A flurry of announcements from private jet companies hit the wires during the week that marked the one-year anniversary of last year's terrorist attacks on the United States. While the intent was the same—to draw wary travelers away from commercial transport and to private jets—the specifics of the messages were different, reflective of a splintered industry sector offering many different models. Should corporate travel departments opt to assess private jet opportunities, they must weigh the pros and cons of fractional ownership, dedicated corporate shuttles, on-demand charters, prepaid private jet service and corporate-owned aircraft.
The private jet industry as a whole clearly has stolen high-yield passengers from commercial carriers. "We have seen lots of people who used to fly us flying their corporate jets whenever they can," acknowledged Tom Gleason, American Airlines vice president of the eastern division, speaking last month at a business travel forum sponsored by Austin Travel and the Long Island Business Travel Association.
Fractional jet ownership remains one of the fastest growing segments of all aviation and an attractive substitute for or complement to many companies' travel programs.
Forest Lake, Minn.-based The Frandsen Corp. in May began a program with fractional jet company CitationShares, a Greenwich, Conn.-based joint venture of Cessna Aircraft Co. and TAG Aviation USA. "Economically, it just makes more sense compared with owning your own aircraft," said Dennis Frandsen, the company's CEO, "and we do not have to manage anything."
About one dozen Frandsen employees regularly use one of CitationShare's Cessna Citation CJ1 aircraft, often to reach a client location just a one-hour flight from headquarters, but inaccessible by commercial carriers and too far to drive. "And we can upgrade to a larger aircraft when we need to fly longer distances," Frandsen said. "In fact, I am thinking about adding more annual hours to our contract."
CitationShares offers the five-seat CJ1 at a standard total pre-tax cost of roughly $2,600. It also flies larger Cessna Citation Bravos and Excels.
The company last month introduced the Platinum Traveler Program to meet the needs of clients requiring fewer than 50 hours of flight time per year. The program cost begins at $109,000 for 25 flight hours within a 15-month period.
Meanwhile, fractional ownership leader NetJets is set to grow even larger. Last month, the company ordered 100 new wide-cabin, high-speed Gulfstream G150 business jets worth $1.5 billion. The eight-passenger G150 will be able to fly from New York to Los Angeles nonstop. It also ordered 100 new Cessna Citation CJ3 business jets and 12 Citation X aircraft from Cessna Aircraft Co.
"Today, we offer 11 different aircraft types to choose from with six additional aircraft types being delivered in the next three years to meet the evolving needs of our NetJets owners," said NetJets chairman and CEO Richard Santulli. Additionally, NetJets last month created the NetJets Advisory Council, a group of 12 aviation managers assembled to discuss Corporate America's transportation needs.
NetJets and CitationShares are two of the largest fractional players in the industry, along with Bombardier's FlexJet and Cleveland-based Flight Options, and are expanding their customer base beyond the Fortune 500. "The fractional business is being pitched more and more to small and midsize companies," said Mike Reigel, president of Dallas-based Fractional Insider, a new corporate aviation advisory service. "Lowered barriers have made that somewhat easier." Fractional Insider estimated the market potential in the United States at more than 250,000 qualified companies and individuals
Reigel, who previously had served as vice president for FlexJet, said the fractional industry grew "on the backs of individuals and senior executives buying without anyone's input." As such, Fractional Insider launched this summer to help clients understand the industry niche, recognize "inconsistencies in business practices between the major providers" and choose the right corporate aviation model. One such model is based on the pre-paid debit card, which enables individuals and corporations to tailor a program to meet their needs. New York-based Blue Star Jets, for example, recently developed the Sky Card program, whereby clients can prepay between $50,000 and $500,000 worth of private air transportation. Users can access the company's affiliated fleet of 2,000 jets worldwide with just five-hours notice or authorize business associates to use the card.
"A lot of companies got rid of their flight departments before and after Sept. 11 to consolidate their aviation needs," said Blue Star Jets president Todd Rome. "We work with several hundred companies, more and more of which are midsize companies."
The program is similar to those at other private jet companies, including Boston-area Sentient, formerly EbizJets, and New York-based Marquis Jet Partners
(BTN, June 3).With providers expanding services and some corporations still looking to purchase their own aircraft, manufacturers are gung-ho. Rolls Royce, a major provider of business jet engines, expects market health to return to 2001 levels after a slower delivery schedule this year and next. "While the traditional market for business jets continues to dominate deliveries, we expect strong growth of the fractional business, where demand is currently outstripping supply," said Ian Aitken, Rolls Royce president of corporate aircraft, speaking this summer at the National Business Aviation Association annual convention. "We also see the supersonic business jet as a possibility within our forecast horizon."
Meanwhile, Brazilian manufacturer Embraer is set to begin delivering its new Legacy corporate jet to U.S. customers. The $20 million, 19-seat aircraft recently received final certification from the U.S. Federal Aviation Administration. When flying 10 passengers, the Legacy has a range of 3,100 nautical miles. Embraer already has delivered Legacy jets to clients in Europe and Latin America. Among Embraer's U.S. clients is Chicago-based Indigo, a company providing charter services between Chicago Midway and Teterboro, N.J.
"The Legacy is a new way of thinking that strikes an ideal balance between capability and cost, comfort and common sense," said Sam Hill, Embraer vice president for the corporate aviation market. "Its combination of size, speed, range and price represents a change in the way business jet owners will view the current competitive offerings."
Meanwhile, Eclipse Aviation is raising many eyebrows. The Albuquerque, N.M.-based company last month announced that orders for its six-seat Eclipse 500 jet surpassed 2,000, with about two-thirds now on firm order. The first of the twin jet aircraft will be delivered to customers in January 2004, assuming the Eclipse 500 receives FAA certification as planned in late 2003. Because of the jammed order books, new orders will not be filled until mid-2006. Eclipse said it would manufacture 1,500 planes by 2007.
The company touts the low purchase price—under $900,000—and relatively cheap operating costs of about 56 cents a mile. The Eclipse 500s will have a range of 1,300 nautical miles, roughly the distance between Boston and Miami.
"If any organization can get to the finish line in terms of FAA certification, I think they could, but certification costs may be higher than they thought and maintaining the fleet will be challenging," Reigel said. "In North America, the market potential for a light jet of this type is there. I am a bigger fan of the recent launch of the Cessna Mustang." The Mustang is a six-seater that sells for $2.5 million, a price Reigel called "more realistic" in terms of the manufacturer's necessary investment.