Private aviation market update: Vista Jet's $600M raise, Starlink adoption, and bonus depreciation tailwinds

fund eight uh coming up quickly number of wealth that is right uh we got Preston Holland welcome to the what is up Brothers what is up Brothers if there is if there's anything that we should talk about in the temple of Technology it is private jets I think that this is uh probably one of the more fitting uh segments no we've been waiting for this you're our private Aviation correspondent got the professional studio lighting set up you're looking great uh should we pick it off with uh G 650 ER versus BBJ you know like like a lot of our a lot of our listeners are trying to decide between those two uh where like what considerations would you make if you're trying to make a big purchase if you're going BBJ or 650 ER personally I'm going 650 ER for the sole reason the market is far more liquid bbj's tend to sit on the market I think the absorption rate is something like 450 days on Market is the average because you have to think you have Grant card and Saudi princes those are your two buyers of your jet and if they don't like it then you're just going to be stuck with it whereas with the 650 ER you know let's say ramp might do another upu I don't know maybe there's a buy there I don't know we'll see Eric to Eric's way too modest he's way too modest but way too modest but yeah I I take your point I take your point but hey Evan Evan Spiegel also he's got a BBJ yeah he has his own uh own hanger there too the snap hanger yeah when we discussed this uh our argument was that uh BBJ a little bit less flexible on where you can take it sure it makes sense if you're a politician you're landing at major regional airports major international airports for big campaign stops but if you're more of a CEO doing the offsites doing the ski trips you want something that can land at a smaller airport you think that's a reasonable way to think about it I think that I think that it's almost like you've been reading my newsletter uh because I make that exact argument because BJs are very cool but now you're limited to really long runways and so who you know the whole point of private jets is that you get to access the over 5,000 runways that exist in the United States which is a fun fact there's more airports than Chipotle in the United States so like just to just to put in perspective of like how many airports there are wow and we got to triple it and then we got to triple it again we need an airport in every suburb of America I mean that's the answer to the flying car just have I just have airports everywhere I can fly oh I'm going 10 miles across town we have a yeah we've had a popular flying car manufacturer called GF stream for a very long time yeah yeah exactly no I always say my line is you can you can sleep in a jet you can't fly a house so if you're making if you're making if you're making that kind of money you're making a you know you're making that if you're coming up oh should I buy my first house should I should I get a private jet what you know the answer's obvious obvious and and you guys talk a lot about stock tips I mean we better to get good stock tips than the FBO I mean is prime listening for stock tips exactly that's right um talk about uh I I'd love to get a highle market update on just private Aviation broadly we're at this interesting time you know are we in a correction are we in a recession is the economy crashing my sense is that the uh the whales that sort of move the private Aviation Market are are insulated to some degree from fluctuations in the market but what's happening in your neck of the woods so private jet Flyers tend to Fly Above small Market Corrections right so you you go you look back to 2008 now there's a lot of of Carnage there and and and a lot of you know you've got bad practices obviously in real estate you had a lot of bad practices in private jets too and so people were buying positions and flipping them and just a lot of a lot of nonsense shenanigans that happened what we're experiencing right now is is uh not that the market has got really hot during Co you saw uh if you look at like valuation softwares in private Aviation and they do exist um you see this kind of depreciation curve and there's a pop right at the end of 2020 tended to Peak right fall fall of 2022 which is when all the other you know sort of assets so um but but really peaked in that we've been coming down off that high we're not I wouldn't say that we're back to normal quite yet so like if you look at the trajectory we should should have been on in 2019 barring the pandemic cuz you got to remember you know if if if you remember way back then which felt like 30 years ago but um during the pandemic so many people that probably could have flown private but didn't now said oh well I still want to be able to travel so I'm going to go ahead and fly private you see you saw wheels up you saw Vista you saw all these companies just kind of Go Bananas in growth because so many new entrance were into the market well that's since eased off as you know interest rates have gone up and the economies cooled off a little bit and you you know kind of the The Fringe uh private flyers I an interesting quote that I heard um in kind of a a happy hour setting from an aviation executive was there's a lot of wheels up King Air Flyers going back to comfort plus uh they're not even the first class Flyers they're more the Comfort plus flyers and so you know we kind of had this this Market correction but um this year there's there's some Tailwinds for 2024 some optimism 2023 in kind of the transaction space was relatively slow you typically see a bump in the fourth quarter and we did again last year but not quite as as sharp as we had kind of in previous years and what everybody's expecting a lot of people anticipating bonus depreciation and for those that are not obsessed with buying assets and depreciating them it means that you can take 100% of the cost in the first year to reduce your tax basis so what it ends up doing kind of when you do do the math uh is it's about 20% of your purchase price that you get in tax savings in that first year so if you finance the aircraft you know now you basically are just paying monthly for access to the airplane um and are able to carry it you know over over the life of of that you're own the owning the aircraft Charter Market slowed down a fair amount last year um it's recovered okay in the first quarter this year not you know not to the to the levels that it was in 22 and 23 um but it's uh it's definitely better or sorry 21 and 22 it's better than it was in 2023 um but there's been this and this is a macro shift into kind of fractional The Net Jets and flex Jets of the world even from owning aircraft or chartering there's been a lot of growth in kind of that segment so it's a little bit about what we're seeing bonus appreciation whenever it does get passed uh it's definitely going to be a stimulant to uh transacting of airplanes when when is the when when will that be decided is it is it known and and what's your is there a prediction Market set up for this yet are you are you going that's a good question I I would I would love to see if poly markets got a uh got a 100% bonus appreciation setup like when it actually happens so Trump addressed it in the State of the Union speech he he said 100% costing that's kind of code word for 100% bonus depreciation as the rest of us know it um it was it was almost through Congress last year I love that he's addressing the private jet Market in the State of the Union great well the private jet Market got it well it's it's a beautiful funny that you mentioned that it's a beautiful contrast from uh the last budgetary proposal which specifically called out private jets something like 12 times specifically in like a two-page document basically saying we're going to cut all of the private jet loopholes for you know corporate Executives yada yaada yada obviously Trump is a he likes private Aviation I there's there's no there there is no hiding it that Trump appreciates a good private jet um and so uh so yeah so so kind of the sentiment is a little bit more positive 100% budg appreciation actually almost made it all the way through Congress last year uh but the Republican uh the Republican Senate did not want to give the Biden Administration a win before the election and so it it died but it was it was there I mean we were we were on the you know two yard line so I think I I I don't I don't know exactly when kind of what I'm hearing from some of my clients is they're anticipating you know one of those any day now type things uh from what they're hearing in Washington so I I think it's any day now what about starlink uh how has adoption been of starlink on private jets it means it seems like it' be a no-brainer but are there barriers to actually retrofitting planes and are there certain planes that are easier to retrofit is it expensive I imagine that it's got to be the number one request for a lot of people it it definitely is starlink is gobbling up market share but as a percentage of the overall Fleet installation base it's still pretty small um I don't know exactly off the top of my head what the what kind of the percentage penetration is but it's growing faster than any of the other providers right so there's there's transitions you have um connectivity in in private jets has been undergone a little bit of a transition from uh surface to air so think uh cell phone tower to private jet to satellite from above low earth orbit um and so there's been the the Legacy ground to ground to air systems are kind of phasing out you've got the atg 4,000 for instance which is a very technical uh older uh wi-fi system now they have the selection between do I go to the L5 Wi-Fi or do I switch over to starlink and when you talk about you know it's it's anywhere from $150 to $350,000 to install the equipment and then uh last time that I looked I think the unlimited Wi-Fi package was like 10 grand a month uh for unlimited starlink uh it's it's funny they the way they measure that is by speed how fast are you going is how they determine how they're going to charge you wow so if you go under 300 mil an hour it's like 200 bucks a month and if you go over that it's like 10,000 a month so it's pretty significantly different uh you ever heard this line before uh what's the difference between private AV private Aviation and uh crack cocaine I have you can you can you can quit crack cocaine uh I I have a more uh I'd love to get your take um uh Vista jet announced a $600 million investment I believe it was was yesterday I think that's when um when we first chatted about having you come on um what are what are you know historically private Aviation you see a lot of tech guys look at the market and say I'm gonna I need to dominate this I love this I need to I need to get a piece of it uh you know we we've seen sort of a lot of Silicon Valley attempts at cracking the private Aviation code that just haven't worked for one reason or another uh some of these companies like even over the last few years I feel like they spaed and then like really struggled right um talk about the the Vista fundrays and then maybe I'd love to kind of hear you expand around is this should Venture just stay far away and just let private Equity play their game or their Venture opportunities in the category yeah so Vista jet just announced uh $600 million fund Ray uh which interesting enough it that's actually down off of the the original leak uh came in the fall was going to be around a billion dollars and then come February it was going to be 800 million and then they settled it at $600 million so um not it's not public information of what it raised at Vista is actually based in Malta uh so they're not even a they're not a US entity and so there's a lot different reporting rules and all that kind of stuff well we're not going to hit the siis gong because they didn't they didn't hit their target but maybe a little little golf clap yeah little pencil on the gong um yeah but they uh it really the the main reason is when you think about software and you think about um financing growth of something that has really low fixed costs and low cost of good sold um you can really gas it with a bunch of capital and and it's going to just grow really quickly because your cost of good sold don't scale proportionately with that Revenue growth that's the whole beautiful point of venture right is that you can if I've got a a pile full of money today I can throw gas in the fire and it's going to grow exponentially well private Aviation is just really expensive um and so Vista the reason that they raised this mostly is for kind of a deleveraging activity they they had levered up a lot of their assets they do have a really young Fleet which is part of the the appeal for Vista so if you guys remember back to uh Taylor Swift flying back for the Super Bowl if you've followed that Saga um she flew on Vista yet uh because it's there they're young they're young airplanes they're really good at International operations so if you're going to Asia a lot or you're going to Europe a lot from the United States this is a really good option for you because not every Charter operator is great at that type of international operation and so they had levered up all their planes and then they went on a buying spree and they bought EXO jet they bought Talon air they bought I mean like literally went on a private Equity style rollup of a bunch of different providers in the space because you know having the thought that you you know if you get to a certain scale then you know you all of a sudden unlock uh a lot of opportunity well if you think of traditional ebitda right uh if you remember what the d stands for depreciation if you hold the assets like that's an that's a real cost that's not just a financial addback cost and so kind of restructuring some of the debt on their Fleet and freeing up free cash flow in order to be able to continue to to service their members and so you know they're they're they're not publicly traded they kind of flirted with an IPO a couple of times now um but frankly the companies in private Aviation that have gone public have you know tended to struggle because retail investors and institutional investors do not understand the space because they don't understand the cost of the fuel fluctuation costs and the engine maintenance costs and oh guess what all of our pilot salaries just doubled because the airlines doubled so now we have to follow suit and so reporting quarter to quarter is really challenging in this business because it's really hard to take a step back in a public market and kind of see the bigger picture and so that's kind of why these companies it's part of it too that some guys and girls out there love private Aviation so much that they'll own an asset almost as a trophy asset they just don't really care how much money it makes they just want to say that they're in the game is that part of it and then if you're trying to compete on really putting up earnings you're like well this guy doesn't care if he makes like as long as he's breaking even he's happy and we're trying to run a business here that that kind of introduces a pretty poor competitive uh Dynamic yeah I mean there's no industry that is sexier I mean let's be honest right like to say that you own a portion of a private jet company is something to talk about it you know the cocktail factor which is like a real thing when you're raising money right hey check out my B2B SAS my B2B HR SAS that I own like no one's going to be like oh wow tell me more well not after Monday they're be like oper I got got spies are you doing I got a question for you has there been any Corp has corporate Espionage meets private Aviation right somebody bugging their competitors golf stream get picking up those private conversations uh have we seen that before in the past oh not none that I'm aware of but that sounds that sounds juicy you might be given some some Bad actors some ideas yeah no we know we know you got some stories but um I I do have a a question on on kind of like the future of the industry obviously huge cost associated with with private Aviation is just the the pilot two pilots Etc uh there's companies like U what's the what's the one that does automation for the military um flight automation oh flight automation I don't know paler Shield don't they do oh Shield I mean they make drones but yeah yeah yeah okay uh are are are there exciting companies working on autonomous flying I know a lot of the underlying manufa facturers have really good autopilot but how close are we to sort of more Integrated Systems that are you know communicating with air traffic control and actually just self-driving or like self-driving cars for the sky company but they were working on the C130 and then the ac130 more like troop transport than private Aviation but there's a bunch of interesting laws he was talking about where you can't have a non-deterministic system in the loop there like you can have deterministic software for like a cruise control but you can't have an AI generated uh non-deterministic system actually choosing to step on the gas of the brakes and so his solution was he puts an iPad here that tells the the human what to do and then there's a human in the loop at every step but I'd be interested to just hear about like what's the state of self-driving technology in Planes yeah so there's there's a big regulatory issue um the FAA is historically um well it's the government so like first of all like let's The Benchmark of speed and and Innovation at that and then you know the fa is somewhere below whatever that Benchmark is which is by is by Design I mean look nobody wants to feel unsafe when they get on a commercial airliner or even when they're getting onto a private jet like regul regulatory capture in this situation to a certain extent is good the problem is is when you start to disrupt and interrupt some of that regulatory framework you have to create an entirely new basis for how you think about some of these Technologies so couple of interesting companies that are that are doing this and and and and your point to the end the loop um that's totally right and and I frankly there's there's a a long slew of of basically the whole framework for the regulation is built around the pilot and so you now have to create a a scenario basically create an entire new regulation for automated flight one interesting uh household name brand company that's doing really cool stuff in kind of the safety world is Garmin uh so like they don't just make watches they also make avionics and aircraft and so uh they came out with a feature I don't know a couple of years ago called Autoland and it's specifically designed for kind of the owner flown pilot you can get it in King airs and vision Jets and tbms I think epic's about to come out with it um where essentially there's a button and I call it the oh [ __ ] button and if something happens you push the oh [ __ ] button and the screens go white and it says okay you know we're in emergency scenario it communicates with the tower it finds your nearest airport it puts your gear down it lines you up on the approach and literally lands you on the runway without a pilot intervention now it's designed for it's literally designed for emergency situations it's not for you know every day but or or a crew had a couple extra drinks and you know don't do that don't do that on private jets they mix but not in the cockpit usually John gets angry if anybody mentions Garmin but it's in regard to Garmin sport watches no yes yes we're we're supportive of their Aviation products yes yeah the uh well the dueling apps on their uh sport watches is just ux just um uh but anyway so so that's an interesting company there's a company called skyrise you guys may have heard of them they've done a couple of raises uh I got to fly their simulator uh over the summer and so it's a helicopter simulator and essentially what it is is a flyby wire system fully reimagined avionics and what it does is now there's still a human in the loop and you're still flying it but what it does is it sets up uh like an envelope that you can't go beyond and basically create uh an unrecoverable situation so helicopters have a lot of different uh variables when you're talking about tilt and lift and all that kind of stuff this basically makes sure that you as the pilot cannot exceed those barriers and put yourself into an unsafe situation that's really cool because I you know everybody loves to talk about flying cars and there's been a lot of Carnage in the flying car space recently I mean it seems like almost every week somebody can't raise another fund uh there's a lot of movement actually going to Dubai now uh in that sector so so The Sovereign wealth funds are starting to pick up the slack where us VCS have gotten a little tired with projections I mean 2025 supposed to be our year of flying cars and I don't know if you see any outside but I I know that I personally don't but we got slop on the timeline yep so there's that uh last last question I'm going to leave you with uh Preston uh if you were flying you don't do this very often but let's say hypothetically you were flying in a commercial aircraft uh the pilot had an issue would you be able to land a Boeing 707 fairly easily you confident in that I think everybody every guy I know is pretty confident but where's your confidence yeah I'm I'm about halfway through my Private Pilot so I'm going to go with better than probably 80% of the guys on board 90% of the guys I mean okay so you're you're the guy we're putting in the cockpit I I at the very least know what to say to the air traffic controller and I know that I know the buttons that we need to push to alert everybody that like hey by the way like this is coming in hot coming in hot uh well thank you for coming in hot this was a fantastic conversation we appreciate you stopping so much our private jet correspondent we'll have to do the next version of this on a private thank you by the way the other you were helping us uh look at a at a at a flight recently we did a trigger but hey if you're looking to fly private uh go go talk to Preston he will uh walk you through the process and uh get you some