manufacturers, they're aggregators of parts and making it an airplane at the end. And, you know, there's still a fair amount of work to be done. And obviously, if a certain part is not there exactly in time, then it's downtime. And downtime is not good for us and not good for our clients. I think that's one element. I think the reoccurring geopolitical conflicts that we have is not so much for us, but for a client, you know, making it slightly less predictable.

15:50Now in the commercial space, even worse, right? People stop flying there or airlines stop flying. But it's just, you know, a word of caution and safety. There are certain no-fly zones. That means your flight is longer. And these things are just affecting your travel. And, of course, we're monitoring this 24-7, 365. But those are just some of the challenges that exist day in, day out. And it's a question of how you manage them. Yeah, well, how do you manage that? Because I guess people will look to you in the business as the leader, the figurehead, to reassure them, right? Oh, look, we can navigate a path through geopolitical volatility, but it is by its nature so uncertain.

16:31How do you reassure people? Is it a question of ensuring that they're confident to execute and they're not preoccupying themselves by asking the wrong questions? What's your sort of management strategy, leadership strategy to deal with that? Sure, but think about it. I keep on using the word industrialization, right? I mean, there is enough information available to make the right choices. And of course, we're connected to the deepest sources of intelligence available, whether it is safe to fly, yes or no. And we always, if anything, are on the side of safety, if there's a small question mark. But it's the processing of this vast amount of data to make the right decisions, which I call the industrialization.

17:16So we feel extremely comfortable that we have a system in place, an institutionalized system in place to make the right calls of what is safe or what is not safe. And I think it's in stark contrast what we believe a one airplane, three airplane or 10 airplane operator can actually offer its customer base. Yeah, you know, they might make a call. There are situations where Vista might say, we're not going to fly there. And maybe you find someone who will fly there and trust us. We have all the motivation to fly because we have the assets on the balance sheet. But safety is first, and then there is safety, and then there is safety again.

18:01And we will not take a risk. And I think that's been a 21-year-old strategy that has paid off. Let's do a bit of a quickfire round. Can I get you to choose? This is tricky. Favorite aircraft? So we could go back to, was it 2003 or first Learjet 60, was it, going back over 20 years? Is that first one always special? Is there another favorite? You can go business jet. You can go, you know, wide body, whatever you like. Can I get you to pick one? Concorde. Oh, excellent. Okay. You wrong-footed me with that one. You know, I was commuting a lot between London and New York at the time. But in today's world, it's a global 7500.

18:42Absolutely favorite aircraft. It is as smooth as it gets. It's completely silent in the cabin. It has a permanent bedroom in the back. You can carry, you know, 15 packs and at the same time, you know, have enough space for yourself. It's just an incredible machine that Bombardier was able to pull off. And it's way above any competitor's aircraft. And I'd say that is my absolutely favorite aircraft. Now, if I fly from London to Milan, I'm not going to fly on a 7500. I think at Vista, we always strive for efficiency. So, you know, whatever aircraft is right for the mission. But in terms of favorite aircraft, 7500.

19:25I get two good answers for the price of one. I like it. I wanted to ask you about motorsport, if I may, just quickly, because I know this is a passion of yours as a racer, as a partner of famous and storied, you know, Scuderia, whatever. Why so? And is there, I don't know, do you find that as a business leader, there are learnings, there's utility from being around something that's as dynamic and exciting and challenging as motorsport at that kind of level? Well, you know, I think you're hitting a very important point here. Not that I can, but if you look at Formula One, great sport, fantastic.

20:01Look at the FIS three world championships, Formula One, World Endurance and Rally. I'm in World Endurance. championship and endurance racing is what you do day in day out in business as an entrepreneur you got to perform at 97 98 percent over a very long period of time okay as you you can't sink down to 90 otherwise you get overtaken just like in motorsport you got to be right up there at your best, just below the limit. And that is what endurance racing is. So you're dealing with a sport that is highly competitive. It brings the best out of you. The preparation, let's talk about preparation. You got to be fit mentally, physically, and both play together, right?

20:55There's no point to go to the gym and be the very best in the gym if you're not mentally equally trained, vice versa, right? So I think all parts of your being, of your wellbeing, for me, have a lot of resemblance in endurance motorsport and in performing at the highest level in business. What are you most excited about, Thomas? I sense possibly, you know, Le Mans, but what are you most excited about? you can look through the prism of your business of your personal passions motorsport whatever what will get you leaping out of bed tomorrow ready to set your face against the world well i think it's it's there's not one single thing that that that kind of like stands out for me for me it's the excitement day in day out that i have the honor and the opportunity to meet the most influential and wealthiest people in the world, and I can learn from them.

21:59They hopefully learn a little bit from me, and it's intellectually extremely challenging. It's wonderful. I had a gentleman yesterday from Silicon Valley coming over, very successful gentleman, and the day before in France, and we spent some time together, and it's just wonderful to learn how they see the world, how they approach it, and there is literally a level of camaraderie building around in this entrepreneurship, which excites me a lot. And I think that is driving me to hopefully excellence every single day of the year. So I think it's rather this process and this environment that I'm in what excites me every day than one single event that might be coming up in the very near future.

22:44And you don't ever get tired? Sounds a bit tiring to me. Sounds tiring to me. Well, it's not because there is so much excitement around doing it. It's like saying, are you getting tired by going into the gym? Yeah, well, it's the consistency that counts. And yeah, you have a choice to make. At 5.30 or 6 p.m., you go to the pub or you go to the gym. I love going to the gym. And whilst this one hour in the gym might be tough, but how I feel over a long period of time with all the energy that gives me, that is for me the exciting part of it. That was Thomas Flohr, the founder and chairman of Vistajet.

23:26You can find out more about the business and where they're headed next by heading to Vistajet.com.

23:40You're listening to The Entrepreneurs. Well, I am delighted to say we cross over to Monocle's Paris Bureau Chief Simon Bouvier at our studio on Rue Bouchement right now. Bonjour, Simon. Always good to hear from you, particularly on the entrepreneurs. You've been a very busy man covering the Paris Air Show, of course. What was the mood like on the ground? Tell us about the experience of being in Le Bourget. Bonjour, Tom. Well, it was hot, first of all. Walking around on the tarmac under the June sun was no easy feat. But fortunately, some of the chalets and pavilions had some nice fans and air conditioning.

24:20So we were able to take refuge from the sunlight a few times. But no, it was really fascinating to see how this show, which is one of the principal, if not the principal aviation fair in the world, has kind of evolved from having mostly civil aviation highlighted and kind of the defense part of things being very much present, but a bit on the sidelines, especially considering this is Europe, you know, it's not the United States. So the mood has changed quite a bit, and the defense companies were really front and center, most notably with drones. Well, this is it, and you whetted our appetite at the top of the show, defense, drones, Boeing.

25:02We'll come to the big airframe and that story in a second, But just, yeah, on defense and drones, what kind of narratives? Who were you talking to? And what was the, that was obviously the big topic, but what was the cut and thrust of the conversation, Simon? Reveal some of the, you know, overheard at Le Bourget for us. Yeah, I mean, I think I spoke to some military sources who were telling me that the foreign delegations, we saw a lot of people in uniform of all kind of shapes and sizes and colors coming in from countries all over the world to do some shopping. And these French military sources were telling me that these delegations of foreign militaries, they're interested not just in buying French, but they're interested increasingly in upgrading equipment that they already have.

25:49and for some of the nations with bigger budgets in drones. And everybody was talking about how this new era where, you know, in some scenarios, a kind of$100 off-the-shelf drone that anybody can buy online could incapacitate a$100 million fighter jet is changing the game and reconfiguring how defense contractors are thinking about what the future of military aviation looks like. And it's looking like a lot of these expensive planes will now be synchronized with swarms of drones that they're going to be able to deploy around them as kind of kamikaze shields, but also as reconnaissance devices. So it's really a shifting landscape and people were there to learn, but they were also there to shop.

26:37Yeah, fascinating. So really, really interesting. Lots to watch and ponder. Let's just talk a little bit about Boeing. Of course, it was interesting. We went into Le Bourget off the back. of course, of the Ahmedabad air crash, this disaster, still, you know, now lots of unanswered questions. How did that shape the mood? Obviously, you can imagine it pretty somber, but in terms of orders, you know, we know now, you know, Airbus did a lot more business, perhaps predictably out of Le Bourget. Tell me a little bit about what was the narrative around Boeing at the event? Well, I think that everybody had a pretty kind of sober atmosphere about it.

27:12And, you know, was talking about, let's just see where the investigation goes. And everybody was very understanding actually of the decision of the top leadership at Boeing to cancel their attendance. The CEO decided not to come and a number of senior executives from Boeing decided to focus on the investigation instead of coming there. And it was really supposed to be a victory lap for them after overcoming in the past couple of years, all of these concerns about safety issues and maybe shoddy manufacturing practices that had really hurt their business, but instead they were in full crisis management mode.

27:50And although they announced that they wouldn't be focusing on announcing new deals ahead of time, I personally thought that they might be conducting business as usual anyway, even though they weren't, you know, shouty about it. But it turns out, you know, we'll see in the months to come, but it turns out that they really didn't do any business at all at the air show, at least that we know of publicly, which is pretty concerning for them. Yeah, really interesting. Simon, thanks for being with us on the Entrep. It was great to get your wrap up. It was great hearing from you live on Monocle Radio as the event was taking place.