Kate Sarsfield/LONDON
An online revolution is underway across the business aircraft charter market. Barely a week passes without a new service emerging with a catchy title and impressive site, tempting travellers to purchase their special brand of charter magic across the internet with just the click of a mouse.
"Booking charter online is a simple and faster alternative to picking up the phone and calling your broker," says Jane McBride, chief executive of FlightTime.com, a Boston, Massachusetts-based online reservation company and online charter specialist. McBride believes the online approach benefits both user and provider: "The internet has slashed the price of finding an available aircraft, and has reduced a search to a few clicks and a few minutes that previously involved many phone calls, faxes and waiting time for the reservations to be confirmed. For the provider, it can weed out timewasters and is far less expensive to run [than conventional brokerages]."
According to the industry source book, the Air Charter Guide, total charter jet hours increased on average by 12% in each of the first six months of this year, compared with the same period in 1999. Within the previous 12 months to July, it says, charter hours increased from 56,702h to 63,966h, and aircraft used for charter soared from 1,458 to 1,523.
The fledgling online charter movement is gathering pace, finding acceptance with established charter companies and fractional ownership schemes, such as Executive Jet's NetJets programme, the largest charter customer in the USA. But the financial impact on the overall charter market appears to be minimal - although a breakdown of charter hours booked online is not available. Trevor Cornwell, founder and president of pioneering online charter company Skyjet.com, explains: "The US charter market creates around $1.3 billion a year in revenues. Currently around 1% of travel is booked online. This $10 million a year is only the tip of the iceberg."
Cornwell established his Washington DC-based venture in 1997 to promote business aircraft charter and recast its image as a well-respected and sought-after transport solution for the business traveller. In July, Skyjet was snapped up by the third largest business jet manufacturer, Bombardier. Says Cornwell: "By getting smart and developing the charter market, it has the potential to become a $17 billion industry."
Niche markets
Online charter companies are tapping into the growing market of disgruntled airline passengers and the deteriorating airport infrastructure to target research and marketing campaigns. FlightTime's McBride notes: "Our research shows that most complaints focus on delays that cause travellers to miss meetings, waste time in airport terminals or have to go through numerous transfers and indirect travel routes."
These misfortunes have spawned opportunities for online providers to diversify beyond the archetypal reservation service, with which they are commonly associated, into specialised areas, such as block charter, fractional ownership, auctions, high end business charters, scheduled public charter and corporate shuttles. McBride says: "The market is changing and we don't want to be seen as an online broker, but as a charter provider."
FlightTime has exploited a gaping niche in the large corporate shuttle market, and in March signed up pharmaceuticals giant Proctor & Gamble as the launch customer for its so-called Global Programme. Acting as a private airline, FlightTime manages and co-ordinates a 56-seat corporate configured Airbus A320-200, which operates four times a week between Cincinnati and Brussels. Such is the interest in the service that FlightTime anticipates its Global Programme will represent around 50% of its overall business activity as a number of other corporations are signed up over the next few months. In August, FlightTime formed an "informal and non-competitive" strategic partnership with Airbus Industrie and its airliner remarketing division, Asset Management, to place the A319 Corporate Jet, A310 and A320 in service with large international corporations as executive shuttles.
In a separate move, FlightTime.com simultaneously linked with Switzerland-based operator PrivateAir to promote their transatlantic services, offering a Gulfstream IV-SP, a Boeing 737-300, a 757 and three Boeing Business Jets. McBride explains: "While Airbus and PrivatAir will supply the aircraft, FlightTime.com will supply the charter management services, such as contracts for ground handling, fuel catering and customer service." She adds: "Corporations can get access to the aircraft either through outright ownership, leasing or financing."
Unscheduled charter
As technology and demand streamline access to large corporate jets for multinationals, new online companies are emerging to sell individual seats on business jets for the equivalent of a full airline coach fare through a network of scheduled services.
Flightserv.com began selling seats on chartered light and mid-size business jets in April between Atlanta's DeKalb Peachtree Airport and New York Teterborough. Rival Indigo, owned by New World Holdings, kick-started its exclusive brand between Chicago Midway and Teterborough last month, selling tickets on a company-owned, six-seat Dassault Falcon 20. Indigo president Matt Andersson explains: "Small business jets are available only through purchase, fractional ownership or charter, yet each of these channels is prohibitively expensive, costing several times the price of even the most expensive commercial airline seat on a comparable route." The market for a scheduled business jet service, he says, is located at the "intersection of the commercial airline and private air carrier markets and taps both sources for customers".
By aligning its fare structure to the unrestricted domestic coach class ticket on an airline, Indigo anticipates gaining access to the $34 billion frequent business traveller market, thus "enabling penetration of potentially lucrative routes that are too thin to support a regional jet platform". A one-way airline fare, for example, between Chicago and New York is $659 compared with around $600 for a seat on a non-scheduled business jet on the same route.
Indigo's venture appears to be surging ahead, with plans to add two more company-owned Falcon 20s to its fleet by the end of the year and one every 30-45 days throughout 2001. The Chicago-based venture will operate initially within a region bounded by Chicago, Boston and Atlanta, serving 30 cities with up to 50 aircraft. Plans call for nationwide expansion. The product is sold through stakeholder American Express' travel services operation, as well as through the internet and travel agents. System-wide profitability, to cover even its start-up costs, is expected within 12 months.
Flightserv, meanwhile, had plans to establish 100 city pairs for its Private Seats programme by the end of the year, but shelved them due to lack of demand and capital. While the Altanta to New York route will remain open for now, the Atlanta-based company is shifting its focus towards the more traditional tourist-class market to generate reliable revenue.
Indigo believes Flightserv's model cannot be sustained as it relies on demand aggregation, using an internet portal to increase demand for charters and then outsource the resulting extra capacity. For an on-schedule service to succeed, Andersson believes, the provider must have complete control of the product, like Indigo, with assets dedicated exclusively to public charter.
Skyjet.com's Cornwell agrees: "It is very hard to accumulate enough demand to fill six-seat aircraft [and cover your costs], especially when you are competing with the financial muscle of the major carriers, whose reconfigured regional jet will offer a first-class service as well as frequent flyer programmes." He adds: "By asking people to move across you are also asking them to abandon a currency [air miles] that has come to mean a lot, such as a free family holiday."
Incentive lure
Targeting the domestic coach fare passenger, unfamiliar with business aircraft travel is gimmicky and naïve, Cornwell asserts, adding: "You have to pick the low hanging fruit first."
Skyjet, which next year plans to claim the title of number one charter customer from Executive Jet, is targeting three consumer groups for its online charter service: Fortune 500 companies, high net-worth individuals and serious first-class customers, who travel over 100,000 miles a year. Cornwell emphasises: "You have to create an underlying product that is outstanding. Online charter companies must learn what first-tier charter companies have learned: a $30,000 purchase cannot just be OK."
Skyjet is planning to launch a loyalty programme to its "premier customers" later this year. Dubbed SkyClub, the programme will be similar to airline frequent-flyer programmes, which provide customers such benefits as block charter hours or regular one-off flights. Skyjet plans to offer a variety of attractive elements to reward customers for using the service, such as discounts and free upgrades from a narrow to a widebody aircraft. Cornwell notes: "We will bear the cost of these incentives [which] will enable us to give value to aircraft charter in the USA and make it a viable alternative to fractional ownership and airline travel".
Cornwell's position is supported by FlightTimes, which began its air charter miles incentive programme across its range of products. FlightTimes' McBride adds: "Our miles can be redeemed against flights on US carriers American, Continental and Delta as well as against rental cars and hotels, although we hope to offer additional services soon."
Both pioneers acknowledge, however, that incentive programmes, while making strides in the right direction, will only serve the business traveller and, subsequently, the online charter market once a satisfactory aircraft reservation system is in place. Cornwell admits: "There are two races going on. The first is to see who can become the savvyest marketeer and the other for technical excellence."
Availability challenge
Online charter providers believe unequivocally that the lack of aircraft availability is the biggest challenge facing their market and poses an obstacle to growth. "It is a challenge now, but what is going to be like when we are dealing with 100 times this level of demand?" asks Cornwell.
As much as 25% of all aircraft booked online at any given time may not be available, suggests Gary Schneidman, vice president of online database company Air Charter On Line. He says: "A customer can book a [Bombardier] Learjet 31A on line only to find the same aircraft was booked 20 minutes ago."
Schneidman established an online database in 1997 which locates aircraft and processes requests for brokers and operators. Air Charter On Line now has 200 operators on its system, of which around 85 provide aircraft availability. Schneidman warns: "You will never capture 100% availability, as so many operators still use the [conventional] white board system and have no electronic software." There must be an incentive for operators to update their availability. He adds: "If they know your database can guarantee business and will process requests from serious bidders, they will take notice."
Air Charter Guide has developed the charter industry source book online. It claims to have more scheduled availability of charter aircraft in the USA and Europe than any of the increasing competition. By using data from US Federal Aviation Administration air traffic services, the site displays the real-time location of around 1,500 aircraft and, according to Air Charter, is updated every two to three days.
International charter broker Air Partner is watching its online counterparts from the sidelines, believing current systems are inadequate. "There are several functions that pretend to offer live and accurate availability, but the information is not updated often enough," says Air Partner director Alan Marler. "The only way it can be done," he adds, "is to get the operators on your side or to employ a dedicated team of people, whose sole job its to contact these companies. But this is costly and time consuming."
Internet intelligence
Skyjet's Cornwell admits: "In order to aggregate supply we have to use the internet in a more sophisticated and intelligent way. The challenge is to create a technical product as smart as talking to a human being but faster and offering more choices." Skyjet has created a dedicated software package to "make it as easy to book a business jet as an airline ticket". To aid this process and increase efficiency and service quality, Skyjet is strengthening relationships with its suppliers. "We are encouraging a two-way flow of information to enable us to ascertain where the peak demand is on a given day," Cornwell says. "As operators update [aircraft movements] into the system, information can be provided on a systematic rather than anecdotal basis."
FlightTime plans to be first to hit the market with a seamless "end to end" live data feed offering up to 100% real-time availability from around 1,000 operators, through its enhanced Mach 1 software. McBride boasts: "We understand the way charter operators work and are building an indispensable, easy-to-use tool which will become an everyday part of their business." Details remain under wraps until the system is unveiled - which is expected in the next few weeks. Cornwell concedes that the industry's inability to produce a strong live availability database has kept the online charter industry at the meagre "1% mark".
The next 12 months will be critical for the industry, he believes, as first-tier charter companies, such as Raytheon Aircraft Charter and Management and Executive Jet scramble on board. He concludes: "Many of the companies that have been established will either go out of business, become marginalised or be acquired in a wave of consolidation. The handful of[specialist] companies remaining, combined with a sophisticated reservation system, will drive the charter industry towards its $17 billion goal."
Source: Flight International
