Carriers Using Corp. Jets

Commercial airlines are pursuing new initiatives designed to derive additional revenue from their best customers in the form of pseudo-corporate shuttles and private jet service.

The newest such effort comes from Lufthansa German Airlines, which later this month will launch six weekly nonstop jet flights with business-only seating between Dusseldorf and Newark. The service, currently the only of its kind on an intercontinental route, is a departure from the advancing European trend of lower-fare offerings from commercial air transport providers. Though sticking with the regularly scheduled commercial service model, the focus is clearly on premium-paying business passengers.

Meanwhile, even as United Airlines disbanded highly publicized corporate jet unit Avolar, Delta Air Lines, Atlantic Coast, Air Canada and other commercial airlines were pushing into the lucrative realm of private jets in hopes that the high-touch approach would pump up sagging revenues.

Mathias Friess, Lufthansa North American director of sales, said the needs of corporate accounts in New Jersey and Pennsylvania were "the driving force" behind the carrier's decision to dedicate Boeing Business Jets—reconfigured 737-700s with 48 seats—for resumed Newark-Dusseldorf service. "Although we did not target Manhattan companies, we think the product is so unique and attractive that it will bring corporate travelers in from the Manhattan market," Friess said, noting that Lufthansa sales reps soon will be visiting such accounts.

"We have seen a trend of many corporate accounts using more corporate jets. But we think many of them will swing back to old spending patterns," Friess explained. "As a result, we have combined the amenities and comfort of corporate jets with the flexibility of a global network." Lufthansa, however, will not offer deeper corporate discounts, relying instead on the product, frequency and connection options in Dusseldorf, either on flights to other German business destinations or to European cities served by high-speed rail.

The six weekly transatlantic flights will be operated in conjunction with Geneva-based charter provider PrivatAir when it launches June 17.

"It is a very interesting concept and seems to make sense when seats in the back of the plane can't sell for just a few hundred dollars," said a travel manager at one of Lufthansa's New Jersey-based corporate accounts. "We have to look at this in the larger context of our program, and I don't know what the right price point will be, but it wouldn't surprise me if we try it."

Friess said Lufthansa will consider expanding the program to other U.S. cities if the Newark route proves successful because "many markets in the U.S. have similar corporate travel patterns and catchment areas."

Though several U.S. and foreign carriers offer connecting service between Newark and Dusseldorf, Lufthansa currently is the only one offering nonstop service. Continental's nonstop flights were discontinued after Sept. 11.

Stateside, Delta Air Lines is the largest U.S. carrier currently operating a growing corporate jet operation. Delta AirElite Business Jets is leveraging purchasing power and operational expertise from its mainline parent. Unlike United's now-defunct Avolar, it is not focusing primarily on fractional ownership but instead offering traditional chartering and corporate aircraft management services that can be elements of a larger Delta corporate contract.

"Our goal is to be a one-stop shop for our customers," said Mike Green, the company's president and CEO. "We are looking at corporate sales agreements that bundle together all our services, including mainline Delta tickets."

Delta AirElite currently operates roughly 100 aircraft for traditional chartering, with a year-end goal of 200. To increase charter aircraft availability, the company is developing the Delta AirElite alliance program, which will link with other charter operators. Delta AirElite also offers a turnkey management solution for privately owned aircraft that can include chartering corporate jets when not in use.

"When a company has its private aircraft certified as a Delta AirElite charter, it makes it more efficient for that company to keep that aircraft and better utilize the assets," Green said. "Those companies would hate to make the decision to reduce capacity or close their flight department and then find out down the road that they really need it." Green said a flight department from a Fortune 50 company and a handful of smaller companies already have enlisted and many others are engaged in discussions.

Delta AirElite has a few programs in the pipeline, including corporate shuttle operations. It also is working on loyalty and incentive programs for charter and aircraft management customers, the first of which could launch this spring, as well as a prepaid card program that potentially could be part of larger corporate sales agreements by the third quarter.

Meanwhile, smaller carriers also continue to explore corporate jet operations as a way to generate incremental revenue. Atlantic Coast Airlines this spring finalized a regularly scheduled shuttle operation dedicated for a corporate client. The service, which uses 32-seat Fairchild-328 jets, provides multiple daily frequencies between its Washington Dulles Airport home and the New York area. "We believe there is potential, especially from our home base, to cautiously grow this business," said CEO Kerry Skeen. "We have had a lot of inquiries come our way and think we have the ability to stick our toe in the water pretty easily." Atlantic Coast Airlines said the shuttle service is "not ultra-exclusive," but rather a comfortable, reasonable approach not at all affiliated with codeshare partner United.

However, labor and financial difficulties at ACA's aircraft manufacturers—Bombardier and Fairchild Dornier—may jeopardize the carrier's corporate jet offerings, at least in the very near term.

Midwest Express Airlines also said that it continues to evaluate corporate jet operations after several clients expressed interest. Though some corporations that initially were enthusiastic have since backed away, a carrier spokesperson said "some have decided it still is a good fit." Midwest Express in 1984 began as a corporate shuttle operation for Kimberly-Clark before evolving into a commercial carrier.

Aside from Lufthansa, other foreign carriers also have tinkered with possible corporate jet operations, including British Airways and Virgin Atlantic Airways. Air Canada's AC Jetz division, which launched last October, already has provided incentive travel for several corporate clients, including Bank of Canada and Labatt Breweries, according to an Air Canada spokesperson. The private jet operation has its own corporate salesforce and recently "sent out feelers" to assess opportunities for U.S.-based clients. AC Jetz uses reconfigured Boeing 737s in an all-business class format.

It remains to be seen how effective private jet units within key airline suppliers will be in attracting business from corporate clients. Though United's Avolar claimed to have generated more than $500,000 in revenue by early spring, it could not find outside investors and was forced to pull the plug.

Delta AirElite's Green acknowledged uncertainty about whether short-term interest in private air transport generated by Sept. 11 will translate into long-term business.

"No matter how you cut it," he said, "it still is an expensive alternative to traditional commercial air transport."