“Don’t play games that you don’t understand, even if you see lots of other people making money from them. ”
Editor's Desk: April-May 2008
Air charter is the Rodney Dangerfield of private aviation. Operators can thank the FAA and fractional-aircraft companies for this. Don't get me wrong. Some charter operators don't deserve any respect, but there are certainly many more who do. The problem for the consumer is how to differentiate the good from the bad and the ugly.
To be sure, it's not the FAA's and fractionals' fault that there are some not-so-good charter operators. The FAA, now in the throes of enforcing ill-defined rules that have been on the books for years, has seemingly decided to accelerate this process by making examples of a few prominent charter operators. And fractional-share salespeople have never hesitated to tell potential customers how difficult it is for the uninitiated to distinguish the sheep from the goats in the air charter market. (Jennifer Harrington gives advice on how to do this in her Bizav Basics article on page 58.)
The antipathy between charters and fractionals came to a head in the mid-nineties over what the charter operators saw as an "uneven playing field," caused by a few key differences between the air regulations under which the fractionals operated (Part 91) and those that govern air charter (Part 135). But the real reason for the charter industry's angst was economic. The fractionals were eating charter's lunch.
At the time, it seemed obvious to me that the fragmentation of the charter industry-unavoidable for two reasons-was its biggest obstacle to countering the frax invasion. First, when the charter industry evolved in the fifties and sixties, it grew regionally because of the limited range of the airplanes available. Second, business jets are so expensive that few operators can afford to own or lease more than a few, if any at all. Even today, an estimated 80 percent of charter airplanes are not owned by their operators. So a national charter operator is a problematic business model.
The ill feelings between frax and charter have mitigated somewhat since the implementation of Part 91 Subpart K more or less leveled the playing field. Later, over the last five years, the rising tide of the healthy business aviation market raised everyone's boats. Both fractionals and charter had more business than they could handle.
Meanwhile, the success of the Orbitz, Priceline and Travelocity Web sites in airline ticket booking got several entrepreneurs thinking the same thing-in essence, that electronic brokers could work for air charter. Though some of the early charter Web sites ran afoul of the FAA and DOT when they advertised having thousands of aircraft in their fleets-a flagrant, incredible lie-today you'll find a handful of modestly successful charter booking sites.
In addition, most charter operators' own Web sites provide a way for customers to plan and even book flights. Many of them offer reduced-price empty legs-those necessary repositioning flights that both charter and fractional operators must deal with.
But still today, we're told, few customers are willing to book charter flights entirely online, preferring instead to talk to a live person before plunking down big bucks, even with an operator they know.
This may be on the verge of changing. As Jeff Burger's cover story ('Richard Branson') suggests, Virgin Charter could be the ticket that brings online booking-real Travelocity/Orbitz/Priceline booking-to the air charter industry. Richard Branson's newest Virgin-branded company, founded by CEO and co-owner Scott Duffy, obviously is not the first to offer such a Web site, but it definitely raises the bar. It promises, by careful vetting of the operators it uses, to serve customers with only the best of the best. Branson told me on the morning of March 4-after the site went live at 6:30 a.m. following some six months of beta testing-that users had logged more than 90 travel requests in the first hour. One week later, the site had logged more than 1,000 trip requests and added 3,500 registered users, according to Brian Pope, Virgin Charter's chief marketing officer.
Gazing into my crystal ball, I see online charter flight booking becoming almost as commonplace as online airline booking in a few years. There will be three or four major players in this market. Consolidation of the charter industry will pick up steam and several national and international charter operators will solidify their positions. The below-par charter operators will diminish in number, but many good smaller operators will remain. Fractionals will adjust their models to cope with the increased competition from charter. For most people, charter will still be the least expensive way to fly privately.
The by-product of all this, I think, will be the air charter industry gaining a lot more of the respect it rightfully deserves.