Fuel Surcharges No Deterrent To Charter Jet Demand
By Michael Ratcliffe
OCTOBER 17, 2005 -- Fuel surcharges imposed earlier this year by charter jet firms as a result of steadily increasing jet fuel prices—even before Hurricanes Katrina and Rita disrupted fuel production—have done little to lessen corporate interest in chartered jets as an alternative to mainstream commercial travel.
Weymouth, Mass.-based Sentient Jet on Aug. 1 implemented a fuel surcharge that amounts to $225 per hour for light jets, $300 for midsize jets and $400 for large jets, said chief marketing officer Kevin Vaughan. "We were the last national company to implement a surcharge," he said. "It got to the point where, instead of paying 100 percent of the fuel for our members, we needed to go to paying the vast majority."
Vaughan called the surcharge "nominal" and added, "That's significantly less than national competitors. We continue to watch the fuel situation. It has been extremely volatile. We're hesitant to change it again in the wake of that volatility. If there is another spike, then we may have to consider an increase."
However, the surcharge has done little to slow interest from customers, he said.
Greg Goodwin, vice president of marketing for Hingham, Mass.-based Private Business Jets, which on Oct. 3 announced the national rollout of its FlyPrivate service, agreed that surcharges have not affected business. "Our prices have gone up a little because of fuel," he said. "For example, a $20,000 flight now costs close to $22,000. People certainly understand, given all that's gone on. It's all over the news. When they go to the gas pumps themselves, people realize there's been a spike. It hasn't affected business. Business is as strong as ever. I've heard that across the board in our industry."
Fuel surcharges implemented by Cincinnati-based Executive Jet Management, which is the aircraft charter and management services subsidiary of fractional aircraft ownership firm NetJets, have had only a "minor impact" on sales, said vice president of marketing Ginnell Schiller. "Most customers understand the situation, so this is not a surprise to them."
Given the fact that commercial airlines also have instituted fuel surcharges and raised ticket prices, it's no surprise that the growth of the chartered-jet industry for business travel has not been slowed by the fuel situation, said Phil Roberts, president of PAR Travel Tech Inc. of Clayton, Ohio, and senior aviation consultant for Deerfield, Ill.-based Consulting Strategies. "Businessmen are going to pay the price to get to where they need to go," he said.
Jet Firms Tout Corp. Demand Executive Jet Management's business has grown 22 percent in the past year, according to Schiller.
The charter industry has been growing, as have we," she said. Driving that growth, Schiller said, is the fact that "charter is definitely seen as a legitimate business tool, saving valuable time and increasing convenience for busy executives."
Private Business Jets' Goodwin said, "It's getting less convenient to travel commercially, and convenience and time are the name of the game. If we can get people from points A to B in a more convenient, more expedient manner, then more and more people will travel privately. Private jet travel benefits from anything that happens that makes commercial travel more inconvenient—whether that's a war, Sept. 11, a disaster, airlines cutting routes, airlines going bankrupt, whatever."
Created in 2002, Private Business Jets has seen annual triple-digit growth, Goodwin said. "We've tried to manage our growth. In other words, really be able to take care of the number of customers that we have and grow in relation to that number of customers." He said the company expects its FlyPrivate service—which he said offers the benefits of fractional ownership and other jet-membership services without requiring up-front fees—to revolutionize the industry.
The smaller the airport, the more convenient it is," Goodwin said. "At Hanscom Field, here in Bedford, Mass., it's still possible to get somebody's car within spitting distance of their plane, whereas at Logan International Airport, that's not possible."
Sentient Jets, founded in 1999, guarantees its members that a jet will be waiting for them within 10 hours of their request on all but a handful of peak days that require a little more advanced notice.
Sentient's "membership growth is up about 85 percent versus a year ago. We've actually seen that trend start to accelerate in the last quarter. So we are growing exceptionally fast and largely we tie that back to the flexibility of our program and it being a unique alternative to some of the other choices on the market today," Vaughan said. "It starts from a simple philosophy that we sell trips and not jets. We have what we believe to be a very flexible—if not the most flexible—approach to private jet travel on the market. You simply deposit funds and start flying."
Vaughan said members choose the type and size of the jet they need for each trip and there is no requirement to use all their money within a specific timeframe. "If you're ever dissatisfied with our service, you simply ask for a refund of your remaining balance."
Earlier this month, Sentient named former DaimlerChrysler Aviation president Tom Davis president and CEO of Atlantic Aviation Flight Services, its operating subsidiary. Davis most recently was president and a founding partner of commercial aviation solution consulting firm TRIAX Partners.