Summary
In spite of the drubbing that business aviation has received in the general press as a result of the auto industry CEOs jetting separately to Washington, a rebirth is coming. Private aviation already offers compelling advantages in comfort, convenience, and flexibility; but it is a very costly service. New service delivery and pricing models will be required to attract new customers needed to jumpstart growth. Since the existing charter industry is very fragmented and loosely managed, there is much room for improvement. The net result will be lower prices, better service, and increased use of private aviation. However, it will never be a serious threat to the airlines for mass-market transportation: the most optimistic projection of private aviation is that it will be 2% of the total air transport market by 2020.
Analysis
Private aviation got a black eye when all three auto industry CEOs flew private jets to Washington for their hearings last December. But it won't stay down for long. Once the recovery starts, business flying will increase faster than the overall economy because:
o Private jets offer access to thousands of uncrowded airports that are convenient to major business centers;
o Private aviation offers access to many communities that are either poorly served by airlines or not served at all;
o Airlines are cutting back on service, reducing options for travelers;
o Private flying allows for customized direct service, while avoiding the indignities of long lines at crowded airports and the TSA.
In spite of these advantages, the air charter industry suffers from two serious weaknesses:
o Its service is very costly (roughly 10 times the cost of a full coach airline ticket), and
o It is inefficiently managed, with low aircraft utilization that partially drives the high costs.
To be successful, private aviation (air charter) needs new business models. A number of entrepreneurs are trying variations on the charter business with fractional ownership, air taxi (one-way, point-to-point, on-demand service), internet marketing, and many others. In view of the inefficient aircraft schedules produced by most air charter operators, new methods are especially needed for scheduling and logistics management. Success in these areas will allow price points to drop, enabling further growth.
More efficient business models will also drive the Part 91 (corporate) operations to near extinction. It makes no sense to own a fleet of corporate aircraft if a charter operator can deliver the service more reliably and less expensively. The advent of new scheduling solutions will improve efficiencies to the point where Part 91 will not be economic for most companies.
The battle of the private aviation business models will play out over the next decade. Like any gold rush, most will fail; some will do OK; and a few will make a lot of money. Whatever model or models wins, the result will be more choices and more convenience for travelers, which will enhance the value of private aviation in the economy.
