[UPDATE, April 8, 2016: We published new information related to this article here.]
The business jet industry is attracting loads of entrepreneurs offering tech-fueled brokerages, marketplaces and communities. Some of the ideas have gone too far for the FAA’s taste, but others could improve the affordability and utilization of unscheduled aircraft if they find a market.
Whether that market includes corporate travel remains to be seen.
“On-demand” charter service Victor last month announced investment of $8 million and its U.S. launch after some years operating in Europe. A new outfit called Ubair counts as an advisor veteran airline exec David Tait (Virgin Atlantic’s first employee). JetMe has a Priceline-style “name your price” option. Others with new mobile apps include Magellan Jets and JetSmarter.
Becoming the Uber for jet charters could mean different things. Some of the new providers welcome the comparison if it conjures up thoughts of on-demand ease of use. They like when those notions appeal to high net-worth individuals. The emphasis on glamour in some of the marketing seems designed to attract those who care for status.
But when it’s used for business, private jet travel isn’t as much about luxury. Convenience, sure. Productivity certainly. Even risk management.
Would a busy executive find it cool to use an app to order a plane? Could these apps cut the cost of jet travel enough that it becomes accessible to a new subset of business customer? We don’t know yet.
Some of the new services appear to offer many more price and availability results than a traditional broker. But for customers who need deeper information about the presented options, the new crop tends to have a phone service like any other broker.
Nick Verdea runs the travel department as well as corporate aviation for Tulsa-based energy firm Williams, which has about 6,500 employees.
“There is a lot of technology out there where you can get charters or use one-way flights,” he said. “I’m not implying all the companies don’t meet the appropriate requirements, but I am saying you can’t charter an aircraft blindly. You have to perform your due diligence: verify proper insurance coverage, validate details on the aircraft, assess maintenance records and pilot records … Someone needs to understand the business aviation market and needs to know what to look for to ensure the necessary safety levels.”
Larger companies chartering aircraft thoroughly vet the brokers, operators and equipment. Sanofi director of North America employee transportation Linda Francis during a late 2012 GBTA webcast detailed the items on which her company interrogated providers: accident history, crew training, maintenance, third-party audits, fixed base operations and catering. The firm narrowed its options down to two operators and then quizzed them on site about scheduling processes, access to pilot contact info and contingency plans. “It was a lengthy process,” said Francis.
The new raft of brokers would like to handle some of that work. Victor selects operators with valid Air Operator Certificates as well as ARG/US and Wyvern safety ratings. Audits cover aircraft documentation, crew training, flight time records, maintenance and manuals for engineering and operations.
Victor founder Clive Jackson argues that his company is not like other brokers. “We think it’s unfair that you have a marketplace where the broker keeps the customer at arm’s length from the supplier, the broker doesn’t have to disclose their commission and you don’t know who the supplier is when you commit,” he said. “Our model is predicated on trust and service, which requires transparency. The end user gets full details of the operator and pays a guaranteed 10 percent booking fee.”
“Every time we have worked with a traditional broker, we call and they send three options,” said Theo Osborne, founder of corporate and leisure agency Parnassus Travel Group in the United Kingdom, which now uses Victor. “The whole thing is a little archaic. It’s an industry where there are a lot of charlatans.”
National Business Aviation Association vice president Mike Nichols during the 2012 webcast said that while some brokers are very good, customers should be wary.
“According to the Department of Transportation, brokers either are acting as an agent of the customer or as an agent of the charter operator,” said Nichols. “Rarely are they a true middleman. If the broker doesn’t tell you what role they’re serving, ask them. It’s similar to real estate. There are some brokers in the U.S. who are unscrupulous. You need to know the broker’s level of experience and expertise.”
Victor claims to provide three flight quotes within 60 minutes. It takes credit cards, debit cards and bank transfers. Like most of the new providers, Victor searches for “empty leg” opportunities — that is, one-way flights with no passengers. Operators offer discounts of up to 75 percent on such flights, according to Victor.
Not Your Father’s Sharing Economy
On balance, the aforementioned companies do not want to be associated with the “sharing” aspect of Uber in which private drivers can sign up and start flagging down fares. Back in the day, private pilots posted their planned trips on local bulletin boards in an effort to attract passengers and share expenses. FAA regulations do not allow them to charge fees beyond a pro-rated share of costs.
Some of the new crop of apps are looking to take advantage of this concept and bring private flight opportunities to more potential customers. But FAA last year noted that companies like AirPooler, Jumpseat (whose founder is now CEO of Ubair) and Flytenow vastly expand on the bulletin board concept by allowing private pilots to post on the web. FAA determined the companies require Part 119 certification under Federal Aviation Regulations. Flytenow is appealing.
Uber chairman Garrett Camp in 2012 helped launch BlackJet. The company struggled to build a market for its service offering seats on charters (which are Part 135 in the FAA regulations) rather than whole aircraft. The concept required significant lead time to build up enough passengers for any given flight. The company has moved to a more traditional charter broker model, according to The Boston Globe.
“Share jet models are trying to make private jet flights more accessible to a larger audience by reducing the price point,” said Greg Raiff, CEO of Private Jet Services Group in New Hampshire. Speaking on a recent GBTA Risk Committee webcast and in a follow-up conversation with The Company Dime, Raiff pointed out several potential problems in sharing models for time-sensitive business travelers. What if one of the passengers cancels or is late for departure? Some operators have a “disclaimer that says if we don’t get enough people we can’t fly out,” he said. Can passengers bring pets, or peanut butter, or a criminal record? Are passengers comfortable flying with others when there’s no Transportation Security Administration screening?
Democratizing The Business Jet Market
Companies like BlackJet were among the first to attempt to create a new app-based layer in a market that Raiff described as a pyramid. The process of making private jet travel more accessible and affordable has been underway for decades, and each new layer seeks to improve aircraft utilization. At the top of the pyramid, with the smallest share, is commercial jet ownership. That falls under FAA’s Part 119 regulations. Fractional ownership popularized by NetJets is next, with larger share and lower expenses (Part 121, Subpart K). Membership-based jet card programs (load the card with flight hours, pay again when they’re used up), charters and so-called air taxis from authorized Part 135 operators all form layers as well.
“If there are additional flight hours placed on private aircraft, that should make air charter more accessible for regular corporate customers,” said Raiff. “It shouldn’t just be C-level execs and directors of boards traveling on private aircraft. It makes sense for multiple people going to the same place to share a ride — less fuel is wasted, pilots are used more efficiently and the airspace is less congested, which leads to fewer ATC delays for the rest of us.”
Will the new breed of app-touting brokers or the sharing economy startups make this happen? Raiff said he’ll believe it when he sees it.
“You will see a harmonization of new-economy applications in certificated companies,” said Raiff. “The customer acquisition and servicing component of the industry is maybe 4 percent of the overall spend. You can expand the market, but the family who is booking a flight to Boca once a year for March break is not core. There are not enough people in Corporate America with the spending authority. Those who have it are too busy to be online shopping when they have professional corporate travel departments to help do that procurement.”
About one in five travel managers is involved with selecting or managing business jets and charters, according to Business Travel News.