Skyjet Study Uncovers Corp. Charter Possibilities

<B>Skyjet Study Uncovers Corp. Charter Possibilities</B>

By David Jonas

Despite a shaky economy that on the surface suggests diminishing usage of chartered aircraft, a new study released today by Skyjet uncovered numerous routes where small groups of travelers can travel more cheaply on charters than on regular full-coach fares.

Though price savings become more apparent when examining first-class fares available from commercial carriers, the study concluded that numerous fare hikes have brought charter "within reach of more business travelers paying full-coach fares." Overall, the study revealed that full-coach fares rose 22 percent during 2000 as compared to charter industry prices, which edged upward only 3 percent.

Skyjet, a Washington-based online charter reservations company, commissioned New York-based Harrell Associates to compile both published first-class and full-coach fares across 925 routes as a means of comparison to charter prices available in the market. Fares were collected between January 2000 and January 2001 and included most of the top 40 U.S. markets and a smattering of routes to and from smaller cities. Fares offered by the dominant carrier on each route were selected.

In attempting to identify "where the potential exists for air charter to reach parity with airline fares," the study, "Closing the Gap: Skyjet Airfare Study," acknowledged that corporate discounts often come in well under published fares. However, those discounts may not apply for all last-minute travel and, of course, are for increasingly crowded and delayed commercial flights. Indeed, the charter value proposition is enhanced when taking into account traveler productivity.

Of course, individual charter travel usually is reserved for the most senior members of a company's management team. And while Skyjet found that first-class travelers unfamiliar with private flights as a group would be willing to pay a $400 premium for private jet travel, corporate travelers in the United States increasingly are required to fly coach.

As such, charter flights are not financially feasible until several travelers are grouped together, thereby lowering the price per passenger.

In fact, Skyjet found that charter flights are directly competitive with certain shorter, high-cost airline routes when several employees travel in tandem, particularly on the 25 routes with the highest cost per mile. According to the study, "the 'break even' point for charter on these flights, including both full-coach and first-class fares, is generally when three people travel on a six- to eight-passenger turboprop and when four or five people travel on an eight-passenger small jet."

Short-haul routes in general offer the greatest savings for corporations, attributable to higher costs per mile for the major carriers. Four employees traveling together on the Chicago- Cincinnati route, for example, would save $551, comparing the published full-coach fare to average charter jet prices compiled by Skyjet. Several other city pairs offer some level of savings or a charter premium of a few hundred dollars or less. The chart, left, shows 10 markets with the largest savings or smallest charter premium on private flights for four travelers.

Several other markets showed continued high charter premiums, often thousands of dollars above published full-coach fares, especially for jets versus turboprops. Those routes include Portland, Ore.-Seattle, Los Angeles-San Diego, Houston-San Antonio and Chicago-Detroit.

Nevertheless, Skyjet said the air charter industry moving forward will be able to uncover cost savings opportunities on shorter routes that have particularly higher cost per mile commercial airfares.

The study showed the effect of Southwest Airlines, in that nearly all routes showing decreases of 5 percent or less were within Texas. Furthermore, in analyzing share of lift at major hub airports--with data provided by Travel Analytics--the study found double-digit price increases for nearly all airports, except those dominated by Southwest, Houston Hobby and Dallas Love Field, where prices grew by only 3 percent.

Departure airports with the largest fare increase for full coach were Charlotte at 38 percent, Portland, Ore., at 37 percent and Philadelphia at 32 percent. These results, when including the 29 percent increase at Pittsburgh, suggested that "US Airways in particular was able to use its dominance."

Skyjet last month introduced Personal Fleet, a customizable virtual fleet program. Corporate travel departments create their own fleet, based on their needs, while Skyjet negotiates preferred rates with operators and provides a dedicated account manager and concierge services.

CEO Trevor Cornwell acknowledged that charter industry demand decreased in January and February, but said Skyjet continues to show growth.