Flight Options LLC, the second- largest fractional jet company in the U.S., won $167 million in financing from Brazil’s development bank to pay for new planes as it takes advantage of a rebound in demand.
The financing from Banco Nacional de Desenvolvimento Economico e Social, known as BNDES, will be used to buy dozens of Embraer SA (ERJ) Phenom 300 aircraft over the next several years, Cleveland-based Flight Options said today in a statement.
Flight Options is expanding its 100-plane fleet and recalled 35 pilots amid rising business-jet trips, including a 50 percent jump in travel for golf’s Masters Tournament in Augusta, Georgia, in April, Chief Executive Officer Mike Silvestro said. The Dow Jones Industrial Average is the best gauge of demand because it’s a proxy for corporate profits and personal wealth, he said.
“If I showed you how utilization tracks with the Dow, you’d look at it and say a third-grader created it because it’s too close,” Silvestro said in an interview at Bloomberg’s New York headquarters.
The 30-company Dow Jones index rose 7.5 percent this year through yesterday. The Dow climbed 11 percent in 2010 and 19 percent a year earlier after plunging 34 percent in 2008 during the recession.
Fractional jet use at Flight Options increased 9 percent in the first quarter of this year, compared with 2010, while jet- card use surged 30 percent amid strength in the financial, retail and manufacturing industries, Silvestro said. Similar growth patterns continued in the second quarter, he said.
“All indications are that things are more positive” than over the past couple of years, Silvestro said.
The financing from the Brazilian bank will allow Flight Options to sell jet cards in 25-hour increments for the Phenom 300 aircraft for the first time, making access to that jet more affordable than previously, when customers had to buy a fraction of the plane, he said.
“Customers have been looking for more non-asset purchase options,” he said.
Fuel costs, which are passed on to customers, don’t have as direct an impact on demand as corporate profits and the investments of wealthy individuals, Silvestro said.
Crude oil climbed 5.8 percent in the year through yesterday, and its closing price averaged about $101 over the past three months.
Berkshire Hathaway Inc.’s NetJets is the largest fractional-jet business.
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