Jessie: Good morning and welcome back to the VIP seat. Today we have so many stories from Corsia updates to exclusives on Gulfstream. Sit back, buckle up, and let's take off. All right, so we're very excited today to have a guest on the show, Kennedy Ricci from 4Air is on. there's some things going on with Corsia that we wanted to pick his brain on. so Kennedy, thank you so much for coming on the show at the very last minute that we asked you like an hour ago. ⁓

Kennedy Ricci: No, thank you so much for having me. I'm excited to talk with you guys today.

Jessie: Awesome. Well, so we have a variety of listeners to the show. I think first of all, can you explain what Corsia is to the layman out there who don't even know what this word is?

Kennedy Ricci: Yes. So CORSIA is an international framework. we launched it almost about ten years ago as an industry. So international, you know, aviation emissions aren't really captured within the kind of w national inventory of emissions. If you think about every country looks at how many emissions do they create, and emissions, by virtue of the way they are, don't get captured in within any of them. So ICAO, the body that regulates all of our international kind of aviation rules from

Preston Holland: So, Jessie, the first story today is the Wheels Up news is going to be the launch customer for Surf OS, which is the operating created by Surf Air, kind of a sourcing platform for Wheels Up, is two publicly traded companies. So we have to read the disclaimer. This is not investment advice, it's commentary entertainment purposes only, yada yada yada.

Kennedy Ricci: customs, to security, you know, air traffic navigation over water, came together and said, okay, how do we build a consistent framework for everybody to have easy rules of dealing with international emissions? It's one of aviation's biggest source of emissions. About a third of our emissions from aviation come from five percent of flights, and those are the long haul flights, which are usually going to be international. So the industry came together about 10 years ago, built a framework, and that became Corsia to say we're gonna cap emissions

Jessie: Mm-hmm.

Preston Holland: ⁓ but yeah, this is an interesting one because two companies, two publicly traded companies, ⁓ have partnered up and shift in SurfAir's model and kind of their business plan.

Jessie: Yes, they've been through quite a number of different kinds of iterations from being a regional turbo prop aircraft operator to technology platforms. But will say, I I read this story at first. I was like, wait a second, didn't wheels up just buy someone? And then I had to remind myself that that was 2019 and time goes by so fast. so 2019 is when they purchased Avianis which was supposed to be the flight management, so not flight management, operating software for the company. and they were gonna onboard all these operators and aggregate all this operator.

Kennedy Ricci: ⁓ they were gonna look at 2019 and 2020 as kind of a baseline. Given that COVID ended up happening in 2020, they've adjusted the baseline now. So we just look at 85% of 2019 emissions as our baseline, we offset ⁓ use sustainable fuel to reduce anything over and above that. So it requires all states, though we think about participation at the country level or the state level ⁓ being countries, and about 130 participate today.

Jessie: data into one place. I assume that part of that is still in existence today. But the idea with the Surf Air OS system is to be an AI layer on top of all of that and to start aggregating things even more. So it's definitely interesting. I it was definitely unexpected news. I don't think anybody saw this one coming.

Kennedy Ricci: As of January one, all countries becomes mandatory. So all countries are participating as of January one. so you go to 130 now to 193 participants. So anywhere you're flying in the world will now be subject to Corsia. And ⁓ you your emissions, you report them each year. And if you're over 10,000 emissions from international flights, you have to participate in that offsetting. So essentially every country reports, you report to your country, the country reports to the international body, and then the body calculates what the emission re

Preston Holland: Yeah, I I agree. I think that it's think Wheels Up is at an interesting spot in their transition, right? So they've transitioned from the King Airs into the Phenom 300s, they've transitioned out of the Citation 10s and XLS into the Challenger 300s. So they undergone this big fleet transformation. My guess, and is complete speculation, you know, kind of observing is my guess is is that.

Kennedy Ricci: reductions or offsets required are and they publish that back down to the operators. So we've been in a pilot phase. We started in twenty one was kind of twenty nineteen, twenty twenty set the baseline. Twenty one, twenty two, twenty three was a pilot phase where we kind of got used to experiment ⁓ to understanding how it worked. And then twenty four, twenty five, twenty six, they all work in three year periods, is the first time we're really seeing the implementation of the of the the framework, ⁓ so to speak. So

Preston Holland: They still have those legacy customers that they still have to service. so this is their ability to be able to service those turboprop type customers and the, you the the non-Phenom, non-Challenger 300 customers, because they have a wide customer base. This is to allow them to actually service those more efficiently and more effectively. I don't think gets rid of the people in the sourcing department. Like I think that those people are still.

Kennedy Ricci: the first kind of compliance period, you know, we're we're in now. the deadline, you know, you we've you've had to report each year if you were subject to it as a as a large operator. but the first kind of compliance deadline then when you actually have to s ⁓ purchase and surrender them will be twenty twenty eight, January, ⁓ end of January twenty twenty eight. So it's kind of it's been there for a long time, but people are, you know, we're finally starting to get into the compliance season of it. and now that's why I think it's such a more, you know,

Preston Holland: required. We know this industry. It's very driven and and things like that. But I think that there is it does signal a shift as they've gone to the unified fleet away from the management, but still need that sourcing engine to be able to pick up off fleet type supply.

Jessie: Mm-hmm.

Kennedy Ricci: higher frame of of topic for everybody right now because of that.

Jessie: Yeah. And I mean, we've been talking about AI, you know, on this show, and also, you know, I've been posting about it lately. Like there's so much optimization and there's so many failures of optimization in our industry that AI I think is gonna be a huge, huge unlock for especially for large operators, because when you're talking about operating, you know, tens of thousands of flight a year, little optimizations and insights that AI can deliver are huge. so the OS system is fundamentally it's a it's not bad.

Preston Holland: So it is I've got a question. So ⁓ my because I'm ⁓ I you know, some probably stupid questions it's all said and done. But if you take so you so basically it doesn't matter where you originate from or and where you go, it's on the operator. let's say Delta is responsible for Delta's emissions. report up to the body that's all pulled together and set at that baseline. ⁓ How does it work? Like, they then pay their proportionate offsets to the pool?

Kennedy Ricci: Yeah.

Jessie: Backed by Palantir, but functionally operating on a Palantir model, if I understand.

Preston Holland: Or is the pool evenly distributed amongst all operators? Like how does the how does the ratio of who's responsible for what work? Jessie can I ask you what does Palantir do? I don't know if anybody could really say with a hundred percent confidence what Palantir actually does, but

Kennedy Ricci: Yes. So you'll get the technical briefing. ⁓ we'll go into some of the details. basically it it varies as we go through the compliance cycles. So right now it's a sectoral growth factor. So we look at the growth of all emissions over that baseline of the 2019 baseline, and essentially get a proportional share of that kind of growth in the emissions. As we go further down the road, it becomes more and more about your individual growth. So say, you know, you grew a lot faster than other operators.

Jessie: I don't know. Super super secret government AI stuff.

Preston Holland: Yeah, but I mean I guess I guess now it is it's powering private jet flights, which is cool. I mean that's that's neat. It's interesting. I did not know that they could do that, but you AI can do anything.

Jessie: Mm-hmm. Yeah, it is. So just anecdotally, this was kind of funny. The person who originally sent this article to us, who will not be named, called that they would probably see a merger at some point in the future. That's pure speculation and completely unfounded and not investment advice, but I did think it was funny. ⁓

Kennedy Ricci: That activity and that growth will be more exclusively attributed to you. So there's kind of a phase in of an individual responsibility, whereas now it's more of about a sectoral growth factor and growth responsibility. So how it kind of gets assigned. You are the jurisdiction you fall under is based off where your your certificate's based. So if you're based, you know, your certificate's based in the US, your flights will be administered by the FAA. ⁓

Preston Holland: Yeah, no kidding. I do want to pull one little thread from a couple of months ago for another publicly traded company. Fly Exclusive has a similar broker platform that they're trying to bring or operator platform. now you have the tail of two operator platforms. And is an not operator, you know, but not really sure exactly on the status of that. Wheels Up ⁓ is an operator.

Kennedy Ricci: If you have a separate, you know, AOC maybe within Europe, those flights will be administered by the country that the AOC is in. So where this gets complicated is, you know, things other policies out there like the EU emissions trading scheme, which operators also have to comply with, you could be totally administered by somebody different under that scheme, even though, you know, your your certificates may be based in one country or another. So it is a complex kind of you know reporting requirement because it just you it's not aligned with other ones that are out there. But there's a really good use case about why we have this, because you see

Preston Holland: Surfair is a broker. Wheels Up is also a broker. Right. So it's like, I think that the lines between unquote competitors in this space continue to blur ⁓ everybody's seeking this AI We talked about it last week with kind of the aggregated supply nirvana. So we'll see. My question be it's a $12 million deal. So up to $12 million subscription fees.

Jessie: Ha ha ha. Yeah.

Kennedy Ricci: If we, you know, we had an amazing thing about 193 countries coming together and saying this is gonna the policy that's gonna cover all international missions. Without that, you see each country building their own rules. And part of the other reason it's very topical right now is Europe has been talking about extending the ETS to international missions. If they don't think CORSIA is strong enough, they want to make the ETS apply to international missions, and that's a much more costly scheme than what we see compliance costs under CORSIA.

Preston Holland: How many other will pay twelve million dollars or about for this? Like what's the what's the scale plan here? I don't know. Curious.

Jessie: If I I had to guess, because this is how some of the optimization models used to work and what people were trying to get, I never kind of got into it, but there's probably like a fee per dollar saved on some sort of decision. if I had to guess. So the up to twelve million is probably like the capped fees. based on how I've seen like optimizers and other things work in the past, it's whatever the decision model delivers is what the person pays to the company for it. ⁓

Kennedy Ricci: So we'd rather have kind of an international standard that everybody uses rather than having to deal with different countries having their own rules. And now it really does matter where you're flying and and where you started from because those rules could be different.

Jessie: So this could also be why it's been in the headlines this week with the airlines. They're pushing and saying, hey, our margins are getting squeezed. This is tough. So this is probably in reaction to EU saying, okay, let's add more the to the plate. Yeah.

Kennedy Ricci: Yes. It's funny because we've seen a little bit of both. I mean, you've seen all the air also the airlines come back and backcourse you to say, well, if we're gonna have one, we'd rather have this one. So we've seen a little bit of both sides of of support and saying, Well, this is gonna be expensive, but if we have to choose one, we'd prefer this one. Yeah.

Jessie: So I don't know. Maybe maybe not, but I would guess that.

Preston Holland: Yeah, it's a race for the software layer. Who can layer on the software on top of operators? I there Surf not the only ones doing this. ⁓ Wheels Up is not the only ones doing this. There's a lot of people trying to race there. I guess it's gonna be it's gonna be a race to see who can aggregate the most. ⁓ Is there do you know do you think that there's enough space for multiple players like this in aviation? Like, is room for

Jessie: Right. At least make it simple and straightforward. And and the other piece of this too is credits. So there were some complaints in the news this week that there aren't enough credits available or it wasn't what they expected. So could you show us what's going on there exactly? Mm-hmm.

Kennedy Ricci: Yes.

Jessie: It's almost like

Kennedy Ricci: Yes. So it's actually, you know, this is interesting about these credits and and many of them that are compliance credits out there is they're market based. So people are trading them, people are buying them and and holding on to them. So it's a market value that fluctuates. We've actually seen the price come down about half in the last few weeks, last few months. I think a lot of people kind of stocked up early and have been holding them, but all the yearlines are a little bit kind of waiting until we get close to the last minute. And so we're seeing prices come down pretty extensively.

Preston Holland: three or four, or is this a winner take all market?

Jessie: I think what's happening here, which was the question I was gonna ask, that I think like honestly, investors, private equity, they're all telling these companies to build AI motes around their businesses, and that's exactly what's happening. ⁓ I don't know how much of this is really strategic long-term thinking about like having the best maybe some people are thinking about what's the best AI AI model and optimizer, but I think everyone is in a race for value to make sure that they have that moat established. But do we really know like what's gonna be the win?

Kennedy Ricci: So you you're dealing with these fluctuating compliance costs, and frankly they're better today than they were a little while ago. And where they're at today, they might be to ten dollars a credit for the equivalent cost under the EU ETS, it might be a hundred dollars a credit, ninety dollars or a hundred dollars. So about 10x the compliance cost for that same flight under a different scheme. The problem is the credits are supplied by carbon offset projects, and of way that the regulation works, we're looking at international emissions. ⁓

Jessie: and what's gonna be the loser, knows.

Preston Holland: Yeah, exactly. Well, we are going to move to everybody's favorite segment, which is Mile High Madness. Mile High Madness is where Jessie and I go to the internet we find you the funniest, craziest, most cringy things that we can find on the internet as far as business aviation and commercial aviation. So Jessie, do have a good one? I'm gonna pull mine up here while you go.

Kennedy Ricci: And international emissions not being captured in any nation's inventory, carbon offset projects are captured in a nation's inventory. So now they're worried about a double claim where the country claims the reduction, but it was used against the international emissions that they didn't claim as their baseline. So you've got this kind of mismatch of the nation's inventory and then the international emissions. And so you have to get a letter of authorization from the country saying, okay, we won't claim the emissions from this project, therefore you can use them for your international emissions.

Jessie: Yeah. I do. ⁓ and it's gonna come with a rant after we watch it, so let's all watch it together and then I will get into it here. It's our favorite influencer out there. Colin talking about

Kennedy Ricci: And that's actually the single mechanism holding up a lot of the supply right now. There's plenty of projects out there, there's plenty of credits out there. But if you don't have the letter of authorization, the cr the project can't be used for CORSIA compliance. So that's really what's holding it up. But y you know, I think we have seven countries right now with LOAs, letter of sort of authorization. You know, you've got 190 countries that could 193 that could issue one. So it's really just trying to push a lot on the countries to look at their projects, issue the LOAs, and and that for kind of increase compliance.

Jessie: Okay. So Colin was talking about in this video about how you get banned from a private jet. And I just want to point out first comment was that if you're too drunk, you get will get banned off of flying privately. I can tell you from experience, because I I have I had this experience ⁓ so times. There is, well, not name names, there is a famous chef that is out there who was always so intoxicated on his flights that he usually has to get like drug off by the crew and stuck in a hotel before he can fly out the next day. But they don't ban

Kennedy Ricci: And each one of these, I mean, a single project could be millions of credits. So that could be two or three percent, you know, of the entire kind of supply gap from a single project. And there's thousands of projects out there. So even just a few LOAs would really significantly address that that supply deficit.

Jessie: ban him from flying. They just stick him in a hotel, let him dry out, and then he gets to come home the next day. So no that A does not get you banned ⁓ from a private jet, and B

Preston Holland: So how does this how does this work for business aviation? I mean, I obviously the airlines is probably like the big driver here. is it too small to matter? Does it does it matter? I'm assuming this is only for, you know, international trips is where it's it's So that shrinks the operator pool. ⁓ But how does this relate to call it 135 operators and then 91 operators?

Jessie: I'm gonna say the thing that I think a lot of people have been thinking and feeling and wondering about Colin because he's gotten a huge following. Awesome, great job. but a lot of people we were tagged in a post this week saying, like, I don't feel like he's really portraying the industry the way it is, and he's kind of feeding into these like "RichTok" talk narratives about what wealth is like and kind of being voyeuristic. And I'm gonna finally say it that I don't think it's right. I think that if you're gonna build a business in the luxury space, you need to focus on.

Kennedy Ricci: Great question. So anything you really have to be flying a significant amount internationally to be subject to this. under the ETS rules, they have a lower threshold. And if you use about a hundred thousand gallons of of fuel internationally in into or within Europe, you'll hit kind of the limit for the the threshold for ETS. Corsia, the compliance is a milli about a million gallons. It's 10,000 metric tons of CO2. So you've got to be doing a significant amount, and that's all international. Anything domestic is excluded.

Jessie: the reality and the value and the safety and the quality and using some of this like look at this wealth, you know, choosing who's a billionaire or not a millionaire. I like it just it doesn't feel right to me. And I think I finally put my finger on why and that's why.

Kennedy Ricci: Up until now, anything from non-participating countries was excluded. Again, starting next year, all countries will be included. So anything international starting next year. But about a million gallons, commercial operations only are really what's going to hit that kind of activity. So we don't see a ton of operators in our space that are are subject to this. ⁓ but when they do, I mean, you're probably, you know, to address a decent amount of your emissions. So these could be hundred tens of thousands to hundreds of thousands of dollars of compliance costs if you are a large operator hitting that.

Preston Holland: Yeah, I agree. I think that the you let the algorithm dictate the type of content that you put out, you're going to make decisions ⁓ are not necessarily net good for the long term. So while it is a quick hit and while you get a lot of views and you may get you may go viral, over the decisions that you'll make to feed into the algorithm is not necessarily And is that like I mean, just jets, Vista, flex, like ⁓ like where's the line? I guess is like what I'm curious about. Going to align with what you're trying to communicate. So as someone who has created content on the internet, it is very tempting to be like, ⁓ I'm going to use a cheap trick to get engagement. over time it does degrade your brand. And so I think yeah, it's tricky. Well, speaking stuff we don't like on Instagram, my Mile High segment this week is an ad, actually.

Kennedy Ricci: Yeah, you see the the fractionals, any maybe large charter operators, ⁓ some of the management companies, depending on how they set up their their certificates, can be needing to comply as well. also interesting is that the penalties are set by the country you're administered by. So we're also seeing a very different stage for compliance and penalty enforcement. So that will be, you know, huge impact as well. If you're a European operator, you're probably gonna be facing more severe penalties for non-compliance.

Preston Holland: That was posted on Bizav Memes. ⁓ it was on their story. So they actually posted this and ⁓ it's it is it is cringe worthy. Take a look.

Jessie: Yeah.

Kennedy Ricci: than if you're, you know, an an operator based in North America. So that will interesting to watch kind of play out, I think, really, you know, what the enforcement for non compliance with the scheme will end up being.

Preston Holland: And also, I mean, Spain to Germany is not that far. It would be like going from Florida to Tennessee, right? That's still domestic. So guess Europe has a lot more exposure because you you become international a lot quicker geographically than the United States. What about nine like is if management companies, like this something they should be thinking about? Like let's, you know, call it the the large 91 operators.

Kennedy Ricci: Yes. much quicker. Exactly. Yep.

Jessie: No

Preston Holland: Get the bleeper ready. Get the bleeper ready. the fuck? I like, are you me? Are you kidding me? It's it's cheap, but but it's cheap gimmicks and it's these types of people that are making it really for the real operators in this space to actually do what they do. can you make a lot of money selling private jets? Yes. Does it take a lot experience? That are doing management for, you know, the Fortune fifty. Is that is this something that they need to think about, or is it on the individual corporations and their own threshold?

Jessie: Cheap gimmicks. There you go.

Kennedy Ricci: A lot of times it'll come to the operator to look at your compliance. And frankly, regulatory compliance is something you really need to watch a lot more closely than, you know, five years ago, six years ago. So when we started the company, for we we focus a lot on this international, you know, compliance monitoring around environment, around sustainability. When we started the company, it was pretty much EU ETS and Corsia. Those were the two things you had to think about as an operator. And again, just international missions. We're tracking over a hundred and ten policies now that are either have

Preston Holland: Yes. Does it take a lot of risk? ⁓ there is professional risk. And if something goes wrong, you know, ask. I've got friends who have been sued over spec sheets, right? Like have to be on top of things. You have to ⁓ experience required is the dumbest line in business aviation. Like that is, it's a anyways, lead with that. Dumb things on the internet. That's why you come to us, the VIP seat.

Kennedy Ricci: come in place or are pending kind of imp enactment that will affect business aviation operators. And these can be anything from new policies, new emissions trading schemes of other countries, new SAF mandates on the horizon. ETS has added more monitoring requirements. So now it's not about just the CO2. You have to monitor the non-CO two. So what are your the impact from your contrail creation, your nitrous oxide emissions? So we have so much more policy than we had, you know, five years ago.

Jessie: Yeah. No. But that's why this is all interrelated, you know, this this cheap gimmicky, all this stuff. Building a luxury business, building a private jet business takes relational capital. You have to have the relationships to do those things. And it doesn't come from an online course from a quick video that you made. You might get a one-hit wonder, but at the end of the day, if you don't have that networking and that relationship, and that takes years to build up by talking to a lot of people and having mentors and everything else, like I yeah, I'm getting frustrated because that's not our industry and that's not the way it works, and the internet needs to stop. ⁓

Kennedy Ricci: And that compliance obligation is just so much bigger than it was. But again, it speaks to why we want Corsia, because without it, I mean, you have got airport level requirements, country level requirements, even within Europe, which has an emissions trading scheme block wide, the rules about what staff is eligible varies country by country. So it just becomes a very difficult compliance. Whereas Corsia sets a one standard for eligible that's global.

Preston Holland: Yeah, exactly. speaking of someone who has been in the business for a long time, let's talk about A B Jets, who is our lead sponsor this week on the VIP seat podcast. A B Jets based out of Memphis, Tennessee, with floating fleet, including their brand new Challenger thirty hundreds with Starlink, which are absolutely beautiful. But they have around for a while and they know what they're doing.

Kennedy Ricci: So, you know, it it's gonna have its imperfections, but having that global standard I think is so important for aviation, which is just inherently global. Yeah.

Jessie: Yeah, well I guess it's a good thing that you've got 4Air out there to help guide people through this process. so where can people find information, you know, and and 4 air and and also what's going on in the industry.

Kennedy Ricci: Yeah.

Jessie: Yeah, and you talk about the relationships there. Good old Southern hospitality. They got the banana pudding on board if you need it. they're just they're good people, they take care of you, and they have beautiful airplanes. So thank guys so much for being our sponsor.

Kennedy Ricci: Yeah, w we actually maintain something we call policy watch. So just on our website, 4air.aero we publish here's what we're watching, and here's how we think it'll affect business aviation, and here's, you know, where the stage is. And so we keep that pretty updated. it's gotten a lot longer since we launched that tool of just how many policies are out there. Even in the US, for example, now you've got twenty five states with their own policy around fuel production or fuel use credits for sustainable fuels. So that just shows you, you know, how

Preston Holland: Yeah. moving on to our next story of the week, it is time to ring the newly sponsored M&A Gong. Thank you to Oshman Aviation for sponsoring the M&A Gong. And it is time to ring the Canadian M&A Gong.

Jessie: Mm-hmm.

Preston Holland: A, it's the it's the Canadian gong. A. That's bad. That's a that is a bad, that is a really bad joke, funny nonetheless. we have got Air Sprint, can't Canadian fractional Air Sprint, which has sold to private equity or taken a private equity partner, which is one of the first transactions of its kind in Canada. ⁓ so yeah. So Jessie, what can you tell us about this transaction?

Kennedy Ricci: different the the operating environment can get pretty quickly. So ⁓ do our best to keep the industry updated and and until something surely will continue to evolve. So we'll needed we'll need to do a fresh a fresh up on the podcast here in probably a year or two to see what's changed.

Jessie: Yeah.

Preston Holland: Awesome. Well, Kennedy, thanks for coming on the VIP seat. We really appreciate it.

Kennedy Ricci: Thank you, Preston. Thanks, Jesse. Appreciate it.

Jessie: Mm-hmm. Yeah, I think this is really interesting and cool. ⁓ private equity is, you know, they've already been going big on the fractional model because it makes sense and it's doing well, and they're continuing to do so with more investments. So Air Sprint is I've ⁓ it called the net jets of Canada. it's, you know, Canada's not a huge country. It doesn't have a lot of aviation traffic, but they have like 35 planes. So they are big, mind you, just not, you know, 700 airplanes. ⁓

Preston Holland: It's a it's a large country, not a lot of people and not a lot of private aviation. So thirty eight thousand flight thirty-eight thirty-eight thousand flight hours in twenty twenty four. It would it would have ranked eighth ⁓ fractional in charter ops. So like it's not tiny. It's not huge, but it's not tiny.

Jessie: Yeah, yeah. But they have a variety of nice aircraft. Yeah. Mm-hmm. Significant. Absolutely. Yeah.

Preston Holland: Yeah, so One X Partners via its One X Partners Opportunities Fund, Tri-West Capital Partners, and others co-invested acquire AirSprint. So those that follow the show, you understand the M&A playbook. You buy platform company and then you bolt on other companies and add it to your central operator. What's the challenge here? The challenge is Canada because AirSprint is biggest by a by a large order of magnitude. So, how do you add other businesses onto that? Maybe you vertically integrate. Do you cross the border and come into the United States? don't know, but will be I would imagine that they will do other acquisitions because OneX partner has invested over $22 billion across six funds. It has 53 operating company platforms. It has completed more than 590 add-on transactions. So that's basically 10 or 11 per. Operating company platform. So you would imagine that they will probably follow that playbook. and Tri West has raised over 1.7 billion Canadian, which is like 1 US, I think. That's might be bad math. But Canadian money is not as robust as US dollars. but yeah, it it will be interesting to see if they're gonna continue that path. I would imagine that they would have to because this feels like a platform company.

Jessie: Something like that. Yeah. I would think Other international I mean maybe they go cross border, but it's kind of I like there has to be some sort of major growth without here. Like private equity doesn't even like get up in the morning unless you tell them that you know one day you're gonna be a half billion dollar company. so you know, but I think it's good. All this is good for the industry. I think the fractional models, especially to investors, like they look at it and go, hmm, you have no financing cost because the owner themselves, they're paying for the plane, you're just operating it and trying to make a nice slice off of it. ⁓ and you get, you know, the big bigger you are, the more scale you have to reduce cost from OEMs and everything else. So think it's a good play. just same with bond and everybody else these days. Private equity is just really into fractional and I get it.

Preston Holland: Yep, it is. And it's easy to understand because it's kind of like a timeshare, right? So it makes a lot of sense to private equity investors where charter is like, don't get it. It's not like Airbnb, it's not like Uber, it's totally different. It's much more capital, you know, cap it ⁓ a lot more capital, right? It's more hungry. So it'll be interesting. Well, next story this one is a bombshell, and this is not the last time we are going to be talking about this, I think. ⁓

Jessie: Mm-hmm. More risk.

Preston Holland: But ATI Jet, also known as JetVia, has sued Pratt and Whitney. So this is now adding to the list of program administrators and manufacturers.

Jessie: Yeah, and I think, you know, they they had already been offered a settlement before this for like thirty million or something, but ATI is basically just like, no, you know, you failed to deliver on the contract, you know, we lost hundreds of revenue days per aircraft. In one case, one of the overhauls that was supposed to take, you know, like sixty, ninety days, and worst case took eight hundred and six days. I cannot imagine having an aircraft out of service for that long, the amount of financial damage and reputational damage to the company that is done when the aircraft's out of service, which is a story. That almost everybody in this industry has experienced, including myself, because of the issues with rental engine availability, ⁓ time it takes to overhaul the engines, and just the sheer cost of these programs and not getting what you expected. So it'll be to see. This is in a Texas court, so you can't really use the precedent of the Flexjet case in New York in this case. And they're also very different jurisdictions in terms of how they treat contracts and you know who's more favorable. role the buyer or the seller. we'll have to see.

Preston Holland: Yeah, it is a mess. Yeah. And there is to thirty million dollars that they have paid thus far into the program. Now, thing ⁓ just point out, and just so, you know, for let's call it integrity, you know, of of understanding. ATI Jet did transact. JetVia, you know, was the former name was ATI Jet. So this is kind of a continuance across the transaction. So what I would imagine happened was the new owners came in and said, hold up a second. We've been getting screwed. This is not okay. Again, speculation, but I would imagine that this preceded that transaction from ATI jets changing hands. and know, and it's a problem. It's Lear Lear 60 engines. you know, 12 according to ATI.

Jessie: Mm-hmm.

Preston Holland: Pratt maintained 12 rental engines to support more than 800 Learjet 60 engines. That's crazy. That's not a lot.

Jessie: Right. It's unacceptable. It's not it and there's there's standards on these things. The airlines have been doing this for a very long time. That's where these programs came from originally. Yeah, four to eight percent is the expected acceptable pool amount, according to experts in the lawsuit. You know, who knows what the court will actually say. And their numbers were showing one percent. was part of the again, the all accusations not proven in court law yet, but these are accusations in the document, is that you know they refused they had partnered with someone else to tear down some Lears And use those engines for the pool. And then one day they just go, I don't need it. And then they told ATI Jet the same day, we don't have anything available for you. So yeah, we'll have to see. I think this is everyone's been really frustrated. You know, it was first it was COVID. And then once COVID was kind of passed, we're like, okay, there's still something going on because new airplanes are still getting delivered. There's still problems. What's going on? But I think this is the this is the only tool that small operators have. Not that ATI was that small, but relatively small in the grand scheme of things, against OEMs is to pursue these cases. So there they do have some power, but it's gonna take a lot of money, a lot of time, ⁓ they may or not may not get anything out of it. We'll just have to see.

Preston Holland: Yeah. And just to correct the record, there is no actual number of what they're suing for. ⁓ the dispute is somewhere between 20 and 30 million plus the down days, right? So it's it's how much has it actually cost plus what have they paid? what type of relief, where they come to at a settlement. I I do want to make a quick callback to our Kenn Ricci episode with Honeywell. I think he started something. Like I think that this is I I think that.

Jessie: Hmm. Mm-hmm.

Preston Holland: When he said, Hey, this is not the last time that you're gonna hear about this, and it hasn't been thus far, I would venture to say this is probably not the only operator that's having an issue. I I think that this the story ⁓ engine issues is only starting.

Jessie: Mm-hmm. Definitely not. Yeah. It's only beginning, yeah, and it and it may not even, you know, be only engine programs. There could be other areas affected as well. But yeah, he's basically laid out the playbook for operators to say, Okay, this is this is how you need to do it, this is what you need to do, follow my lead. And it looks like they are.

Preston Holland: Yep, exactly. Well, moving on to other dumb stuff affecting private aviation. There is a new this is a new one and Jessie actually uncovered this through an interesting channel. So tell us about some of the dumb stuff that is affecting private aviation right now.

Jessie: Yeah. Yeah, maybe this should be a new segment of the show, ⁓ dumb things that affect airplanes in the sky or something from the the groundlings that bother us. so my husband's in ⁓ the Bell Helicopter training this week. He's a 407 pilot. He goes every year. and one of the things they brought up in his safety briefing this year was that there's a new recreational sport, maybe not that new, but a couple years old. called slack lining. I always thought it was tying, you know, a rope in the middle of two trees in the forest and walking on it and showing that you have great balance. But apparently people are now tying these ropes at like crazy altitudes, crossing mountain ranges, some cases not informing anyone. So the FAA has no NOTAMs in place. There an accident in January of this year where a helicopter ran into one of the lines. They have wire cutters on them, but the line is so thick it can't cut through the wire. So killed everyone on board. more is going to come out on an investigation. There was a NOTAM in that case actually. But plenty of other situations where people need pay attention to this. There's a website called Slack Map. You can go and check out where these are set up. But pilots, everybody out needs to be a lot more aware of this because who knew this was a problem?

Preston Holland: Yeah, seaplane pilots, GA pilots. I mean, this is if you're flying through a canyon or something that has two points, ⁓ could be at risk for this. That it's me personally, you're not gonna catch me dead on a slack line. I'm gonna be honest. That is not that does not sound interesting to me in the slightest. yeah, need need be aware of that. Another thing you need to be aware of is drones, apparently, because ⁓ there have been two this week.

Jessie: Ha ha

Preston Holland: about drone strikes in kind of the New York City area from airlines. So like another issue, everybody knows about birds. You have to look out for bird strikes, but now you have to look out for drone strikes.

Jessie: Yeah, when we've reported on this in the past, I think this is just one of those things coming to a head, like where more and more reports of hitting things. And probably even more, but pilots may not even notice it because some of these drones are pretty small, probably just gets ingested into the engine. You don't even know what happened. but yeah, fortunately no one's hurt at this point, but it it's going to happen. You know, if the FAA or somebody doesn't crack down, these drones were flying at three thousand feet near an airport. Like you've got to be crazy. You're supposed to have some sort of certificate before you go fly these things and they're just flying them Right in the path of airplanes.

Preston Holland: Is it time to put the tinfoil hat on and say, why didn't it have ADSB out? there be a reason for that? I don't know. ⁓ gonna leave that for the real tinfoil hat people, but you can't help but wonder if the United States has enforced an ADSB requirement for its drones and has put ceilings and limits on all of its consumer drones, why was there a drone at 3,000 feet?

Jessie: Yes. Hmm, right? because of all the Chinese imports that don't have that restriction.

Preston Holland: Yeah, so tough. Be on the lookout for drones when you are flying on short final. Very exciting. Well, that concludes our dumb stuff that happens to airplanes, which is why it's important to have really solid, strong operators. That's what our partner at Realjet does is they vet all of their operating partners to make sure that they meet the highest level quality of safety. And that is not something that's ubiquitous across the brokerage ecosystem.

Jessie: Yeah, and I'll tell you, I've worked with Robert Withers and Kenny Ditcher in the past, and they do, they've always valued quality. You know, even when they were working with Grandview Aviation, was all about safety, making sure that they could get the right support that they needed, the right availability. So I have no doubt they will continue that in the future. Thank you, RealJet, for sponsoring this podcast.

Preston Holland: Well, moving on to our last story, Flexjet has announced that they are the exclusive fractional provider of the Gulfstream G five hundred. They have taken delivery of a G five hundred, these are going to replace the aging G450 fleet that they have in their fractional program. I to point one thing out. They are also expanding their G700 fleet. And I a tweet about this, and I said, The G seven hundred will replace the G six fifty similar to how the five hundred is replacing the four fifty. someone called me out on this and said, ⁓ technically they are not retiring the G six fifty fleet, they are continuing it and just adding on the G seven hundred. That feels a bit literal because you cannot order a new G six fifty today.

Jessie: Yeah. Yeah. Yeah, I think he was taking you a little too lit literally. FlexJet is gonna continue to sell the six fifty program into service and support it, but obviously the long-term plan is that the seven hundred will be the next phase.

Preston Holland: It's the flagship. The six fifty ER was the flagship, and now the G seven hundred is the flagship, so it is a logical move. do you think that Gulfstream discounts much when you buy in bulk like this?

Jessie: I am so curious. I mean, I guess these days probably nobody discounts anything because like prices are just like so crazy and the waits are for so many years. But I have to wonder because I mean, to be the exclusive, you know, does that mean you paid more for the plane, or because you bought too many, bought you you paid less? But going to our conversation with Kenn from last year, which again, everyone should go back and rewatch this because given the ATI jet case now, it's very relevant as well. But he's all relationships and people taking. care of each other. I think that obviously comes through in this deal. But Flexjet customizes the heck out of their planes. So price is probably not as much of an issue for him as it is for other buyers.

Preston Holland: Especially when you're really one of the only fractional that offers Gulf Stream at scale, I would imagine that you can demand some sort of a premium for that. And they have have kind of the what is it, the red jet or the the is it the red jet, the red label program that is little bit more custom, a little bit more high touch. It's a little bit more like sharing an airplane with three people as opposed to the traditional fractional model. So I would that.

Jessie: Mm-hmm. Red label. Mm-hmm.

Preston Holland: There is some bright some price discrimination here. Even if you're having to buy at retail, you can probably discriminate a bit to ultimate end user who's buying into your fractional program. So congratulations the Ricci family on getting two shout-outs in the VIP Seat podcast. If you would like to sponsor, reach out, reach out to us. Hello at the VIP seat.com. Just kidding. ⁓ but yeah, that is a that that is exciting. Well, this has brought us to the end of another awesome episode of the VIP Seat Podcast.

Jessie: Mm-hmm.

Preston Holland: I want to say a quick shout out a couple of people who have shouted out the podcast on LinkedIn here recently. So really love the positive feedback. It is super helpful. So I going to go through Trey Baker, Chase Martin. I gotta go through all these comments. Ryan Cranford. ⁓ we've gotten a lot of shout outs and people saying, Hey, you need to listen to the show. That is the best way to help us grow this show. So they listened, ⁓ they got a out on the podcast. Thank you so much for listening.

Jessie: Yes.

Preston Holland: If you want to subscribe to the newsletter, go to the VIPseat.com. It is the abbreviated version of the podcast so that you can understand what's going on, a little bit smarter about business aviation. We love for you to share, leave a five-star review, Spotify, give us thumbs up on YouTube, hit the subscribe button. All of those things happen help the algorithm. Happy birthday to 250 years going strong, 1776, and we're not stopping Let's see if we can win the World Cup. That would be pretty epic on the 250th year. And we will see you all next week.