Security
threats and delays have made it much more attractive for firms to charter
private jets to move their staff around. Can the cost be justified to
shareholders? Jane Lewis reports.
Low-cost
airlines appear to be the main winners in the post-11 September aviation
industry crisis, but there has also been a startling hike in the demand for
private corporate jets.
This
is so pronounced that in the US some companies are even beginning extend this
perk to middle management. The fastest-growing segments of the market are
‘fractional’ ownership or timeshare and chartering.
Air
Partner, the world’s largest private jets operator, has seen business jump 25
per cent compared with 1999 figures. Its jet-hire sales have more than doubled
in the past four years too.
A
large part of this demand comes from international City firms. As Air Partner
managing director, David Savile, says: "Gone are the days when flying club
class was better than rear-cabin. It is more congested and is now mass-market.
It is the same difference as taking a bus or hiring a taxi."
The
rise of private jet charter firms such as Air Partner has come at the expense
of those selling corporate jets. These companies have been hit badly by the
economic downturn. The cost of buying a jet (average price £5m-plus) is much
harder to explain away to critical staff and shareholders than the cost of
hiring one.
How
to hire a jet
Air
Partner charges between £1,500 and £15,000 an hour for the hire of its
aircraft. At the top end of the range is luxury Boeing 737, complete with beds,
showers and meeting rooms. However, most companies tend to settle for a
mid-range eight-seater for around £3,500.
It
is possible to make a case for private flying on economical grounds. If all
eight seats of the jet are filled, the final bill compares quite well with what
you might spend flying eight executives club-class to the US on a commercial
flight.
There
is plenty of evidence to suggest prices may well fall even lower as more
players sign up to the chartering business. Certainly, there is no shortage of
cheap jets available. In the prevailing climate of economic uncertainty, the
market is currently swamped with a glut of surfeit corporate jets – both new
and second-hand – and prices are falling rapidly.
Jets
for sale
By
the end of December around 16 per cent of the world’s corporate jet and
turboprop fleet were up for sale, according to one aviation market research
company – cheap bargains for the new ‘taxi firms’ of the skies to pick up.
Indeed,
some argue that private corporate jet charter will soon become widely accepted
as a mainstream activity.
One
expert sees the increase in demand as part of a wider change in aviation. He
forecasts that the number of conventional scheduled airlines will diminish, to
be replaced by three sectors – merged ‘mega-carriers’, low-cost airlines and
business aircraft.
One
of the world’s most successful investors, billionaire Warren Buffett, is
certainly counting on this. Formerly one of the most vocal critics of corporate
aircraft, he has bought into one of the leading US jet time-share firms,
Executive Jets.
The
benefits of private air travel
So
what then are the main benefits of private air travel, aside from the swank of
it all? In the immediate aftermath of the 11 September 11 attacks, a major
selling point was clearly security. As one operator remarks: "When you
charter an aircraft, you are in charge of the people that go on it".
But
most people who fly privately insist the greatest boon of going private is
convenience – particularly in light of delays caused by heightened security
measures in the main carriers.
Private
users, by contrast, can turn up a quiet airfield 10 minutes before departing at
a time they have designated. They also have more leeway in terms of
destination. In the US, for example, there are 580 airports served by scheduled
carriers while business aircraft can choose from 5,400.
Decadent
luxury?
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
The
chief difficulty lies in overcoming the continuing perception of private jet
travel as a decadent luxury – particularly in the current environment of
tightened belts and redundancy notices. Being seen flitting around the world by
Learjet as your company crumbles is hardly a PR statement that most senior
executives would embrace willingly.
This
is less the case in the US, where air travel is regarded as a mundane activity.
But in Europe the mere mention of corporate jet can bring out accusations of
being elitist. The subject remains sensitive enough for some CEOs to request
secrecy – especially for those with trade unions to consider.
