Private Jet Travel: A Primer
The way most people travel today is through the use of commercial airlines.
For the last 40 years, air traffic systems were developed to handle the increasing traffic and revenue management systems were developed to optimize costs while maximizing profitability. Lately, the airlines have neglected customers by sacrificing long-term customer loyalty for short-term financial gains. In addition, the challenges of new low-cost carriers, increased security burdens and eroding customer loyalty have put the airlines up against a wall and some of them into bankruptcy.
This hub and spoke model utilizes only 600 of the 5500 available airports that private aircraft can utilize. Of those 500 airports, 90% of all airline passengers travel to or from the top 28 air carrier hubs (Source: NBAA). According to the FAA, this system is expected to grow between 3 and 5 percent annually and if something is not done it will collapse by 2010-2015.
Currently, private jet travel are reserved or chartered by companies and individuals to accommodate their schedule provide access to those 5,500 airports. This service is called Air Charter. Recently, a new market has emerging based on a class of Very Light Jets to provide private jet service in a regional short trip format. This service is called Air Taxi. This primer covers the benefits of each and answers some of the most frequently asked questions.
Emerging Market: Air Taxi
Air Taxi service is an approach that combines the high utilization model of the airlines with the on-demand model of air charter. The goal of air taxi is to leverage the over 5,500 airports while providing a lower cost alternative to air charter and compete with commercial airlines.
Q: How is Air Taxi different than Air Charter?
A: These terms have been synonymous for years. However, the utilization of current Air Charter is around 250-500 hours a year, while Air Taxi is closer to 1500 hours a year. For reference, the average commercial airliner flies about 3000 hours a year.
Q: What kind of aircraft does this service use?
A: These aircraft called Very Light Jets or MicroJets that have an interior the size of an SUV and seat 4-6 passengers in leather seats with plenty of legroom.
Q: How can this compete with airlines?
A: There are three critical components that allow private air travel services to compete with the airlines.
Affordable Aircraft
Each aircraft cost from $1.2M to $2.1M so overhead costs are dramatically lower than larger aircraft.
Lower Operating Costs
Each aircraft operating costs are lower cost per mile.
High Utilization Rates
Each aircraft will be used 1500 hours a year reducing overall costs per mile.
When evaluated in trips fewer than 1000 miles, all of this contributes to a lower price per mile for the customer.
Why should you should care about this emerging market
For those exploring the market, these aircraft open up an amazing opportunity by appealing to an entire class of customers willing to pay a little more than their first class ticket price. This is not just an extra group of potential passengers, but a whole new market for your business.
Current Market: Air Charter
These private jets (i.e., Gulfstream, LearJet, Falcon) are able to access over 5,500 airports enabling point-to-point travel. The overall advantages of Air Charter are:
Time Savings
Multiple cities in one day, Arrive minutes before departure, Arrive at airport closest to you
Less Hassle
No airport lines, No lost baggage, No cancelled or overbooked flights
Scheduling Flexibility
Choose your departure time, Fewer overnight stays
Perception Issue: There is a market perception that it is only for the wealthy and elite. On the contrary, when there is a smaller aircraft (6-7 seats) with a trip of 3 or more people and the trip distance is less than a 1000 miles, it can be more cost effective than paying for a full fare airline ticket.
