- 10 Aug 2020
- Gerrard Cowan
- Jet Charter
When considering if ad-hoc charter is a viable travel solution, versus scheduled airline services, there are several factors that need to be considered besides the actual cost. René Armas Maes explores these…Back to Articles
If privacy and multi-city stops are your top priorities, no other travel solution can beat Business Aviation. Similarly, if on-board meetings will be held (with confidential information shared), or if a group of six to eight senior employees need to travel together, then Business Aviation is likely to be the right travel solution. But are the costs to charter a jet really justifiable compared to airlines?
A good percentage of scheduled airline services fly via hub-and-spoke systems that allow them to optimize fixed- and human-capital resource utilization. This also increases the overall time it takes to travel, with aircraft transfers and security lines and queue bottlenecks at airports at the pre-boarding, boarding to deplaning stages.
Those delays can translate into significant corporate losses in terms of diminished productivity, revenue, market share, and face-time with key customers or prospects.
Business Aviation, including private jet charter, on the other hand, increases the value that a corporation can deliver to shareholders and core customers, maximizing the productivity of a team, as well as the time it takes to respond to a client’s need.
When evaluating your options, it is vital to analyze your travel history. At a first glance, Scheduled Airline transportation may make more sense financially, but often is not practical from a time-saving or productivity perspective.
As an example, one Senior Executive for an S&P 500 company commented that his corporation noticed typical time savings of 50-75% on certain trips using Business Aviation compared to aboard the scheduled airlines. The reason was down to the fact that the executives could not have productive work days sitting in airport terminals, or on a ramp.
What are the Savings of Private Jet Charter vs Scheduled Airline?
Recently, I conducted a business case for a client. Typically, the client’s CEO flies a round-trip from the East Coast (JFK, NYC) to the West Coast (SFO, CA) with three Vice Presidents. They make the trip non-stop, business class aboard the scheduled airlines.
The trip is flown four times annually, and the average total airline cost for all four executives is US$8,225. Tickets are usually purchase two or three days ahead of departure.
Having gathered some confidential information from my client (including the CEO’s and Vice-Presidents’ salaries and benefits, their expected revenue turnover, and the expected average productivity on-board the scheduled airline service), we then collected ad-hoc charter quotes for Mid-Size Jets able to connect Teterboro, New Jersey with Oakland Metropolitan airport non-stop, carrying four passengers.
The highest quote was $68,000, and the lowest was $59,000. Does that automatically make the airlines the best value solution? Let’s explore…
Even against non-stop airline services, it is evident the ad-hoc Business Aviation charter option offers a good return in terms of employee productivity. But let’s delve a little more deeply...
TABLE A: Schedules Airline vs Business Aviation Productivity Findings
For a six-hour, one-way direct commercial flight, a team of four executives gains 26.4 hours of productivity using Business Aviation
Building the Charter Case: Creating Time & Money
Not depicted in Table A is the fact that the increase in productivity of its executives (compared to travelling with the airlines), saves the corporation $34,000 in wages that are otherwise lost through unproductive travel time.
The corporation’s stated goal is to turn at least three-to-four times the executives’ wages into revenue-earned activity, allowing the corporation to grow and prosper. As depicted in Table B, that brings between $102,000 and $137,000 in revenue to the corporation.
Based on cost, the round-trip ad-hoc charter per passenger is 7.7x higher (or $15,750 greater) than the average cost of flying with the scheduled airlines. However, in the case of our study, that is reduced by 56% (to 3.4x the cost of the airlines, per passenger), when executive salary savings and productivity gains are factored.
TABLE B: Scheduled airline vs. Business Aviation Productivity Model & Assumptions
Further, by assuming scheduling flexibility for the ad-hoc charter service, including departure and arrival, and higher sales conversion rates that are enabled through more customer face-time/extra time for sales prospecting, and additional time for strategic planning initiatives, the benefits to the corporation, as shown in Table B, for a single return private charter flight were estimated to be between $74,000 and $108,000.
Simply put, the time savings equate to revenue earning with the private charter option. Ad-hoc charter may still be the most cost-effective option for a corporation in certain circumstances compared to the scheduled airline service.
Develop a Plan Based on Individual Circumstances
For companies measuring the feasibility of private charter, it is important to develop a corporate travel optimization model including multiple scenarios. It should focus on labor productivity, corporate income, and return on investment.
The goal should always be to assess the highest value creation strategy to move executives around. For the above client, a second business case was run to consider connecting flights for accessing remote areas. This study considered a scheduled airline’s connecting service (requiring a subsequent two-hour flight).
As with the first study, the conclusion showed a loss of an additional five hours of productivity for our executives, whereas if the corporation booked a charter flight, the employee KPI would jump to 7.2x, again favoring the private charter option (see Table C).
TABLE C: Scheduled Airline vs Business Aviation Productivity Model Findings – Two Hour Connecting Flight
Finally, our study featured a Mid-Size Jet. Ad-hoc charter generally starts at around $2,500 per hour for an Entry-Level/Light Jet, rising to $5,000 for a Mid-Size Jet, and $10,000 per hour for a Large Jet. Turboprops, meanwhile, are available for charter starting at $1,200 per hour (read more about private jet charter on AvBuyer).
Prices vary greatly in today’s highly negotiate private charter market. If you have yet to use Business Aviation – and particularly ad-hoc Charter – you may well be surprised by the extra value it brings, both to your top and bottom lines.
And if your projected charter requirement for the year exceeds 25 hours, you’ll find further savings can be made through a Jet Card program, which is a whole other story and opportunity to optimize your executive’s time and corporate profits…
Read More About: Mid-Size Jets