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Q: Financial details of private charter jets business and brokerage opportunities? ( Answered,   1 Comment )
Question  
Subject: Financial details of private charter jets business and brokerage opportunities?
Category: Business and Money > Small Businesses
Asked by: mikeinseattle-ga
List Price: $200.00
Posted: 06 Apr 2003 21:23 PDT
Expires: 06 May 2003 21:23 PDT
Question ID: 187032
I am currently in the travel business and am looking at entering the
"private charter jet business".  My primary focus would be to broker
flights on behalf of other charter jet companies to corporations and
individuals (essientially brokering contracts)I am looking for the
following information.

1.  Is this a viable business and what are the names of
companies/entities that are strictly brokers (these companies do not
own their own jets, they brokers the flights on behalf of others)

2.  What is the overall market for this in terms of dollar value in
the USA only?

3.  What are the inside financials.  i.e.  margins (percentage/dollar
value), total market size, profitability of other brokers?

4.  Are there any licenses required to be a broker and enter this
business?

5.  Are there any associations that represent the private jet charter
business?  What are the names and specific urls pertaining to their
sites.  What are the names of relevant trade publications?

6.  Who are the major players?  Provide specific urls and details.

7.  Can you provide financial information on a specific player
(www.airroyale.com)

8.  Is this a viable business based strictly on the internet?

9.  Any other information that may benefit us?

RESTRICTIONS

1.  We are not interested in investing in infrastructure.  We want to
maintain toll free phone/fax numbers and an office.  Essentially, we
want to trade contracts or agreements
Answer  
Subject: Re: Financial details of private charter jets business and brokerage opportunities?
Answered By: ragingacademic-ga on 09 Apr 2003 03:24 PDT
 
Dear mikeinseattle,

Thanks for your question.  First, let me request that if any of the
following is unclear or if you require any further research – please
don’t hesitate to ask me for a clarification.

As with every other segment of any other business I had ever looked
at, what you had defined as the “private charter jet business” is
simply fascinating.  I will address your questions one by one as best
I can – please feel free to ask for clarifications once you have
reviewed the information below and the links I will provide you with.


1) Is this a viable business? Names of companies that are strictly
brokers?
---------------------------------------------------------------------------

Let me start with a resounding yes.
However, not only is this a viable business – there are several models
in play, and various companies are making a brisk business leveraging
these models.  Let’s begin, then, by reviewing these models quickly –
following a review of each model I’ve included the leading players:

Jet Charter Models
’’’’’’’’’’’’’’’’’’
I’ve identified four distinct business models in this space as follows
–

a) Professional aircraft and flight management companies

These companies basically take over the management of business jets
owned by various corporations, doing absolutely everything except for
actually financing or owning the plane – they typically do have some
limited infrastructure for maintenance etc., but this could be
outsourced to a third party that does aircraft maintenance (such as
British owned Signature Flight Support,

http://www.bba-aviation.com/flightsupport/

), leaving you “infrastructure free.”  Some such companies “own” the
pilots (i.e. employ them) while others require that the corporation
which owns the jet employs the pilots.


Jet Aviation – leading global provider of “business aviation service
management”

http://www.jetaviation.com/

“Jet Aviation was founded in Switzerland in 1967 and is the leading
business aviation service company today. More than 3,500 employees in
over 60 facilities and stations worldwide cater to customers in North
& South America, Europe, the Middle and Far East. The company provides
maintenance, completions and engineering services, fixed base
operations, along with aircraft sales, charter, and management on a
global basis. Jet Aviation's U.S. and European aircraft management and
charter divisions jointly operate a fleet of more than 150 aircraft,
including 38 Gulfstreams (including 9 Gulfstream Vs), 31 Falcons, 20
Challengers, 16 Cessna Citations, 6 Global Express and 5 BBJs, among
others. In 2002, Jet Aviation provided close to 60,000 hours in global
flight operations.”

*** The company claims $500 million in year 2000 revenues ***


Signature Aircraft Charter

http://www.signatureurope.com/charter/

Seems to offer less comprehensive services, but competes with Jet
Aviation.


Executive Jet Management (subsidiary of NetJets)

http://www.ejmjets.com/


b) Fractional Ownership (new or used)

In the fractional ownership model, a company coordinates fractional
ownership of airplanes among several owners – typically, there are 2,
4, or 8 owners to a plane, depending on the size of the plane and of
the company.  The company also undertakes all management and
maintenance functions and employs the pilots – or hires them from a
third party flight crew outsourcer (e.g. Jet Professionals,

http://www.jet-professionals.com/ ).


Net-Jets (owned by Berkshire Hathaway)

http://www.netjets.com/home.asp

“NetJets is the overwhelming choice of Fortune 500 companies. More
successful individuals, financial service firms, information
technology companies, professional athletes and celebrities choose
NetJets. In fact, in 1998 after experiencing NetJets ownership for the
prior three years, Warren Buffett and his company Berkshire Hathaway
purchased NetJets and its parent company, NetJets Inc.”

*** Fill out this form to receive a free guide to fractional jet
ownership from Net-Jets ***

https://www.netjets.com/guide/buyers_form.asp


Flight Options

http://www.flightoptions.com/

“Flight Options offers both factory-new and pre-owned aircraft, the
largest Beechjet 400A, King Air and Hawker 800 fleet in the world and
exclusive factory maintenance. And with the youngest flying fleet,
Dedicated Crewing, paperless cockpits plus the FAA's Diamond
Certificate of Excellence in its Aviation Maintenance, you'll always
be assured of our diligence to providing the highest level of safety
in the business.”

*** recently acquired TravelAir ***


Tikal Aviation Services

http://home.earthlink.net/~angera3/

“Tikal Aviation Services, Inc. offers a variety of aviation and
business services, including supporting the Command Share aircraft
ownership program and offering the only integrated acquisition service
for buyers and sellers of aircraft.”


Citation Shares (joint venture of Cessna and Tag Aviation)

http://www.citationshares.com/

“CitationShares is owned equally by two of the leading names in
aviation. Cessna is synonymous with top of the line aircraft
manufacturing, and TAG Aviation is one of the world's premier aircraft
management and operations companies. As a CitationShares owner, you
get the best of their experience and expertise.”


Command Share

http://www.planeadvice.com/

“Command Share  programs offer services similar to fractional programs
such as Executive Jet's NetJets, FlexJet, TravelAir and Citation
Shares. The primary difference is the utilization of cost effective
piston and turboprop aircraft with limited use of jet and other
turbine aircraft. The services provided give you a sense of having a
private corporate aircraft with a dedicated flight department
available at a moment's notice.”


FlexJet (owned by Bombardier)

http://www.flexjet.com/


Sentient Jet

http://www.sentientjet.com/home.htm


c) Business Charter Services

Charter management companies operate much as tourist charters do, but
rather than coordinating leisure travel they coordinate business
travel.  It seems that the leading charter companies are subsidiaries
of aircraft management and fractional ownership companies.  What they
do is lease out free time available on the jets they already manage –
such a company could, therefore, also be managed as a infrastructure
free entity.  Some charter companies charter their own company-owned
planes.


Executive Jet (Now NetJets)

http://www.ejmjets.com/

Operates charter services through its Executive Jet Management
subsidiary.


Jet Aviation

http://www.jetaviation.com/

Already mentioned under model “a” above – charters managed jets, and I
believe also owns jets which it charters out.


Profile of a charter company – SkyJet

http://www.btnmag.com/businesstravelnews/images/pdf/corporate_profiles/skyjetcorp_promay01.pdf


d) “Pure Play” Charter Intermediary (Broker)

This is the ideal model – if you can swing it…  The leader seems to be
Flighttime –

http://www.flighttime.com/flighttime_web/index.jsp

Flighttime, founded in 1985, went bankrupt a couple of years back and
is now managed by Zineth LLC, a company I could find little about but
seems to be buying up similar distressed operations worldwide (I found
some information relating to an additional acquisition in New Zealand.

I could not find additional companies operating exactly under this
model.  A paid article appeared in a special advertising section in
Forbes in 2001 –

http://www.forbes.com/specialsections/aviation-2001/08.htm

A pure play charter intermediary can operate from an office with a
phone, fax and server – basically, the company coordinates supply and
demand.  Supply is managed by aggregating information through
partnerships with any and all of the companies of the types mentioned
above, as well as with private owners of business jets, corporations
etc.  Demand nowadays can be managed much like Expedia in the leisure
travel category – through a Web-based application.  For examples, see
Flighttime’s site, as well as Executive Jet Management linked above.


One similar company I had managed to identify is LegFind –

http://www.legfind.com/index.asp


An interesting twist using an auction model is – 

Charter Auction

www.charterauction.com


And yet another one –

Air Charter Net

http://www.aircharternet.com/



2) Overall Market in US
------------------------------

Market size data for this segment is somewhat elusive.  According to
Business Travel News, the fractional market alone recorded upwards of
one billion dollars in sales in 2000.  In addition, we know that
JetAviation, a management company, recorded about $500m in 2000. 
Given the size and stature of the players profiled here – and the
hundreds of small players in the market, it’s safe to say that the
market as a whole is worth upwards of two billion dollars annually
(and probably a couple times that).

Perhaps more importantly, however, evidence concerning the rapid
growth in this market – especially since September 11 2001 – is
reassuring.  Here are some prime quotes:

From a recent press release by Air Charter Guide, 

“the U.S. charter industry continues to grow steadily despite
depressed travel markets, financially challenged scheduled carriers
and a volatile economy. Over 70 percent of 100 US charter operators
surveyed reported increased bookings in the second quarter of 2002
over the same quarter a year ago, with an average increase of 8
percent in jet aircraft preferred by business travelers. This is the
third consecutive quarterly survey showing growth.”

http://www.guides.com/acg/pressroom/LaunchPress.asp?path=8-26-02.htm

And from another source –

“The air charter market has seen a noticeable increase of 20 percent
to 30 percent over the past few years, Stroud says.”

http://www.bizjournals.com/bizresources/toolbox/topics/professional_services/charter_plane.html

“"Fractional ownership represents the fastest growing area of
aviation, period," said Phil Roberts, president of Par-Travel Tech and
chairman of the National Business Aircraft Association, speaking this
summer at the National Business Travel Association's annual conference
in Atlanta. According to NBAA's Business Aviation Factbook, the number
of fractional aircraft owners increased in 2000 to nearly 3,700, from
just 542 five years ago, representing more than $1 billion in
fractional shares sold.”

“The ***NetJets*** program from Executive Jet is the market leader and
last year flew 200,000 flights for its fractional owners. A
one-sixteenth share buys a client 50 flight hours in a year for
$375,000.”

Source: Business Travel News, 18 (19): 24(1), September 03, 2001 (not
online)


A great deal of industry statistics are available here –

http://www.nbaa.org/factbook/2003/section4.htm#05


3) Financials
----------------

Since none of the companies are public, it is difficult to locate data
on margins etc. – however, I have found a variety of interesting
information which could be used to conduct some financial analysis of
the industry.

Average national hourly rate to rent certain types of aircraft,
according to industry tracker Air Charter Guide:

Aircraft	Avg. National Hourly Rate
Helicopter	$924
Single engine piston aircraft 	188
Multi-engine piston aircraft	440
Turboprop	948
Small Jets	1,653
Medium Jets	2,500
Large Jets	4,305

Source: http://www.thestreet.com/funds/ericgillin/10047431_2.html
 (October 2002)


“The average price of flying charter was 8.7% lower in July than it
was the previous year, according to CharterAuction.com, an online
exchange for charter flights. "The drops in pricing are even more
remarkable when one considers the demand for charter services has
risen more than 20% over the past year," said Nate McKelvey, president
and founder of CharterAuction.com.”

http://www.thestreet.com/funds/ericgillin/10047431_2.html


Charter cost comparison

http://www.charterauction.com/Compare/CostCompare.html


An incredible wealth of information is available on what seems to be
the only industry site out there – Air Charter Guide.  Data available
through the following URL includes:

	August 2002 US Business Survey Results 
	May 2002 European Business Survey Results 
	March 2002 Quarterly Business Survey Results 
	US charter operator numbers by state 
	US charter aircraft availability by state 
	US charter aircraft by major metropolitan market 
	US charter aircraft price averages by state 
	US charter aircraft type changes over time 
And much more…

http://www.guides.com/acg/pressroom.asp?acgprofile=ex


4) Legal
----------

You asked whether any licenses are required to operate this kind of a
business – from what I have gathered, it does not seem that any
license or any other form of registration outside of standard business
license and incorporation requirements are needed.  However, I would
recommend that you pursue this issue with a suitable lawyer prior to
embarking on any significant investments.


5) Associations and Trade Publications
-----------------------------------------------

As mentioned, I could not identify an association that is specifically
associated with the charter industry – although according to the
following press release, there will be one soon…

http://www.usaenews.com/news/Oct_29_2002/AirCharter.htm

In the mean time, there is a wonderful site chockfull of information,
the Air Charter Guide site mentioned above, accessible at –

http://www.guides.com/default.asp


I doubt you’d be interested, but there is a Baltic charter association
–

Baltic Air Charter Association

http://www.skylineaviation.co.uk/baltic.html


The following are not charter specific but you may find them to be of
use –

National Business Travel Association

http://www.nbta.org/

National Business Aircraft Association

http://www.nbaa.com/

Aircraft Owners and Pilots Association (AOPA)

www.aopa.org


A comprehensive guide to trade publications is available at the
following site:

http://www.business.com/bdcframe.asp?ticker=&src=http%3A//rd.business.com/index.asp%3Fbdcz%3Di.l.l.ml.e%26bdcr%3D31%26bdcu%3Dhttp%253A//aeroflt.users.netlink.co.uk/mags/worldmag.htm%26bdcs%3DFE60D0A3-AFD0-42CE-A8A4-3E361F604A90%26bdcf%3Dd30b9c2f-df55-11d3-82d3-00c04f01021c%26bdcp%3D%26partner%3Dbdc%26title%3DWorld%2520Guide%2520to%2520Aircraft%2520Magazines&back=http%3A//www.business.com/Directory
Transportation_and_Logistics/Airlines/Airline_Personnel/Maintenance_Crew/Reference/Publications/&path=/Directory/Transportation_and_Logistics/Airlines/Airline_Personnel/Maintenance_Crew/Reference/Publications

(copy and paste…)


6) Major Players
---------------------

Please see companies highlighted in section (1) above – as far as I
can tell, those are the major players.


7) www.airroyale.com - financial information
--------------------------------------------------------

Air Royale International is privately held – the company does not
provide financials.  I have managed to gather the following
information:

“Air Royale International has a worldwide network of more than 5,500
aircraft ranging from twin turboprops to corporate jets and
wide-bodied commercial aircraft.”

Source: http://www.thetimesharebeat.com/2002/htl/sept/0906-01h.htm

From Hoovers (www.hoovers.com), I have gathered the following info:

Sales range: $10 to $15 million

# of employees: 11 to 20

Key executive: President, Wayne J Rizzi

You can purchase a comprehensive D&B report from –

http://www.apollolibrary.com:2420/cgi-bin/offsite?dn=849366943&site=HBN&url=http://dodge.hoovers.telebase.com/cgi-bin/dandb.cgi?P=P0020HA&Q=HOOVERSNOCHG&service=HOOVERS&U=[IP]&r=HO0

(copy and paste….)

The cost is $123.

If you can’t get to the report through this link, go to www.dandb.com
and search for the company.


8) Is the business viable based strictly on the Internet?
--------------------------------------------------------------------

It seems to be, although this will of course require a far more
in-depth analysis and some significant primary and secondary research.
 As a vote of confidence in the viability of an Internet model, check
out the press coverage Charter Auction, an Internet pure play, has
received –

http://www.charterauction.com/Press.htm


9) Additional information
--------------------------------

Please see reference list and additional links below.

 
I hope this response adequately addresses your request.  Please let me
know if you are in need of additional information concerning this
query.

Thanks,
ragingacademic-ga


References:

The Enlightened Business Traveler
Forbes Special Advertising Section
http://www.forbes.com/specialsections/BusinessAviation/BusinessAviation.pdf

2001 Special Section
http://www.forbes.com/specialsections/aviation-2001/flashintro.htm

Chartered Flights Boom Signals Change in Air
http://www.thestreet.com/funds/ericgillin/10047431.html


Additional Links:

Directory of Charter Companies
http://www.avbuyer.com/MainCharter.asp

Business.com Air Charter Directory
http://www.business.com/directory/transportation_and_logistics/airlines/carriers/charter/

Profile of Canadian Charter Market
http://www.planebusiness.com/perspectives/perspectives081598canada.html

Charter Terms Glossary
http://www.guides.com/acg/articles/glossary.asp

Google guide to charter companies in North America –
http://directory.google.com/Top/Business/Transportation_and_Logistics/Aviation/Charters/North_America/United_States/


Search Strategy:

"jet broker" –ink
“flight broker”
Comments  
Subject: Re: Financial details of private charter jets business and brokerage opportunities?
From: daisysdesk-ga on 21 Apr 2004 03:37 PDT
 
In response to your question, you should note that there are several
key players here.  Perhaps understanding the market could prove more
beneficial than an analytic detailed review of several companies.

To operate a coporate jet, for what is considered "on demand charter"
a company must comply with certain restrictions listed under FAR
135.xxx.  Aircraft maintenance, pilot qualifications, training,
records etc. all add up to high costs.  These companies then market
their aircraft to individuals or companies who might fill a void by
using their aircraft.

An extremely large pitfall here is that there is an extremely large
sunk cost invested into providing the service that a large return on
the charter rate (hourly) is required to make the venture profitable. 
Another pitfall is that once the aircraft and pilots are available,
the aircraft must meet the needs of the client, and airplanes, like
automobiles are very different in their "mission profiles."  For
instance, a certain jet might be able to transport 8 people from Las
Vegas to San Antonio, but could not take 4 people from Aspen to Las
Vegas.  Perhaps a midsize jet advertises a 2500 mile range, but can
not travel from New York to the Los Angeles Basin, (one of the most
popular year round routes) with 80% reliability due to changing winds.

Another pitfall in the business, is that Charter operators are
typically not Multi-Million dollar companies that OWN their corporate
aircraft.  These aircraft are typically owned by a client and are
"managed" by the charter company for the client, and chartered when
they are not in use by the client.

Because of this, the airplanes available for charter are not always
the best fit for the charter client.  Therefore when a client begins
looking for a charter flight, some knowledge of the aircraft available
is invaluable, this is where the customer sales representative becomes
the shining light.

There are several very profitable companies operating internationally
here in the US alone.  Blue Star is a popular one, and while they
don't own, manage, take care of or even see an airplane, their web
page convinces clients that they have at their disposal, hundreds of
aircraft located throughout the world, for different missions.

For the non-discriminating client, it is easier to pick up the phone
and call one person rather than try and get several quotes from
operators you don't know over the phone, and so begins the life of the
charter broker.

An important question to ask is who does all the work?  Once the
client calls the broker and requests a quote for Chicago to Vancouver,
then it's up to the broker to decide which airport in Chicago and
Vancouver and to find the operator that will best fill the need.  Is
there an empty airplane going that direction? That would be the most
profitable.  Or is there an airplane that will fit the bill located in
Chicago so that a positioning leg will not be required?  Also, how
reputable is that operator and how do you control quality? Wyvern? 
Once the best price is found for the flight, a commission is added and
the quote forwarded to the client.  If the client books, then money is
made off the top and the broker hopes all goes well on the charter
side.  If it does not, the broker's career will be short...

In real life companies feel the same way about brokers as they do real
estate agents.  With no overhead expenses except for a land line or
two, charter operators do not hold them in the highest regard, but on
the other hand will not turn down their business should the phone
ring.

Best of Luck.

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