Rough Takeoff to Smooth Sailing
Rabin Pilots JetSuite to Steady Growth
By Mediha Dimartino
Orange County Business Journal, April 1, 2013 (PRINT)
JetSuite’s timing couldn’t have been worse.
The Irvine-based charter jet service started up as the U.S. economy plunged deeper into recession in 2009, and terms such as corporate bankruptcies and layoffs became part of routine conversation.
President and Chief Financial Officer Keith Rabin says he managed to pilot the company through the recession by hiring the best people, investing in smaller, fuel-efficient light jets, and harnessing the power of social media to “bring private jet travel to more people than ever before.”
His strategy has kept the company on a growth track amid the economic recovery.
JetSuite has grown to 130 employees during Rabin’s tenure and was recently ranked No. 10 in the travel/hospitality sector of Inc. Magazine’s Hire Power Awards.
The company doubled its fleet last year by adding Cessna Citation CJ3 aircraft, which can seat six or seven people.
“Regardless of the economic environment, if you have a great product that is 30 to 40 percent cheaper, you can get a great market share,” said Rabin, who was one of the honorees at the Business Journal’s 12th annual Excellence in Entrepreneurship Awards on March 20 at the Hyatt Regency Irvine.
JetSuite doesn’t disclose profits, but Rabin said it has been growing revenue steadily since its inception, reaching $25 million last year. It expects revenue to double this year, helped along by the addition of two planes, taking its fleet to 18 overall.
Rabin started groundwork on the company in 2006 with two partners- Alex Wilcox, the company’s chief executive and cofounder of JetBlue, and Brian Coulter, vice president of operations- for Proctor NBF.
The New York-based private equity firm had just invested in several fuel-efficient light jets and asked Rabin and his partners to put a business plan behind the aircraft, providing startup capital for operating the first five airplanes.
“We researched the market and analyzed the competition, everything from food, fuel, pilots, cost structure,” Rabin said. “We wanted to find a way to offer comparable or better service for roughly half the cost of already-established companies.”
Rabin discovered that private jet flights usually carried four people at most, traveling less than 1,000 miles. His competitors had sizable fleets of larger aircraft designed for long hauls and consuming more fuel. Some charged customers for extra travel time caused by traffic delays or bad weather.
“You’d get a surprise statement at the end of the month,” Rabin said. “We wanted to be transparent. JetSuite posts [prices] on our website, so you know exactly how much it will cost.”
Some competitors also require customers to buy a fraction of the plane or a set number of flight hours. Rabin’s team offers memberships that include “jet cards”- a payment system that deducts the price of each flight from a $50,000 deposit. Membership is not required to charter a JetSuite flight, although the company offers discounts.
JetSuite initially employed Embraer’s Phenom 100 aircraft, fuel-efficient and sized to accommodate just four passengers. Its bread-and-butter routes in the early days included destinations within the 300-mile radius of its home base at John Wayne Airport.
“Across the western United States, the cities are a right distance apart, and planes fly 25% faster in good weather,” Rabin said. “Orange County has a lot of potential customers who think similarly to us in terms of business.”
Rabin’s team uses social media to appeal to younger consumers for whom flying on a private jet is typically out of reach. JetSuite offers its Facebook followers deals on “empty leg” flights- as low as $499 to book an entire plane. It also does special promotions such as the “Indie Mogul,” a $9,999 four-person, round-trip package for people heading to the Sundance Film Festival in Utah, and a $3,998 charter to Coachella Music Festival in Indio.
“Our clientele varies from high net-worth individuals to a group of four college grads,” Rabin said. “They can take advantage of flying with no delays and no hassle associated with commercial flying, such as parking or security.”
JetSuite has seen its share of turbulence along the way.
Rabin devoted his efforts to JetSuite full time in January 2008. He immediately did an assessment of the financial status of the company’s vendors, and one of them- Adam Aircraft- raised a red flag. Rabin asked that JetSuite’s $2 million deposit be moved to an escrow account and found out that the aircraft manufacturer was filing for bankruptcy. JetSuite had no recourse as an unsecured creditor.
JetSuite got new investors in 2010: David Neeleman, a founder of JetBlue, Tony Hsieh of Zappos.com, and a private equity firm headed by Art Samberg. The three bought Proctor NBF’s stake in JetSuite and now own a majority of the company.
“I can’t imagine doing this without them,” Rabin said. “They are the most supportive investors you can imagine.”
Rabin and his partners now hold a minority stake.
Rabin was a partner at New York-based hedge fund Verity Capital before the JetSuite venture and “was responsible for portfolio management and development of Verity’s sector shorting strategy,” according to JetSuite’s website.
Rabin, who has a bachelor’s degree in industrial engineering and an MBA, has advice for up-and-coming entrepreneurs: “Stay humble,” he said. “Hire great people and empower them to be as great as they can be. People that work with you on your team are the people that will make you a success, or not.”