Charter takes a dip, but for how long? Take our quiz
It’s been a long week. So, how better to relax on a Friday than with a business aviation quiz and a small glass of refreshment in your local bar or pub after work? Our subject this week is the future of private jet charter. Good luck with the answers. (We have already supplied some, courtesy of industry insiders, so you don’t have to).
Question one: Is charter taking a dip?
If you answered Yes, take a point. There has been a 16% year-on-year (YoY) dip in charter demand in the US by the 11th week of 2023, including a 22% decline in Florida, according to WINGX. And Europe’s charter flights dropped 10% since this time in 2022.
James Leach, chief marketing officer, Air Charter Service (ACS) agrees: “The feedback from the market for us is that overall, the charter market is cooling.” While he recognises the drop in charter sector-wide, he says that ACS has experienced a levelling out, partly due to former Russian businesses still contributing in February last year.
Doug Gollan, founder, Private Jet Card Comparisons, Andrew Collins, co-CEO, Flexjet and Glenn Hogben, CEO, The Air Charter Association (ACA) all agree charter has dipped. Hogben thinks this is no surprise. “This year’s figures, compared with 2022, have fallen. But 2022 was an exceptional year for demand,” he says. “It was anticipated that there would be a reduction or levelling off in demand as the market normalises.”
Question two: Why is this happening? (Multiple choice).
Is the answer: The airlines’ recovering schedules, Rising prices, or Satiated demand? Gollan believes the first option is the correct one. “While the airlines [schedules] are still awful, if people are flying alone and don’t have to check baggage, they will pay $1,000 to fly first class for a two-and-a-half-hour flight, instead of $20,000 for a light jet,” says Gollan.
Leach also thinks the airlines are to blame. “There were a lot of new customers coming into the charter market over the past two years,” he says. “While some are now chartering regularly, many have returned to scheduled service for most of their air travel, chartering only occasionally.”
Richard Koe, MD, WINGX says that while industry-wide issues are affecting travel, people also don’t have the same appetite for jet travel as they did immediately post-lockdown. “Economic uncertainty and down-trending equity markets have capped business jet charter demand in the last nine months,” he says. “Combine that with the inevitable drop off in ‘revenge travel’ as pent-up demand from lockdowns dissipates. Year-to-date, scheduled airlines are flying well above last year and closing the gap on pre-pandemic levels.”
But ACS’s Leach also sees another factor. “Pricing has also played a big role,” he adds. “We have seen charter pricing rise significantly over the past 12 months and no doubt this will have priced some lower end charterers out of the market.” Leach says this is evident in the ACS statistics, which show flight numbers in February this year level with February 2022, but overall gross revenue rose by 20% YoY.
Question three: Should we be worried?
“Very hard to say,” says Gollan. “There was more demand than the market could support. There are still issues with supply chains, maintenance delays, pilot shortages, training slots, so this is giving everyone a chance to take a breath and begin again providing a dependable product.”
But Gollan adds a warning: “That said, a slide in charter was a precursor to the 2008 financial crisis.”
Leach worries not for the sector overall, but perhaps for some companies. “It will be a cause for concern for those organisations whose business model requires strong growth to service debt or who over-expanded their cost base during the boom,” he says. “However, a big economic shock if the banking crisis escalates may change things.”
On the other hand, ACA’s Hogben is optimistic. “The growth experienced over the last two years has been exceptional, and for this to be maintained is still a very positive situation for the industry.”
Collins adds: “Looking ahead, pre-sold demand is strong and will eventually unlock flight legs.” US passport renewals for international travel have seen a 30-40% YoY increase in applications, which shows there is still strong demand. “We will see a return to a more normalised world of flying,” he says.
Koe adds that appetite for business jets is still strong, with charter activity in Europe and North America still “well up” from 2019.
So, how did your answers compare with ours? (Please let us know via email). Whether you answered the last question Yes or No, it could be time for a well-earned drink – after work.