Daring to Think 'Private Jet' Again
March 5, 2010
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    HAPPY days are not quite here again in the business aviation industry, but at least there are some breaks in the clouds.

    Gingerly, some business travelers are venturing back into private aircraft after the battered economy – and a public outcry against that perk of fat cats, the corporate jet – walloped the general aviation industry starting in 2008.

    The signs of a small and tentative rebound are discernible. In January, business aircraft flights, as monitored by the aviation research firm Argus, rose 5.3 percent over January 2009.

    Starting late last year, business jet operators saw “a very distinct, small, consistent upturn in demand,” said Fred Reid, president of Flexjet, a company owned by Bombardier that sells fractional shares in aircraft, as well as charter flights and so-called jet cards for buying flight time in 25-hour blocks.

    But the market dynamics have been shifting. Big publicly held companies are still wary of using corporate jets, even if there is a clear economic justification for, say, flying a group of executives or technicians to places not well served by commercial airlines on trips where time is of the essence.

    In 2008 and 2009, as the economy stumbled, some major companies sold or sharply trimmed their fleets. In many cases, they shifted to less expensive (and less ostentatious) fractional-share jet ownership or chose to book charter flights, or both. Others simply dropped out of corporate aviation entirely.

    One result was a glut of late-model business jets at fire-sale prices on the used market last year. Industry officials say that surplus has begun to shrink, and that prices of used planes, while still depressed, are rising again.

    But deliveries of new aircraft have not yet reflected a rebound, as credit remains tight and companies continue to cut back on flying hours in general, according to data released last week by the General Aviation Manufacturers Association, a trade group. The industry, long dominated by American companies and technology, has laid off tens of thousands of workers since 2008 and hasn’t indicated it will be hiring anytime soon.

    Last year was a particularly bad one after five years of record growth. So even though the industry slowly regained some ground in the second half of the year, shipments of business jets were still off 33.7 percent compared with 2008, to a total of 870. Shipments of turboprops, the high-end propeller planes increasingly used for corporate flying, were off 17.6 percent, to 441, the trade group said.

    This year, however, “flying hours are on the rise” and inquiries about new orders are growing, Robert Wilson, the trade group’s chairman, said in an industry briefing last week. Last year, billing for all general aviation planes, jets as well as piston-driven aircraft, was off 21.4 percent, at $19.5 billion.

    Flexjet and others have been gaining some ground by emphasizing the benefits of flexibility, as opposed to outright ownership of a plane or fleet. At the same time, the continuing deterioration of the commercial air travel system is a big marketing advantage.

    As any business traveler knows, it’s far more time-consuming and difficult now to get to or from midsize and smaller markets, given reduced flight schedules and capacity. Then there are the rising airline fees and the security delays.

    “One of the things that has happened is that people, for whatever reasons – financial distress, concern at the board level about public and employee perception – had to go to commercial aviation. And for people who hadn’t done that in a while, they’re suddenly reminded of how utterly, dreadfully inefficient that is,” Mr. Reid said.

    Operating on surveys showing that nearly eight of 10 business jets fly with four or fewer passengers, and over 90 percent of those trips are for three hours or less, a start-up company called JetSuite last fall began providing flights by the hour or day. JetSuite now has seven new Phenom 100s, entry-level light jets made by Embraer. JetSuite operates primarily in California and other parts of the West.

    In the past, companies would purchase big business jets because of the need for occasional “superlong-haul flights” overseas, said Alex Wilcox, JetSuite’s chief executive.

    “It was often a matter of ramp ego, of who had bragging rights to the biggest plane,” he said, even if that plane was not efficient for most of the company’s flying needs, which are often short haul.

    Source: NEW YORK TIMES
    Date: 2010-02-23