After Two Difficult Years, Charter Companies See Modest Recovery

February 23, 2011

In many ways, business conditions are especially ripe for a turnaround in air charter. The economy is growing, and business travel is increasing. For those who use business aircraft, or plan to, air charter offers a cost-effective alternative to outright aircraft ownership; something that is especially attractive to budget-minded business travelers and companies during these cost-conscious times, according to David McCown, chairman of the Air Charter Association of North America and a senior consultant to Air Partner.

“You don’t have the capital outlay; you don’t have the depreciation risks, the outright cost of ownership,” McCown said. “As long as that’s how people are thinking about things, I think that will continue to benefit the air charter industry.”

That explains, in part, the improvement the air charter industry is seeing as the economy slowly begins to improve. For the most part, the industry’s shift into positive growth is mirroring the trend seen in business aviation overall. Incremental industry growth began last year, and McCown expects to see the trend continue well into 2012 and beyond, provided the overall economy continues to expand.

“I think it’s safe to say that 2010 saw an improvement from 2009. [The fourth quarter of] 2010 has turned out to be strong for many suppliers and is carrying over into Q1 2011,” McCown said. “However, I would not characterize it as a robust turnaround. It will very much mirror the state of the broader economy, which is pointed in the right direction, but looking backwards has been somewhat anemic in its improvement.”

While business is improving, it’s coming in many cases with a squeeze on profit margins as business travelers shop for the best prices. While many air charter operators and brokers are countering by offering more services, such as one-way ticket pricing, McCown said many are forced to be more competitive in pricing.

The growing popularity of VLJs also is helping to keep air charter pricing in check, although McCown said their impact on the market at this point has been modest.

“I think they will have a positive impact, but I can’t say at this point that it’s been significant,” he said. “Again going back to the theme of value…when a light jet or a mid jet can do the job, that will be the aircraft of choice.”

As with business aviation overall, air charter has a long way to go to recuperate to the levels of three or four years ago. The last two years saw quite a shakeout in the industry, with several players exiting the market. For those who are left, even sluggish market growth offers a chance to pick up market share.

“I think in some ways it’s healthy to have a shakeout,” said Scott Bickford, CEO of Air Planning. “Some of the more marginal brokers and operators are gone.”