Flying on Private Jets

Using private jets for business is making a quiet comeback.
As post-recession business travel revives, one exclusive segment of that market is also making a comeback—but discreetly, since it acquired an unseemly reputation during the down times. One aviation executive blogged that it had become “akin to maintaining a mistress on the side.”
We’re talking about private jet travel. Pre-2008, it was booming and said to be on the verge of a revolution thanks to new, low-cost “very light jets” (VLJs) that would make air taxi service more affordable and ubiquitous. But then the roof caved in.
The biggest blow came in November 2008, when ABC News reported that the CEOs of Detroit’s Big Three automakers, appearing before Congress to discuss a bailout, flew to Washington in company jets. The public outcry over this perceived corporate excess led GM and Ford to close their flight departments and start selling off their planes. Other companies followed suit, as the private jet acquired a PR taint as dark as corporate retreats at posh resorts (the so-called “AIG effect”). Moving into 2009, there was a glut of business jets on the market, pushing used aircraft prices down by as much as 50 percent.
The collapse of financial markets also postponed the air taxi “revolution” promised by VLJs. One manufacturer, Adam Aircraft, went out of business. In 2009, a promising startup VLJ operator called Pogo, headed by former American Airlines CEO Robert Crandall, was dissolved before it got a single plane in the air; and Sir Richard Branson’s Virgin Group closed down a two-year-old business jet booking operation called Virgin Charter...


Manufacturers’ deliveries of business jets fell 12 percent last year, but “shipments have traditionally lagged an economic recovery by one to two years,” says John Rosanvallon, chairman of the General Aviation Manufacturers Association. Moreover, “flying hours are steadily on the rise, and there are two critical U.S. tax provisions in place that will help our industry recover.” One is the extension of a 50 percent bonus depreciation allowance through 2011; the other allows companies to deduct the full cost of new planes from revenues.
There’s still an oversupply of used business jets, but companies don’t need to own jets for their executives to fly in them; there are plenty of other options—fractional ownership, jet card programs for prepaid flying by the hour, charters—and business travelers are using them more. Mike Silvestro, CEO of Flight Options, which offers fractional ownership and jet cards, says his business “is certainly experiencing an increased level of interest from former whole aircraft owners.” This year, he’s seeing “strong growth in fractional ownership”—unlike in 2009, when jet cards were more popular. Still, “private [jet] travelers today are more value-conscious,” Silvestro says.
FAA statistics show the number of U.S. business jet flights grew 11 percent in 2010, after plunging 20 percent in 2009. And providers of private jet services are expanding: In March 2011, NetJets (owned by Warren Buffet’s Berkshire Hathaway) placed a $2.8 billion order for 50 new Global business jets from Bombardier, with options for 70 more; last fall, it ordered up to 125 Phenom 300s from Embraer—and it bought Marquis Jet, a marketer of private jet cards. Also in March, CitationAir by Cessna added six 604-mph Citation Xs—which it calls the fastest business jet in the sky—to its fleet of 81 jets, targeting “busy executives and business travelers who often need to be in multiple cities within a compressed timeframe,” a spokesman says. XOJET has added to its fleet as well and has hired 45 new pilots.
Major airlines are also getting in on the action. Last year, Delta’s Delta Private Jet charter subsidiary doubled its fleet size and introduced the Air Elite Card: Holders can book Delta flights and connecting private jet segments in a single call. As of 2010, British Airways Executive Club members could access business jet flights on both sides of the Atlantic through BA’s PrivateConnect partnership with CitationAir by Cessna. Passengers on Korean Air’s U.S. routes who are Flexjet fractional owners can now use the airline’s Flexjet Connect for private jet connections. Lufthansa is expanding its Lufthansa Private Jet service—aimed mainly at first class passengers connecting in Europe—through a new partnership with NetJets, and will bring the service to the U.S. and Mideast markets this year.
New technology is aiding the revival. A new online booking tool called flyRuby (flyruby.com) recently launched, using artificial intelligence to scan thousands of available aircraft for the best match to the traveler’s itinerary and desired aircraft size. And GetThere, the Sabre Travel Network subsidiary used by thousands of companies for business travel bookings, partnered with JetUs LLC to offer a web-based reservations tool with real-time availability for private jets worldwide. Flying privately is not only more flexible, but also addresses “fiscal responsibility due to the productivity gains often associated with this mode of air travel,” says JetUs vice president Jennifer Wetstein. (Speaking of productivity, business jets are increasingly offering in-flight Wi-Fi.)
A study last fall for the National Business Aviation Association found that small and midsize companies that use private jets produce a 219 percent higher earnings growth rate than those that strictly fly commercial. The study’s author, NEXA Advisors’ Michael Dyment, says the research’s “remarkably consistent results” suggest that “for any company, business aviation is a clear differentiator of shareholder value creation and business performance.”