Avinode sees strengthening market for charter

 - March 28, 2011, 10:45 AM

Light jets are losing market share in Europe, falling from 32 percent of the continent’s charter market in 2008 to 26 percent last year. However, according to Magnus Henriksson, business manager with online charter portal Avinode, there are exceptions to this trend. Most notable among these is Cessna’s Citation Mustang, which went from being European customers’ 10th most popular model in 2009 to the number-three position last year. He also predicts that Embraer’s new Phenom 100 and 300 will have a big impact on the market over the next 12 months.

At the same time, Avinode sees larger jets gaining in popularity, with Bombardier’s Challenger 604 and 605, as well as Embraer’s Legacy, leading the way.

According to Avinode data, average total charter trip values were fairly stable in 2009 and 2010, after a big fall from 2008 levels. “The average trip length also dropped and then stabilized,” said Henriksson. “There is more price consciousness in the market.”

More Efficient Operations

Another European trend identified by Henriksson was that operators whose core business is charter–as opposed to those private management firms who just dabble in it when their owners aren’t flying–will be more active in marketing their fleets. The move away from having fixed home bases for their aircraft will reduce positioning flights and motivate more aggressive selling of empty-leg movements and more one-way pricing. Overall, Avinode expects to see further decreases in charter prices and a greater impact on yields from currency fluctuations.

“Revenue isn’t decreasing but people are realizing they have to use their assets more carefully,” said Henriksson, speaking at the recent Corporate Jet Finance conference. “This will lead to a situation where the total global fleet will be much more efficient, in the airline way, staying away from stupid positioning. There will also be more unified fleets with fewer types.”

“We are also predicting a really strong summer,” said Henriksson. “Last year was better than we expected, with a good summer and autumn, and we think there could be an additional 5 to 10 percent growth in 2011.”

Demand for private and executive charter showed signs of strengthening at the start of March–perhaps buoyed by increased bookings for flights to evacuate people from North African and Middle Eastern countries where there has been violent political unrest. According to the latest forward-looking index from online charter portal Avinode, projected demand for the 30 days from March 1 stood at 110.56–20 points up on where it was on February 1, and almost 33 points ahead of the index 12 months earlier in March 1, 2010 (see demand index chart).

The forward-looking price index also gave charter operators grounds for optimism. The March 1 indices for the whole world, for Europe and for the U.S. market were all slightly up on a month earlier at 99.09, 96.55 and 99.62, respectively (see price index chart).

However, the data for current (rather than projected) flight hour rates gave a mixed picture, with significant geographical variation. In North America, average rates for three selected aircraft types were down both on a month ago and on three months earlier (December 1). The flight hour rate for a Cessna Citation Excel fell by around €99 ($136) over the past month to €2,287 ($3,133), while the average rate for a Hawker 800 was €70 ($96) down at €2,436 ($3,337) and that for a Bombardier Challenger 604 was down €48 ($66). But in the international marketplace, rates for the same three aircraft increased on both last month’s figures and those three months ago by between €42 ($58) and €157 ($215). The average rates on March 1 were as follows: Citation Excel, €2,816 ($3,858); Hawker 800, €3,115 ($4,267); and the Challenger 604, €4,812 ($6,592). o