On the Record with
STEVE O'NEILL, CEO, CITATIONSHARES

Size Does Matter, and Smaller Is Better

"I like to brag about our size," says Steve O'Neill, CEO of CitationShares, the Cessna-TAG joint venture for fractional aircraft ownership. In his case, that size is small, and it's very much by design.

"Bigger doesn't mean better," O'Neill says. "The airline industry has fallen into the trap of believing that bigger is better, and that could very easily happen in this industry." If it does, however, it won't happen to CitationShares, which is pursuing a deliberate strategy of keeping things small.

That includes its aircraft, as the CitationShares fleet of 26 aircraft (rising to 32 by year-end) is made up entirely of small jets: Cessna Citation CJ1s, Bravos and Excels.

CitationShares operational experience indicates that the average fractional flight is just 1.4 hours, and that the average load is 2.6 passengers. People who insist on larger aircraft like Falcons probably fly somewhat farther, O'Neill concedes, but he insists that their average is still well below two hours.

"In this economy and in this environment, people are going to be looking for smaller aircraft, not larger aircraft," he says.

With the CitationShares fleet of small Cessnas, "We have not needed to build the infrastructure to support large airplanes," O'Neill says. "This allows us to be more cost-competitive across our product line." The money saved, in other words, allows the firm to offer lower selling prices, lower operating rates and lower monthly fees than its competitors.

"In this economy and with this stock market environment, people are trying to be cost-conscious, and this plays right into our program," said O'Neill. "We don't position ourselves to be all things to all people."
"We've had a very good year," O'Neill continues. "Our business is up dramatically post-9/11. We definitely saw a meaningful and quantifiable rise in business."

"We'll end up selling between 30 percent and 40 percent more shares this year than we did last year," he says. That contrasts with an overall fractional industry he says is down about 20 percent, with "the heavy end of the industry down much more than 20 percent."

"We believe we have the lowest charter selloff ratio in the industry," he adds.

The small size of CitationShares also allows it to pick the cream of the pilot crop, O'Neill says. The organization employs about 130 pilots now and expects a total of about 150 by year-end. Their average experience exceeds 10,000 flight hours.

New this year, just in time for Orlando, is a revamped CitationShares Web site designed specifically to allow detailed cost comparisons between the various fractional programs, designed with a high-power "comparator" to let prospective customers see at a glance just how affordable CitationShares is. In development for future release is an integrated online scheduling capability for existing CitationShares customers.

"We have built critical mass," O'Neill said of his two-year-old venture on the eve of NBAA 2002, "and are very happy about where we're at. We are on a very clear road to profitability."

By Rich Piellisch