Few understand the boon for private aviation resulting from COVID, especially as travel managers reconsider its value weighed in light of both the risks of exposure to COVID 19 as well as the ease private aviation offers in meeting travel needs. One thing is clear. Travel management companies, who historically don’t know much about private aviation, not only need to learn but forge a way to integrate it because corporations are already there.
Colibri Aircraft cited a Global Air study that flying commercially incurs as many as 680 more person-to-person interactions than private aviation.
Businesses are making a new calculation when it comes to private vs commercial, according to Private Jet Services CEO Greg Raiff. “With the rise of video conferencing, managers are concluding if a meeting is not worth the price of private aviation, they’ll just Zoom it,” he says.
Today, more than managing risk, it is about managing the chaotic airline experience. Indeed, one of the biggest impacts of the never-ending pandemic is the slow rebuild by airlines. Although commercial aviation began experiencing pent-up demand for air travel over a year ago, schedules are still riddled with cancellations, delays and limited services which often change from nonstop to one-stops. This is coupled with unruly passengers who threaten safety and cause diversions, plus the fact that airlines are recasting their contracts of carriage saying, should a disruption occur, passengers are on their own.
“We have certainly seen a resurgence in demand for private aviation,” says Air Partner president Americas David McCown. “While the profile of the trips might be slightly different, with the combination of pent-up demand and inadequacies of scheduled commercial service, businesses are turning to private aviation now more than ever. In fact, last year we experienced 75 percent increase year on year in new customers compared to pre-pandemic.”
Furthermore, McCown is optimistic the trend is likely to continue in a post-pandemic world. “The private aviation boom should be sustained should the economy remain strong because of the greater awareness and acceptance of private aviation. This is combined with likely transition by scheduled airlines to pivot more to leisure travel versus business travel which will drive business travelers to private aviation. As we move forward, private aviation is going to continue to be a growing travel solution.”
The Evolving Story
“At the start of the pandemic, we had a number of requests for private aviation because they wanted to avoid airports and other travelers,” Oracle director of global travel sourcing and GPO Rita Visser told Business Travel Executive. “I think that has normalized, but until the airlines are fully back into all their routes and offerings, there will be a greater need. We don’t use it for frills; we use it for necessary travel to get there and back in a single day instead of incurring an overnight stay and catching an airline flight when it is available.”
In the beginning, Raiff says Private Jet Services was busy repatriating global corporate employees. “Our missions included evacuations from the Caribbean and Africa to the US,” he notes. “After a lull in Q2 2020, corporate travel began thinking about returning to the skies and seeking the safest way to do so. Phone calls from our corporate travel executive friends, people we’d been talking to for years, increased and they wanted to know how to do it economically. Corporate travel departments are not experienced in this area, and we were able to teach them how to move around via private aircraft. In fact, our consulting business made up a huge part of our work designing air lift that would supplement airlines with private air for one-off travel or connecting employees required to work at remote locations.”
Similarly, Air Partner spent the initial part of the pandemic transporting 600,000 tons of key goods and medical supplies and repatriating more than 10,000 people. “In 2020 and in early 2021, Air Partner was seeing business travel limited to industries that need to travel out of necessity – such as the oil and entertainment industries along with government agencies,” says McCown.
Efficiency Generators
What was once a way to minimize risk from COVID 19 is now an efficient way to get business travelers where they need to go, resulting in demand not seen since before the 2008 recession.
Even prior to the pandemic, cost savings from efficiency and increased productivity overcame reservations about the higher cost of flying private. Indeed, for one PJS customer based in a non-hub California market with a large manufacturing facility in Michigan, flying engineers between the two points and back meant two entire travel days via commercial airlines. The company instead opted to create a corporate shuttle.
The shuttle carries 40 mid-level managers and saves 80-man days of travel. “Before the pandemic they were operating once per week and is now four times weekly,” Raiff says. “Not having that accommodation generates higher employee turnover compounding the greatest challenge for any successful business, which is attracting and retaining great talent. In fact, we’ve learned that flying privately has replaced many Silicon Valley perks and is necessary to keep employees happy. Our clients tell us that private aircraft is far more cost effective than they thought – especially with rising air fares – and is ‘shockingly affordable.’ Chartering an eight-seat aircraft to fly from Portsmouth, NH, to New York City is less than eight tickets on the Delta Shuttle and offers added convenience and fewer travel hassles.”
Meeting Demand
Demand for private jet service is so high, three private aviation brokers, NetJets, Jets.com and Velocity Jets, suspended sales of new jet card memberships in favor of selling fractional ownerships, increasing aircraft management services or improving service to current jet card holders, even as availability of used aircraft is at a record low and sales of new aircraft are rising.
“The whole premise of the fractional model is presuming people don’t show up,” Raiff explains. “But with 16 owners per airplane, the chances that four different owners will want the aircraft at the same time rises and if it’s Thanksgiving, that’s a big problem. If you are AT&T and you can’t get employees to the data center, that’s not OK.”
The aircraft shortage is unprecedented, according to Colibri Aircraft managing director Oliver Stone, “We have been operating for over 10 years now, and this is probably the most difficult environment we have encountered for buying private jets,” he says.
This global decline in pre-owned aircraft was driven by the dramatic drop in the supply along with surging asset prices in stock markets and real estate. Historically cheap debt due to government stimulus and depreciation benefits that applied to private aircraft purchases removed many of the financial pressures some owners had to sell their aircraft and encouraged new buyers to act. Current owners are also struggling to find suitable replacements for aircraft they might otherwise sell, further decreasing supply. In addition, new private aircraft deliveries fell around 20 percent compared to 2019, which is the lowest number since 2004.
WingX, a global private aviation tracking company, reports the private aviation industry has not only recovered to 2019 levels but far exceeded that demand. In August, private aviation was up 17 percent from pre-pandemic levels. Charter operators flew 30 percent more sectors in August compared to the same period two years ago.
Permanent Shift?
A recent JetNet’s iMarket Report 2021 predicts the conversion from airline to private aviation will endure beyond the pandemic. It forecast 8,529 new business aircraft deliveries over the next decade worth $245 billion.
Raiff agrees. “I’ve been chartering planes for 32 years now,” he says, “and I have rarely seen someone who starts flying privately go back to commercial because they understand the value proposition in improved schedule flexibility and time saved. They like the ease and the fact they take off from an airport closer to home and land closer to their destination. They also see it as safer with respect to the spread of COVID now,” he says.
“My experience has been that if an organization has private aviation it is viewed as a tool for the corporation,” Cheryl Benjamin, who manages corporate travel for a major company told BTE. “Most travel managers see it as a viable alternative to commercial air. Availability of aircraft allowed them to get employees back on the road with less worry.”
Corporate travel has always been a mix of airline and private aviation, used strategically to improve sales and customer service. Indeed, statistics show CEO use constitutes only 15 percent of aircraft flights, with the majority of the rest dedicated to customer service and marketing teams. And another important benefit: Corporations using private aircraft make far better profits and enjoy higher stock prices than those who do not.
“The mix has changed significantly over the years, with fewer companies having corporate aircraft,” says Benjamin. “I know of at least two companies who use their aircraft as a shuttle service between their home office and the closest major airport. During the past 18 months, it was used for more point-to-point trips between facilities. At my previous company, it was the only way we traveled for many months. It allowed us to keep critical projects going, specifically engineering, IT and sales. I’ve also spoken with travel managers who are chartering aircraft. I think that we will continue to see this segment grow, at least until COVID concerns go away.”
Oracle travel manager Rita Visser agrees, saying her company uses private aviation for challenging routes that required multiple stops or for quick trips to meet with clients.
Raiff said his business is now five times larger than it was in June 2019, but he has seen a shift in the need for more information. “There are a lot of apps to book a private aircraft,” he says. “But that comes with a risk travel managers are not willing to take. If you are the senior vice president of corporate travel for an S&P company, are you going to use an app to move your most valuable employees around? They want to talk to someone. They don’t want to risk their job relying on an app.”
Practicality Matters
Meanwhile, Raiff says PJS’s consulting business continues to be busy advising on buying corporate aircraft, suggesting a reversal of the trend away from corporate-owned aircraft. He sees a shift in understanding of private travel and ensuring the aircraft matches the mission as travel managers learn how to evaluate aircraft.
The lion’s share of the uptick in private aviation is with smaller turboprop aircraft used on short-haul markets under 500 miles or for smaller commercial hops such as LA to Denver, he explained. COVID has reduced the use of ultra-long-range intercontinental aircraft. It is the light and midsize aircraft that are in highest demand, a demand that has returned to pre-pandemic levels and far outstripped supply. The average mission flew 2.5 people pre-pandemic but now it is eight to 10 passengers.
“With a resurgence of business travel for same day round trips as well as interest for corporate shuttles, we also continue to see strong demand for freight services,” McCown concluded. “We predict more businesses will invest in private charters for employee health and safety. Additionally, we anticipate more interest from the meetings, incentives, conferencing and exhibitions (MICE) industry as international travel restrictions lift and companies begin planning in-person events and travel for business again.”
With businesses either increasing or discovering private travel, the rising demand certainly reflects a need for corporate travel managers and companies to expand their travel option toolbox or risk being behind the power curve.
