Pax flocking to charter and fractional operations

 - October 3, 2007, 4:36 AM

“Business has been very strong, but for all the wrong reasons,” said aircraft purchase broker Drew Callen, president of Boston JetSearch, which is based at Hanscom Field in Bedford, Mass. “There has been a surge of new inquiries for fractional shares and wholly owned business aircraft of all types. Also, many buyers who were on the fence have decided it’s time to take action.”

It’s a story oft repeated around the country. Charter operators, aircraft brokers and fractional providers are hesitant to appear as though they are profiting from disaster, but the fact remains that September 11 has boosted demand for business aviation. At a time when many business travelers have shied away from airlines, business aviation has been there to take up the slack.

The economic news has not all been good, however. The airspace shutdown directly following September’s attacks pushed many charter operators and other aviation businesses to the brink of fiscal disaster. Ed Bolen, president of the General Aviation Manufacturers Association, told Congress, “Much has been made of economic losses the nation’s commercial airlines suffered as a result of the attacks. But general aviation companies have suffered as well. Many of these companies are too small to have significant cash reserves, are not publicly traded and do not have access to capital markets. They have been denied access to airspace for weeks, not days.”

National Air Transportation Association president Jim Coyne said, “NATA estimates that its member companies have lost approximately $300 to $400 million and have been forced to furlough thousands of employees since this tragedy.” At the same time, the NBAA also supports government relief. NBAA president Jack Olcott said, “Losses at some FBOs have reached $100,000 per month on fuel sales alone, while smaller management companies are facing possible bankruptcy.”

BBA Aviation, parent company to Signature Flight Support, furloughed 750 employees, 15 percent of the workforce at its newly acquired Aircraft Service International Group subsidiary. ASIG specializes in airline refueling and the furloughs were attributed to “the current drop in demand for air travel,” according to BBA Aviation president and CEO Bruce Van Allen.

The industry lobbying groups are hoping for federal relief as part of the so-called General Aviation Small Business Relief Act of 2001 (H.R. 3007) currently being presented to the House of Representatives. Under the bill, general aviation businesses would receive funds from the government for losses sustained as a result of the airspace shutdown.

At the same time, conversely, demand for services among surviving companies appears to be soaring. For example, charter broker and management company FlightTime of Waltham, Mass., is fielding significant increased interest in its corporate shuttle program. Company chairman Jane McBride said, “Executives at companies around the country have called us in recent weeks to discuss how charter flights can make employees feel more comfortable about flying. They’ve shown interest in our corporate shuttle program because they want their employees to feel a sense of community while on board the aircraft.”

Air Charter Guide, publisher of print and online directories of some 20,000 charter providers worldwide, sampled its constituency to find that 80 percent of the 74 respondents reported increases in business-related bookings. Among those, the average increase was 40 percent. All respondents reported increases in inquiries and requests for quotes. Nearly half the respondents said they had flown at least one trip in the previous 10 days for a customer who had never used charter before. Fred Gevalt, president of Air Charter Guide, said, “Interest is up for all operators and brokers, and for many of those that interest is converting to increased business.”

To help allay fears about the security of traveling on charter flights, Skyjet, a subsidiary of Bombardier Aerospace, instituted new security procedures for all charter flights. The company now requires customers to provide a complete passenger manifest at the time of the reservation confirmation. Passengers must present photo identification to the flight crew before boarding.

Skyjet CEO Trevor Cornwell said, “Business aviation traditionally has focused on providing privacy for customers, but the charter industry is now quickly responding to a changed environment and greater emphasis on tight security.” He added that Skyjet and many other charter providers have new security procedures, including parking lot restrictions, new passenger drop-off and pick-up procedures (no more cars on the ramp), flight crew identification and luggage inspections.

All the major fractional providers report increases in inquiries, if not outright sales of shares. Flight Options president and CEO Kenn Ricci said interest levels had tripled since September 11. The groundings directly after the attacks had a minimal effect on the company’s financial status, he said, since the hourly operating fees are not as critical to revenue generation as are sales and collection of monthly management fees.

NetJets, Flexjet and Travel Air are all said to be experiencing increased interest since the attacks, though none have released specific information about shares sold. A spokesman for Executive Jet told AIN shortly after the attacks that it would not be in good taste to appear to be profiting from a bad situation. “We’re doing well,” he said, “but for all the wrong reasons.”

Observers agree that much of the influx in interest in business aviation comes as a result of an aversion to flying on airlines. The image of airliners full of passengers crashing into buildings is a powerful fear generator among the flying public. The long-term question for business aviation is how long the surge of interest will last.

While the airlines hope that the horrific memories fade quickly, business aviation service providers must try to gauge how best to influence those who may have turned to their services for the first time. Statistics show that large numbers of business travelers have been exposed to business aviation as a result of the attacks. It remains to be seen how many will stay in the fold.