Targeting an unexpected market segment (jet owners) and cutting out a huge startup cost (buying planes), Magellan Jets has seen its business really take off.
As the 2008 recession decimated the private-jet-rental industry, Joshua Hebert saw opportunity in all those empty planes. He and Anthony Tivnan launched Magellan Jets, an aviation broker offering charter flights and membership programs that include 25- to 200-hour buckets of private-jet flight time. A key to the company's success at launch was its guarantee to members that they could book a jet virtually anywhere with just 10 hours' notice. Annual memberships start at $100,000. Revenue grew 1,600 percent in its second year, and the company now guarantees a plane with as little as eight hours' notice. Magellan's continued growth, says Hebert, is the result of cultivating deep vendor relationships and identifying an unexpected customer base.
1. Rent, Don't Buy
Hebert didn't go out and buy a bunch of planes at $3 million to $50 million a pop. Instead, he became a broker and struck deals with 180 charter operators with their own fleets. Unlike many companies, Magellan prepaid the operators, to build long-term relationships. It also hired former pilots to handle scheduling, which, with their deep knowledge of weather, safety, and mechanical issues, they can do more efficiently than the salespeople used by many of Magellan's competitors. The operators appreciate the pilots' expertise. "It's less headache for them," Hebert says. This closer link with operators "gives us tons of availability and has allowed us to offer our customers the cream-of-the-crop planes."
2. Make It Easy on Your Customers
Many of Hebert's members are jet owners who need a ride when their plane is unavailable and fractional owners who are over their hourly allotments. To attract potential clients, membership contracts are customizable. Customers use an online tool to select the number of hours they want to fly, the type and size of plane, and add-ons like in-flight catering, fuel surcharge discounts, and ground transportation. Most Magellan competitors don't offer custom contracts, says Hebert. Such pricing flexibility helped Magellan make members out of people who came to the company looking only for a one-off flight on a charter. Those fliers have been the fastest-growing segment of the client base for the past two years.
3. Educate, Don't Sell
Instead of pumping cash into slick advertising, Hebert positioned the company as the go-to spot for learning about private jets. Magellan published white papers penned by outside experts on topics such as buying and selling planes and aircraft safety. It also built an online tool for finding so-called empty-leg flights that usually fly vacant when an aircraft needs to be repositioned for its next trip. Such moves ultimately improved the sales process: Customers better understood the industry and Magellan's service, so salespeople spent less time pitching and more time assessing individual needs. The strategy "has been a big driver for our revenue growth," says Hebert. "It was a cost-effective way to do inbound marketing."