Commercial struggles offer open skies to private jet operators
The global collapse of aviation over the past year has for the most part been one long unrelenting nosedive, with the occasional moment of levelling out as much-needed respite.
As in most crises, however, there are both winners and losers, and though the big commercial airlines clearly fall into the latter category, an unlikely group think that Covid-19 could yet be a big opportunity for their industry.
For most people, private jets conjure up a life of luxury; millionaires and billionaires hopping from destination to destination on a whim.
And though there is obviously some truth in this picture, that’s not where private jet firms are setting their sights right now.
“Let’s forget this Hollywood image”, Thomas Flohr, chief executive of charter service VistaJet, tells City A.M.
“What private aviation is really about is the effectiveness of conducting business through saving time. Commercial airlines have been forced into massive cuts to their networks and their schedules, meaning it takes a lot longer to get to places now – and that has caused a very significant increase in demand for private jet services.”
For Flohr, it has taken the pandemic to convince the majority of businesses that a private jet is not a luxury, but an essential item.
“90 per cent of corporations who can afford using a business jet were previously not using one, but the combination of the destruction of commercial travel and the need to fly has proved how vital they can be”, he added.
What private aviation is really about is the effectiveness of conducting business through saving time.Thomas Flohr, chief executive, VistaJet
And for finance chiefs wary of tighter balance sheets after the past year, he says that VistaJet’s subscription service provides the perfect answer.
Instead of buying or renting a plane, clients can instead hire a jet as and when they need it – thus keeping an hefty chunk of cash off their balance sheet, Flohr says.
It seems to be working. After an initial plunge in flying a year ago, demand has gradually returned, said Flohr, with VistaJet hitting record figures in the third quarter.
Since last July, the firm says it has seen corporate interest increase by 50 per cent, with the number of flying hours sold up nearly a quarter – 23 per cent – for the first three months of the year.
For Adam Twidell, chief executive of PrivateFly, it’s a similar story, and one that has increased in pace since Boris Johnson announced a possible end to international travel bans on 17 May.
“We’re seeing businesses wanting to use private aviation to get out and see sites that they haven’t seen for a while, or property developers wanting to go and get boots on the ground”, he told City A.M..
And, he added, one of the unforeseen results of the pandemic is that firms have travel budgets which have been more or less untouched over the past year.
Before the Open: Get the jump on the markets with our early morning newsletter
This, in combination with the desire to eliminate the risk of exposing employees to Covid-19, is a potential goldmine for private aviation.
“Firms don’t want to send junior people on unnecessary trips for a while. But for the necessary trips, they’ve got a large amount of budget available so instead of using commercial flying, firms can travel in a safe manner on a private jet which is more efficient and more secure”, he said.
His thinking – and experience – goes against the prevailing wisdom, which holds that finance directors will be doing all they can to keep their staff off planes and on Zoom for the immediate future.
Twidell also agreed that the considerable reduction in commercial flying infrastructure had opened the door to more flexible private jet operators like his.
“There’s many destinations that airlines are not flying to now, or at least not flying to as regularly as they used to do. And when airlines start increasing their schedules, only the really profitable routes will be in focus. So it might be that businesses just cannot get to an area as easily as before by using a commercial operator.”
A new generation of private jets capable of making ultra long range trips, such as the Global 7500, is a further feather in the industry’s cap.
That jet, Flohr says, has a range of about 17 hours in the air. “It can basically take you nonstop anywhere around the world”, he said.
A final change that looks set to boost the industry comes in the form of changing behaviour from wealthy elites more accustomed to the private jet world.
So it might be that businesses just cannot get to an area as easily as before by using a commercial operator.Adam Twidell, chief executive, PrivateFly
Twidell explains: “We are now seeing customers who want to use only private aviation for the next year or so. Prior to the pandemic, many of our customers would flip-flop between flying private for one or two trips a year and then using commercial airlines for the others. But now these customers have said, ‘We’re not flying on an airline for the next couple of years’.”
As a result of this surge in interest, PrivateFly has taken steps to make its payment system more flexible, introducing a 25 hour jet card with fixed flying rates.
Meanwhile, over at VistaJet’s XO subsidiary, customers can now book onto individual seats on a particular pre-arrangement private service – a system Flohr describes as the Uber of the industry.
And he’s putting his money where his mouth is too. Earlier this week the firm said it would spend $1bn on new aircraft over the next two years – including a dozen new Global 7500s – as it seeks to capitalise on the growing opportunity.
“Basically every A380 in the world is parked today”, Flohr said. “We’re very aggressively building a global brand to capture the opportunity that this presents.”