Air Transport World

Airlines' private problem: are premium passengers shifting to business jets?(COMPETITION)

THE AIRLINE INDUSTRY, PARTICULARLY in the deregulated US market, is defined by fierce competition among carriers. Airline executives plotting strategy must be fully aware of competitors' latest fares, route choices and service offerings in order best to determine the direction their own carrier should take. But a serious competitor has emerged in recent years that may be far more difficult to counter than a rival airline: Business aviation.

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While there are no definitive numbers proving that premium passengers are shifting from airlines to business jets, trends in both sectors point to that conclusion. No longer merely the province of the wealthiest corporate titans who can afford to spend millions of dollars to purchase a posh private jet, traveling aboard business aircraft now is available to a wider range of passengers. Fractional ownership, typified by organizations like NetJets, and operators that contract out business jets for individual trips have changed the high-end air transportation equation.

"More people are flying private than ever before," says Todd Rome, president and co-founder of BlueStar Jets, a brokerage company that charters aircraft for individual trips, offering customers "any jet, any time, any place." He tells ATW that BlueStar is growing 25%-30% per year and is on pace to generate $1 billion in annual revenue within five years. "When availability tightens up in commercial aviation, private aviation booms," he says, pointing to significant airline capacity cuts planned for the remainder of this year and 2009.

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Stanford Transportation Group, a San Francisco-based aviation consultancy, recently completed an extensive study that found that the number of US airline passengers paying full fares or higher has dropped significantly throughout this decade while business aviation has gone through "a steady expansion" over the same period. …

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