Kate Sarsfield/LONDON
The corporate charter market has undergone a transformation in recent years. The industry is having to adapt to a more sophisticated clientele, now demanding a lot more than simple executive short haul operations. "International clients expect an international service. They will expect us to arrange a flight in America, Europe or China without it being unusual, like it was a few years ago," says Jamie Martin, co-owner and marketing director of UK charter broker Hunt &Palmer.
The "feelgood factor" is spawning burgeoning businesses, which are being wooed by the allure of business aircraft. For those companies without the means to purchase an aircraft, or even a share in one, chartering has become a favourable alternative. "It is no longer considered politically incorrect to hire aircraft to do business," says Alan Marler, director of operations at the world's largest charter broker, Air London. During the recession in the early 1990s "-one of the first things that a company sold was the business aircraft, considering it unethical to retain it when thousands of jobs were being lost", adds Marler.
CHANGING IMAGE
The image of corporate aircraft is beginning to change. Previously regarded as an "admiral's barge" and "rich man's toy", they are seen more as essential business tools and are being deployed increasingly in various guises.
The aircraft charter market developed out of the shipping industry, with origins in the UK Baltic Exchange. No other countries in Europe, now the largest aviation market outside North America, treated it as a specialist market. "It was only in London that you found specialist air charter, which usually developed as a sector of the shipbroking company," says Martin. Since then, it has become a major aviation force.
"It is so easy to set yourself up in business. All you need is a desk, a telephone and a few contacts," he adds. The market has been made simpler since the European Union (EU) was opened up in 1992, and full-scale cabotage was introduced in April 1997. This has given operators the freedom to transport aircraft anywhere in the EU. "We can move aircraft to where they are required and co-ordinate all of the flights from all of the countries," Martin asserts.
According to Martin, the executive charter market in Europe "-is essentially subsidised". He says that several aircraft are owned by individuals and corporations which only use them for a limited number of hours a year. They then charter the spare capacity on the open market at an agreed rate and do not pass on the full costs of the aircraft. "They only require a contribution to their costs to cover the main elements of expenditure," he says
Users of corporate charters are wealthy individuals, most of whom "-have a genuine logical need to use the aircraft", says Marler . Those in the public eye, for example, crave the privacy and flexibility that scheduled flights cannot provide. Air London, which has offices in Paris, France, Cologne, Germany and Fort Lauderdale, USA - where it is called Air Partner - was responsible for arranging executive charters for UK pop group The Spice Girls and film star Pierce Brosnan following film launches. "Many stars have tight schedules that do not fit around regular operating hours," says Marler.
CLEAR ADVANTAGES
For businessmen, the advantage is obvious. For a highly paid and invaluable company executive, hours spent at the airport and then in the aircraft are an inefficient use of time. A business aircraft can be used as an extension to the office, for executives to continue their business in strictest confidence without wasting valuable working hours. "At the end of the day, users of executive charters have enough money to make a choice. The actual cost of travel is related to an individual's wealth. If you were going from one point to another in a town, the bus will always be the cheaper option, but there will be people who insist on using a taxi instead," adds Marler.
According to Martin, the financial "road shows", or stock market flotations, are one of the most active sectors of corporate chartering in Europe. "Road shows have awakened consciousness to the idea of producing an international service using chartered aircraft," he says. When a company is floated on the stock exchange, the merchant banks are responsible for selling an allocated number of shares to international companies in a limited space of time, and they need the most effective means of air travel. "It's time critical. The people flying earn so much money for the company that they have to be back at their desks as soon as possible, so chartering an aircraft is the most convenient answer," says Martin. With privatisations taking place all over the world, Hunt & Palmer anticipates a record year. "The demand now takes us to the USA, South America and Australia. It is a highly profitable business." Revenues raised from privatisation have increased from $89 billion in 1996 to $161.2 billion in 1997. In 1998, the total is expected to exceed $170 billion. Hunt &Palmer is responsible for arranging 50 road shows a year.
Although the use of executive charter is more common, some companies are now deciding to charter airliners to promote and launch their products. For many car companies, including Nissan, using corporate charters for this end has become the norm. Recently, Air London chartered an Airbus A320-211 on behalf of the Rover Group for the launch of its Land Rover Freelander in southern Spain. Between 26 October, 1997, and 23 January, the aircraft flew 111,000km (60,000nm) and carried more than 4,000 passengers during 30 round trips from the UK alone. "The reality is that people are more receptive to new ideas and concepts in a nice environment," says Marler. Both Marler and Martin believe that the cost of placing any new product in the marketplace is getting higher. "The lead time before the copycat arrives is getting less, so that we have to recover the costs in a much quicker timescale than before," says Marler.
With the "feelgood factor" returning to Western economies, the rise in leisure flying is becoming apparent. "People are relaxing their purse strings and chartering an aircraft just for the sake of it," says Marler. Although it is unlikely to become as widespread as in the late 1980s, the "frivolous" use of chartering is an increasingly lucrative sideline for brokers and operators.
Chartering has its drawbacks, however. For instance, chartered aircraft lack the individuality and cachet that private and fractionally owned business aircraft can offer. "Owning or having a share in a private aircraft can be an enormous status symbol, rather like owning a racehorse," says Martin. For others, the sheer expense of chartering, or some would have it, lack of education, is the main deterrent. "You cannot compare flying on a business jet to flying on a scheduled airline service - it will always be more expensive," says Marler. Providers of scheduled services have the advantage of being able to plan ahead, so they are able to obtain the right infrastructure that they require at airports, including handling and fuel contracts. They are rarely affected by limited slot availability. The majority of charter flights are ad hoc ones and it is becoming increasingly difficult to obtain slots at certain times of the day, which is a growing cause of concern for many operators.
The main culprits, according to Martin, are London's Heathrow and Gatwick airports "-which are making life intolerable for business aircraft users", along with Germany's Frankfurt Airport, Madrid Airport in Spain and Amsterdam Schiphol Airport in the Netherlands. "Many airports are becoming complete non-starters for business aircraft," he adds. The situation is unlikely to improve at the major airports, but Martin believes that there is a plethora of alternative regional airports available that provide a service equal to, "if not better than, the popular hubs".
THE FUTURE
Charter companies are actively marketing several geographical regions. According to Theo Staub, vice-president and general manager at Zurich, Switzerland-based charter operator Jet Aviation, the CIS is becoming a highly lucrative market. "There are Russian entrepreneurs who can afford to hire a corporate aircraft for business purposes," he says. For Martin and Marler, however, China has the strongest pulling power. "The Chinese population has only just been allowed on a weekend break. Until recently, a Chinese man and wife very rarely had holidays together, which brings enormous potential for air traffic out there for leisure and for business purposes," says Martin.
He notes however, that the governments are so determined to protect their own scheduled carriers that they are known to be actively discouraging charter operations. "We will wait until the situation eases and there is more of an open skies policy - as business deals get done, corporate aircraft will become an accessory to that deal," he asserts.
These plans depend on the effect that the economic downturn in the Far East will have upon businesses in the rest of the world. According to Marler, the shock waves are now being felt, and he fears that the situation is unlikely to improve for some time. Many multi-national companies in the Far East are now selling their business aircraft and flying their executives by scheduled airline. "They are not chartering aircraft any more, it simply creates the wrong image," he says.
Source: Flight International
