Private jet operators did not do well in the Great Recession. When March hit, they figured they were stuck in another disaster. But things have turned out better than expected.
When most air travel in the United States effectively stopped in March, some private jet operators feared the worst, expecting coronavirus, along with the recession to come, would decimate their businesses. Instead, for many, the summer of 2020 has held up surprisingly well.
“Business is very good, better than expected,” said Gregg Slow, president of FXAir, a charter company owned by Directional Aviation, one of the biggest brands in private aviation. “We had our best month in company history in June followed by second best in July, for revenue. What would normally be 8 to 10 percent new business is now 50 to 60 percent new business.”
The reasons are predictable. Many consumers don’t feel comfortable flying on a commercial airplane, and while the vast majority of Americans cannot afford private jet flights, those who can increasingly are looking to them. They’d rather pay a fortune — travel by jet can cost 10 times or more the price of a domestic first class fare — than cancel their summer holiday.
The big question is how long the (relatively) good times will last. Some private jet company executives say they expect demand will remain high beyond summer, in part because consumers who start flying on private jets rarely want to go back to commercial travel. The pro-jet crowd points to a McKinsey study showing only about 10 percent of people who can afford to fly private actually do. Jet company executives figure anyone with investable income of over $10 million — a considerable sum, to be sure — is ripe for companies like FxAir and a competitor, XOJet Aviation.
“Once you start flying privately, it’s hard to go back,” said Doug Gollan, who runs a website called Private Jet Card Comparisons. “People go from, ‘I would never spend that type of money,’ to becoming regular users fairly quickly. Since the new customers aren’t looking for nickels in the couch to fund their private flights, they can well afford it. They just had previously chosen not to spend the money, I think it’s safe to assume that a decent amount will keep flying privately even post-Covid-19.”
CHARTER BUSINESS STRONG
The big question is how long the (relatively) good times will last. Some private jet company executives say they expect demand will remain high beyond summer, in part because consumers who start flying on private jets rarely want to go back to commercial travel. The pro-jet crowd points to a McKinsey study showing only about 10 percent of people who can afford to fly private actually do. Jet company executives figure anyone with investable income of over $10 million — a considerable sum, to be sure — is ripe for companies like FxAir and a competitor, XOJet Aviation.
“Once you start flying privately, it’s hard to go back,” said Doug Gollan, who runs a website called Private Jet Card Comparisons. “People go from, ‘I would never spend that type of money,’ to becoming regular users fairly quickly. Since the new customers aren’t looking for nickels in the couch to fund their private flights, they can well afford it. They just had previously chosen not to spend the money, I think it’s safe to assume that a decent amount will keep flying privately even post-Covid-19.”
“We are putting up more aircraft and more flights than we were last year,” he said.
WHAT COMES NEXT?
FxAir CEO Collins admits he did not see this coming.
“I would tell you, having gone through private aviation in financial crisis, we were preparing for for a precipitous drop,” he said. “We weren’t sure where it was headed. Watching it come back and being at levels you would see pre-pandemic has been a really interesting lesson learned. I think it was an unexpected.”
His business may have come back to pre-pandemic levels, but not all is perfect across the industry, according to Gollan’s calculations. He estimates U.S. private jet travel is tracking at just over 80 percent of its pre-Covid levels, though he said there have been weeks it has been above previous years. During the July 4 holiday, he said, demand was up 5 percent, on a year-over-year basis.
Leisure travelers have been fueling most of the growth. But for the most part, business travelers haven’t returned. In the past XoJet’s Hattaway said, business travelers would board jets on Sunday at airports in Southern California, the New York area and Texas to reach that week’s meetings. “The private equity groups aren’t going out and hitting multiple cities like they used to,” he said.
They could return. People long have extolled the luxury of private jets, and more recently many have spoken about jets as a safer alternative to airline travel. But there’s another reason consumers like to fly private — they can access more airports, reducing travel time. For busy business travelers, that’s key.
The time issue soon may become more of a factor. U.S. airlines already have cut service to some smaller markets, and they could slash further once they’re no longer covered by CARES Act rules that require them to serve most markets they flew to before the pandemic. If it becomes impossible for people to go from New York or L.A. to some U.S. cities, efficiently, more travelers could turn to private jets.
“I think there has been a new wave,” Hattaway said. “Is that long term or not? I don’t know. It’s vague. But the commercial market is getting rid of secondary markets, and you may not have the frequency you used to have. I think that is going to drive some behavior for quite a while.”
To some extent, the jet operators only have so much control. If financial markets drop precipitously, some flyers may decide they would rather stay home than pay $31,900 (FXAir’s fixed one-way price) for a cross-country flight. Or the pandemic could end sooner than expected, and people again could decide they’re willing to fly commercial at a fraction of the cost. Or, consumers could start a backlash against private aviation because it is not environmentally friendly.
Among the risks, a big market drop, or massive sustained recession could have the biggest effect. Even then, though, Gollan said he suspects many ultra-wealthy people will stick with private flights.
“There are a lot of people who are doing well,” he said. “As long as there are people who are doing well or haven’t been affected or their net worth is so big it doesn’t matter, I think private aviation will continue to see an influx of new folks.”
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