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Elite Traveler – ET Insider – May 27, 2008

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ET Insider – May 27, 2008

Elite Traveler Insider –

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May 27, 2008

Elite Traveler Insider

By Douglas D. Gollan, President and Editor-in-Chief, Elite Traveler Magazine  

Welcome to the latest issue of Elite Traveler Insider, the bi-weekly newsletter designed to update our top partners on trends in the private jet lifestyle. This information is provided to offer a better understanding of how to target these globetrotting elite travelers, their impact on your business and other trends that affect you. Remember, private jet travelers are paying up to $10,000 per hour to fly by private jet, so these super rich consumers could be and should be your best customer. We talk about them and how you can get more of them and more from them.

CONTENTS:

1. Buffett Sees “Long” and “Deep” Recession

2. As U.S. Airlines Sink, Private Jet Business Booms

3. Fuel Prices Aren’t Impacting Private Jet Travel or Spending

4. The Psychographic Sales Force

5. American Express Survey shows Amex Readers Running Scared

6. Spending in Seattle, the Super Rich Spend Merrily Along

Elite Traveler’s BPA audited circulation aboard private jets and mega-yachts in over 100 countries means your ad is guaranteed to reach the highest spending luxury audience in the world no matter where they are from and where they happen to be today – each issue is read by 318,000 readers with a Household Income of $1 million +, the highest of any magazine or newspaper in the world! Sources: 2007 Prince ET/MMR for others

1. Buffett Sees “Long” and “Deep” Recession

Making the need to focus luxury marketing strategies on the Super Rich even more important, Warren Buffett, whose business and investment acumen has made him one of the world’s wealthiest men, was quoted in an interview published Sunday as saying the U.S. economy is already in a recession.

Asked by Germany’s Der Spiegel weekly whether he thinks the U.S. could still avoid a recession, he said that as far as the average person is concerned, it is already here.

“I believe that we are already in a recession,” Buffet was quoted as saying. “Perhaps not in the sense as defined by economists. … But people are already feeling the effects of a recession.”

“It will be deeper and longer than what many think,” he added.

The 77-year-old chairman and chief executive of Berkshire Hathaway Inc. gave the interview while he was in Europe for what he called a “deferred shopping tour,” looking for possible acquisitions.

Omaha-based Berkshire has about $35 billion in cash and is looking to invest. Berkshire’s subsidiaries include insurance, clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. and Anheuser-Busch Cos. It owns both Netjets and Executive Jets.

Elite Traveler’s BPA audited circulation aboard private jets and mega-yachts in over 100 countries means your ad is guaranteed to reach the highest spending luxury audience in the world no matter where they are from and where they happen to be today – each issue is read by 318,000 readers with a Household Income of $1 million +, the highest of any magazine or newspaper in the world! Sources: 2007 Prince ET/MMR for others

2. As U.S. Airlines Sink, Private Jet Business Booms

Aloha, EOS, Maxjet and ATA have filed for Chapter 11 and ceased operations. Frontier filed for bankruptcy following Delta, United, USAirways and Northwest which have re-emerged but are each teetering on the brink of oblivion once again. American Airlines announced it would ground dozens of planes, lay off workers and cut its domestic capacity by 12 percent as record oil prices wreak havoc. The Texas based airline will start charging passengers $15 for their first checked bag and $25 for their second bag and upwards of $100 for additional bags. USAirways announced it was stopping serving pretzels to save money.

Yet an ocean away at EBACE, the European Business Aviation Conference and Exhibition, private jet operators from around the world were talking about record flight hours in the first months of 2008 both in North America and abroad. While U.S. airlines are deferring aircraft deliveries, private jet manufacturers’ order books were getting even fuller.

And while U.S. commercial airlines were fretting about lack of financing, private jet company XOJet Inc. said it secured financing agreements for up to $2.46 billion for its North American operations and global expansion.

The San Carlos company said that it is the largest publicly announced business aircraft financing package in U.S. history. The announcement reflects widespread change in international travel and a boom in private jet use among business and leisure travelers.

XOJet has 21 aircraft in two hangars at its base at McClellan Business Park in Sacramento. The company has aircraft orders valued at more than $3.1 billion that would bring the fleet to 127 aircraft by 2012.

The financing package will enable XOJet to be the first large-scale business jet operator to fund the vast majority of its own fleet, the company said. Traditionally, companies have required business aviation customers to fund the aircraft or a fraction of the aircraft.

XOJet said it plans to self-finance its aircraft in order to “remove this burden from its customers” and expand the breadth of its product offerings.

“The dynamics of a constrained commercial aviation system combined with the rapid rise of business opportunities in a global economy are driving historic growth in business aviation,” XOJet CEO Paul Touw said in a news release. “In an increasingly diversified and worldwide marketplace, business jets are becoming one of the most important tools for corporate competitive advantage.”

“XOJet’s business model is changing the industry as it continues to outperform our expectations,” said David Bonderman, founding partner of TPG.

If world recession is looming, the throngs of high-spenders and huge orders placed at the biggest EBACE yet indicate that business aviation – if not immune to global pressures – continues to thrive on an anticipated surge in corporate air travel in Europe and the emerging markets of the east.

Austrian-based charter operator VistaJet announced an order for 35 Bombardier jets at the show, worth $1.3 billion at list prices. The deal was comprised of 11 Challenger 605s, 13 Learjet 60XRs and 11 Learjet 85s, with an additional 25 options.

The biggest business jets of all are benefiting from much of the growth in emerging markets, where wealthy users of business aviation tend to travel long distances with entourages and have no qualms about showing off their wealth. Airbus clinched its biggest deal for corporate jetliners, with an order for six A350 XWBs to Saudi firm MAZ Aviation, while Dassault secured an order for 20 Falcon 2000LXs from NetJets Europe, part of the world’s biggest business aviation operator.

Another Austrian operator, Jetalliance, added to a good show for the Toulouse airframer with a follow-on order for an Airbus Corporate Jetliner and two A318 Elites. The company, which operates two Airbuses and has another three on order, is targeting the CIS market. “Russian and Asian customers have become a significant part of our business,” says chief executive Lukas Lichtner-Hoyer. Jetalliance also ordered 24 Cessna Citations to take its Cessna orders this year to 50.

Airbus said on Tuesday that Middle East-based MAZ Aviation had placed a commitment for six wide-body Airbus A350 aircraft, shortly after announcing another order for several private jets. “MAZ Aviation has placed a commitment for six Airbus A350 XWB Prestiges to serve its customers, in what is the first deal for the type in the Middle East,” Airbus said in a statement.

Prince Al-Waleed bin Talal may have been the first buyer of a private Airbus A380, but he won’t be the only one. According to an item from the Kampala Monitor, a Ugandan tycoon named Michael Ezra is in talks with Airbus about buying an A380 for use as his private jet. David Velupillai of Airbus told the site that “We have met with Michael, have had discussions with him and come to a preliminary agreement.”

Mr. Ezra, according to the Monitor article, is planning “a conference room for 12 people, a karaoke room, a movie room, medical center, four VIP bedrooms, another four executive bedrooms as well as a spa.” In commercial use, the A380 will carry up to 850 passengers.

While the world’s economy today is unsteady, one thing is for sure: The wealthy consumers flying aboard private jets are your best bet, and only Elite Traveler delivers these elite travelers to our advertisers through our BPA audited circulation aboard private jets in over 100 countries, including Russia, the UAE, Kuwait, Qatar, Bahrain, Oman, India, Singapore, Korea and China. All with one ad buy!

3. Fuel Prices Aren’t Impacting Private Jet Travel or Spending

An article on Slate.com noted the Senate was set to vote last Monday afternoon on a bill that would raise taxes on fuel for private jets from 21.8 to 36 cents per gallon. The higher tax would require corporate jet passengers to pay a larger share of the cost for upgrades to the U.S. air traffic control system. How much will that set you back when you pull your jet up to the pump?

As much as a few hundred extra dollars on top of the thousands you’re already paying. Small corporate jets, like their jumbo-jet brethren, run almost exclusively on a kerosene-based fuel known as Jet-A. (Piston-engine airplanes, the vast majority of small “general aviation” planes, run on avgas, a leaded gasoline closely related to what you would put in your car.) As of Monday afternoon, Jet-A is selling to corporate jets for an average of $5.21 per gallon. (Fuel is usually more expensive on the coasts and cheaper in the Midwest.) Because the cost of Jet-A closely tracks the price of a barrel of oil, fuel costs for private jets have quadrupled since 2000.

As with cars, the amount of fuel required for a corporate jet varies depending on the model of the aircraft, and newer jets tend to be more energy-efficient. But the most important variable is usually the size of the jet: The 48,000-pound Gulfstream G550, which can fly from Chicago to Rome with 15 passengers, burns through more than 400 gallons of fuel per hour. The Eclipse 500-a lighter jet now being used as an air taxi-can fly more than 1,200 miles on less than 185 gallons of fuel.

So what is the impact of paying $2,000 per hour for gasoline? For the Super Rich, not much, according to a Prince & Associates survey in Newsweek’s cover story “Unsinkable Luxury.” According to the survey and Newsweek, over 80 percent of high net worth individuals actually plan to spend more on luxury goods and services in 2008, and that figure excludes gas for their jet.

Over 90 percent of today’s Super Rich are Self Made and over 80 percent of the Super Rich have made their fortune in the past 10 years. Now is the best time to make sure they know your brand. 86% believe Elite Traveler is a good showcase for luxury products.

4. The Psychographic Sales Force

Richard Baker, who heads both The Luxury Marketing Council in Dallas and his own consultancy, Premium Knowledge, has always interested me. During our brief run-ins at Luxury Council meetings in London, New York, Monte Carlo and one time when we tried to get a project going, I was always felt like Richard really understood the wealthy.

About a month ago I had the privilege of speaking in front of Richard’s group in Dallas at the Stoneleigh Hotel (ex Mansion boss Jeffrey Trigger is running the property for Leon Black and Apollo with some lofty plans). After the meeting, I had a chance to grab dinner with Richard, and we immediately started talking about some of the questions I had taken from his audience.

A popular one is “what do the Super Rich want from my sales force?” Obviously, product knowledge, reliability, and appropriate deference are just the start. Interestingly, both Richard and I noted in meeting literally hundreds of salespeople who specialize in selling to the Super Rich, there were some common characteristics with those we deemed to be top performers.

First, many of these elite salespeople were rarely selling their products, but instead embedding themselves into the speed dials of their Super Rich prospects by getting to know them, and then acting as concierge surrogates.

For the good ones, it was beyond sending them a “congratulations” note when they saw their picture in the local paper, but actually acting as an extension of the Super Rich prospect, feeding them business ideas and leads that had nothing to do with either selling them a Maybach or a share in a private jet.

The next thing we noted is the old adage “birds of a feather flock together.” As a personal example, I could more quickly name the Yankees starting infield for the past 25 years than the Three Tenors.

Obviously each Super Rich individual has his or her own passions, hobbies and personal interests, yet from what we have seen, luxury companies typically divide their sales forces geographically.

Richard noted he has pitched the idea and I think it is brilliant that luxury companies (jet card companies, fractional companies, etc.) think about creating a sales team divided around customer passions. For example, one sales person could be an aficionado in opera, another in golf, yet another in yachting, etc.

The preliminary qualifying process would identify which interests ignites the most passion and involvement in the prospect and then the key would be to pair the prospect with the salesperson who could talk for hours about the prospect’s passion.

Richard and I made our conclusion that with the always-on-the-go nature of today’s elite travelers, servicing these folks from a regional sales model may be of less relevance than a psychographic one.

While the world’s economy today is unsteady, one thing is for sure: The wealthy consumers flying aboard private jets are your best bet, and only Elite Traveler delivers these elite travelers to our advertisers through our BPA audited circulation aboard private jets in over 100 countries, including Russia, the UAE, the U.S., Mexico, Brazil, Kuwait, Qatar, Bahrain, Oman, India, Singapore, Korea and China. All with one ad buy!

5. American Express Survey Shows Readers Running Scared

American Express in support of its Mass Affluent titles such as Departures and Travel + Leisure recently unveiled the Second Annual Survey of Affluence & Wealth in America, produced by American Express Publishing Corporation and Harrison Group. The study examined the purchasing habits of roughly 12 million households, which have an average $352,000 annual income and were more affluent than the readership of American Express publications (Departures has a Median HHI of slightly under $200,000 compared to over $2 million for Elite Traveler as an example. (sources: MMR for Departures, Prince & Associates for Elite Traveler)

Among the usual propaganda, a few tidbits American Express probably would not like slipped out, including the following exchange:

“What effect generally is the current economy having on shopping decisions for the wealthy?

We went back to the field last Wednesday for a second round of data collection and asked our sample that very question. They gave us several answers.

First, they are managing unbudgeted expenses and looking at how to delay or reduce required expenses.

Second, they are eliminating from their spending plans things they don’t need, especially in fashion, accessories, and merchandise categories like furniture, luggage and the like. Vacations and automobiles remain strong.”

Now I will point out that the use of the word wealthy by many is quite liberal and obviously subjective. Prince & Associates Research on Ultra High Net Worth individuals (Net Worth $30 million +) was featured in the May 26 Newsweek Cover Story “Unsinkable Luxury.”

In the story, Newsweek quotes the Prince Research as noting that some 80 percent of these “wealthy” consumers actually plan to spend more on luxury goods and services in 2008 both as a reward as they also up their spending on charitable giving, and because they can.

Over 90 percent of today’s Super Rich are Self Made and Over 80 percent of the Super Rich have made their fortune in the past 10 years. Now is the best time to make sure they know your brand. 86% believe Elite Traveler is a good showcase for luxury products.

6. Spending in Seattle, the Super Rich Spend Merrily Along

A front-page article in the Seattle media recently proclaimed, “Despite gloomy forecasts, the superrich continue to spend.”

In the Pacific Northwest, somewhat thought of as being low key, what’s moving is $3,000 cognac, there is a Rolls-Royce shortage, and heavy demand for private chefs and butlers.

The author includes a great tidbit: “I remembered a story I heard about the scion of an old-money Seattle family. He said his grandmother had no idea there was a Great Depression until his wealthy grandfather told her over a meal one day that times were tough for other people and that they should economize as a show of support. So, they’d have to let one of the servants go.”

“I don’t want to sound harsh, but the people who were buying million-dollar houses with a combined household income of $70,000 or $80,000 were the ones who were chasing easy money,” according to one analyst featured in the article.

Luxus Networks can bring your brand front and center with the world’s wealthiest consumers in over 100 private jet terminals throughout North America. Programs start from $1,000 per month. Contact Kimaada LeGendre at klegendre@elitetraveler.com for more information!

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