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Airlines Want to Stop ‘Travel Hack’ JSX From Luring Rich Flyers Away

(Bloomberg) -- Alex Wilcox’s furious rivals say he’s exploiting a loophole. Wilcox counters that they’re just annoyed he’s treading on their turf.

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At the heart of their dispute is JSX, a Dallas-based carrier beloved by work travelers for offering convenience like a chartered plane at near business class prices.

Wilcox got the idea for the service in what’s possibly the least glamorous business origin story of all time. Combing through US Federal Aviation Administration regulations, he learned that while scheduled flights with more than nine seats have to meet onerous safety and security requirements, on-demand public charters have separate, less stringent rules. Though, they can’t specify flight times or cities or sell single seats.

To get around that, Wilcox decided to create two companies that would work together: One would make a flight schedule and sell tickets, and a second would fly the aircraft on specified routes at set times and dates. In reality, though, it’s one entity working behind the scenes.

“I spent months without sleep, just looking at all the rules, looking for ways why it couldn’t be done,” he said on a clear February day in a hangar at Dallas Love Field. “Every single person we talked to said, ‘No, you can’t do it.’” Then US regulators signed off on his idea. “So we did it.”

In 2015, he founded JetSuiteX, later rebranded to JSX. It allows customers to book tickets online, like a more traditional airline, and flies out of sparse private hangars. In exchange for the amenities of a big airport, passengers get convenience. In lieu of long Transportation Security Administration baggage-screening lines, they get their bags swabbed for explosives and walk through a weapons detector. The experience doesn’t come without pitfalls. If a flight gets delayed, there are only minimal snacks. If it gets canceled, there’s not always an easy rebooking option.

Bringing that ease of travel at a lower price point than a private jet has fueled growth so rapid that competitors are lobbying against it and US regulators are reviewing its practices. Potential rule changes by the US Transportation Security Administration and the FAA could make flying with JSX much more onerous, potentially ruining its appeal.

Nigel Gorbold takes JSX as often as five times a month for client meetings because he can pack more into the trip. “I can have one or two more meetings in downtown Dallas, and still make a 6:30 flight,” he said.

In less than a decade, JSX has gone from operating just 641 flights over 6 routes, to almost 35,000 over 48. Within the next 10 years, Wilcox plans to add hundreds more planes — the vast majority hybrid electric, he said — and new offerings between the US Northeast and Florida, along the West Coast and possibly to Mexico. At the current pace, annual revenue will hit $1 billion by 2028, he said.

That revenue milestone would be an “appropriate time” to consider selling shares to the public, Wilcox said. But he added that investors aren’t in a “rush for the exits,” either. Wilcox said he could also see one of JSX’s airline investors, such as United Airlines Holdings Inc., buying the upstart. Or, it could keep growing and bringing in cash. But first, it has to survive.

Established players have struggled to fully win back lucrative corporate travelers since the pandemic. They’re also facing rising labor costs, inflation and choked supply chains. Investigations into Boeing Co. are slowing business now, too. On Tuesday, Southwest Airlines Co. announced plans to cut flights and halt most hiring, citing delays in Boeing aircraft deliveries.

The big airlines “don’t want to deal with a new kind of business model,” Wilcox said. “They’re just trying to put us out of business.” JSX is one of 19 carriers that could be affected by changes to rules for the model it uses, according to the FAA.

Southwest and American Airlines Group Inc. say the issue with JSX isn’t that it’s going after their customers, but rather its lack of safety protocols. “If you’re going to be a scheduled carrier, whoever you are, follow the rules for a scheduled carrier,” Southwest Chief Executive Officer Bob Jordan said in an interview. “We have decades of proof that accidents have significantly declined and safety has significantly improved. Just follow that standard.”

Doug Parker, former American Airlines chairman and CEO, said carriers like JSX should be required to meet post 9/11 standards that were implemented to counter terrorist threats, like scanning photo IDs, limiting liquids on board and removing shoes during screenings.

“It’s a natural disaster waiting to happen,” he said in an interview Wednesday. “We know terrorists have their eyes set on commercial aviation and we’re giving them a perfect opportunity.”

Parker raised his concerns with TSA Administrator David Pekoske a year ago and wants regulators to move quicker on tightening security standards for these carriers. “They say it’s a better model. It’s not a better model because it’s not safe.”

JSX said Parker’s comments reflect a “fundamental misunderstanding of the regulations” governing the market.

“JSX has had no security incidents since its inception in 2016, and the nation’s public charter program, in its entirety, demonstrates an exceptionally strong safety record,” the company said in a statement. “Our TSA-approved security program at JSX meets and, in many ways, voluntarily exceeds time-tested regulatory requirements.”

The carrier says it has never had an assault on its flight attendants or a fight on its planes. If there are any new rules that put his enterprise in jeopardy, Wilcox said he’ll appeal. “We would obviously exhaust all of our remedies.”

A high school job at the Burlington airport in Vermont set Wilcox on a lifelong career in airlines, most of which he’s spent at upstarts. After a stint at Virgin Atlantic, Wilcox left to help launch David Neeleman’s new low-cost carrier, JetBlue. After six years there, Wilcox jumped to another new venture, India’s Kingfisher Airlines. Then he landed at yet another startup, a private jet service catering to high-income flyers called JetSuite, as CEO.

About a decade in, Wilcox was looking to expand JetSuite’s customer base, when he came across what his competitors now call a loophole.

To get the business started, Wilcox raised less than $5 million from friends and family, including the late Tony Hsieh, founder of Zappos, the late Arthur Samberg, founder of Pequot Capital Management and JetBlue’s Neeleman.

In 2016, the first flight, a rehabbed Embraer SA jet, took off from Burbank, California, and landed 360 miles away in Concord, California, about 90 minutes later.

What mainly differentiates JSX from rivals using the same model is its direct appeal to business travelers in Texas and California. The company really took off when it moved its headquarters to Dallas from California in 2018 and began broadly marketing itself as a “hop-on” jet service and a time-saving “travel hack.” That same year, Qatar Airways put money into the carrier and JetBlue expanded its stake.

Within a year, JSX more than doubled its number of flights and routes.

The pandemic set the carrier back, but the company survived by transporting medical crews and emergency workers. As travel resumed, JSX quickly rebounded by meeting demand for smaller flights with fewer passengers. Plus it could better manage a Covid-induced pilot shortage that plagued the broader industry. Another quirk of the public charter model is that JSX can hire pilots over the mandatory retirement age of 65 and with fewer than 1,500 hours of flight experience required for commercial airline pilots. That gave JSX a bigger hiring pool.

In 2022, United Airlines invested and JSX had another big year, surpassing 30,000 flights for the first time.

Despite the drama, Wilcox is proud of what he’s built. He showed off the Dallas headquarters to Bloomberg reporters and gave a tour of a JSX jet, noting the aircraft’s unique details: JSX had ripped out 20 of the original 50 seats and the overhead bins, installed brighter lighting and put a faux wood grain finish on the bulkheads and tray tables.

In addition to business travelers, the carrier has drawn vacationers like Danielle Dow, whose family flew JSX from Dallas to Crested Butte, Colorado, for a vacation last year. The “biggest draw,” she said was “not having to get to the airport quite so early and not having to take small kids through the whole airport experience.” She paid $1,000 round trip for the tickets and would take JSX again if the price difference to other carriers isn’t too big.

All that growth might now be the company’s undoing.

The FAA says its review of rules for public charter carriers like JSX came “in light of recent high-volume operations” that “appear to be offered to the public as essentially indistinguishable from” commercial carriers. The “size, scope, frequency and complexity” of public charter operations like JSX has “grown significantly over the past 10 years,” the agency wrote in an August filing.

Members of Congress and some pilots unions are now also pushing for quick action to tighten up security and safety regulations. US aviation security authorities have crafted proposed changes that won't be made public, while the FAA continues its review.

“The ambiguity of ‘Is this okay? Or is it not?’ — that's not good for the industry,” said John Cox, a retired pilot who leads aviation consultancy Safety Operating Systems.

JSX has hired a lobbyist in Washington to push back against any changes. Wilcox is also counting on the influence wielded by his partners, JetBlue and United. “When someone points a gun at you, you tend to hire bodyguards,” he said.

In the meantime, JSX has continued expanding. The company this week launched a new route between Scottsdale, Arizona, and Orange County, California, and debuted a new tagline: “This Is How I Fly.”

(Updates with JSX response to former American Airlines CEO starting in paragraph 17.)

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