2024 forecast: Good for charter flyers, for charter operators, not so much

Private jet charter operators and aircraft owners could be squeezed in 2024 as charter rates drop while operating costs continue to increase.

By Doug Gollan, February 1, 2024

Charter customers, both on-demand and via jet cards and memberships, can look forward to better pricing in 2024.

It’s the same story as last year, and while consumers may find it a good read, it may not be so pleasant for operators.

Lower charter demand

Two opposing forces don’t show any letup just four weeks into the new year.

The demand side is lower.

During the first four weeks of 2024, charter and fractional segments in the U.S. were down 5%, according to WingX.

What’s more, several operators say as fractional programs received more aircraft in the last two years and shareowners have moderated their flying, the fractionals, which guarantee availability on as little as four-to-six hours’ notice, have less need to go off-fleet.

Executives say that had been a lucrative source of high-yield charter revenue over the past three years.

“I think if you look at the business model for most of the fractionals, a 10% drop in traffic for them is probably worth 5% profit. The fractionals work better when they do not have to (go off-fleet to) charter (when there is too much demand),” says Al Whyte, the Editor of Corporate Jet Investor.

“Fractionals have stringent requirements on aircraft age, cabin interior, pilot experience, and so they pay a premium to Joe Smith, who is calling three brokers to get the lowest price and will take a 25-year old Learjet,” says one operator.

Guaranteed revenue programs, which flight providers – both fractional and jet cards – use to block time on charter operator fleets specifically for their customers, are not needed in the same volume as during the Covid surge in demand.

One operator says he went from having multiple GRPs covering half of his fleet to zero.

During the spike in private jet flying, Wheels Up paid FlyExclusive $37.5 million to block availability on 30 of its jets.

It guarantees availability to members at capped hourly rates and often found itself paying more for flights than it was taking in.

On-demand brokers who had more informally fronted money to operators so when they called for a client, there would be a jet, say they no longer have to do that.

Price concerns

On the customer side, increased prices remain the number one reason flyers say they are considering changing providers, even if it is lower than in 2022.

Back then, 62.4% of jet card and fractional users cited high prices as the top reason for wanting to switch.

Second was Flight delays, changes, and cancelations at 33.6%.

In 2023, increased prices were number one but fell to 55.3%.

At the same, 37.4% cited delays and cancelations, an 11.3% increase.

Moreover, those flyers citing poor communication when something goes wrong increased from 20.8% to 24.1%.

In other words, despite lower demand, supply chain, and labor issues have made operating as tricky as ever.

READ: Why private aviation’s supply chain and labor crisis isn’t going away

Let’s make a deal

Regarding pricing, the hourly cost for fixed-rate, guaranteed availability jet cards fell 8.5% from Q4 2022 to Q4 2023.

Yet, they were still 27.9% more than the FET-free promotions of 2020 and 21.4% higher than pre-Covid prices.

Buyers are also getting more concessions from the jet card and membership providers.

The percentage of subscribers to Private Jet Card Comparisons who negotiated free hours increased by 39% year-over-year.

Those who were able to gain flight credits jumped by 67%.

With prices going down, more buyers were also able to negotiate rate lock extensions, the period those contracted rates are guaranteed.

Subscribers who say they negotiated rate locks beyond what was offered increased by more than 500%.

READ: 7 things you can negotiate when buying a jet card

Private jet operating costs

What’s up considerably from those pre-Covid days is virtually every cost related to operating a private jet.

Pilot salaries, pilot training, delays in getting pilot training slots, the cost of parts, pay for technicians, the wait to get parts, ramp fees at FBOs, lubricants, deicing fluid, and catering all cost more.

Also higher are the expectations from owners of private jets who earn revenue from making their jets available for charter.

Speaking to both operators and brokers over the past several weeks, including during the NBAA Regional in Miami yesterday, operators increasingly find themselves in a difficult position.

“Owners don’t want to hear that charter prices are down while their costs are up,” says the commercial director at one management company that has nearly two dozen jets on its charter certificate.

“There’s always another management company that will tell them what they want to hear, so you have to be very soft with them. Otherwise, they will pick up and leave,” he says.

Difficult decisions

Other operators say jet owners are less enthused with the charter market now that their yield is going down.

They are being more strategic in terms of what flights they want, knowing that each landing and takeoff is accumulating flight hours, bringing them closer to mandatory maintenance checks.

“A red light goes off, and their airplane is on the ground for one week, two weeks, four weeks, and they are then chartering, buying jet cards, and the question is, ‘Why do I own an airplane when I can’t use it?'” says another.

Owners also need to be more attentive to their pilots if they want to keep them.

Another management company executive says he is in the process of suing several pilots who left for greener grass.

He says their training contracts required reimbursement fees of over $30,000 per pilot the aircraft owners had paid to cover required training.

READ: Why preowned fractional ownership could be hot in 2024

Blue light special

However, it’s not just Joe Smith who is shopping trips.

As fractional owners have seen their costs continue to rise via annual escalators that track the consumer price index, they, too, are keeping a sharp eye on the cost of flying privately.

The percentage of fractional owners who say they also use on-demand charters increased from 18.9% in 2021 to 29.3% in 2022, spiking to 39.2% last year.

What’s more, 59.8% said they also use jet cards.

Experts say they are finding plenty to choose from.

Operators of large owned and leased floating fleets such as Wheels Up, Vista/XO, and FlyExclusive who can’t pass along the bills to aircraft owners like management companies have become much more aggressive in the wholesale market, say brokers.

“Two years ago, you would call for a quote, and you wouldn’t hear back. Now, they are calling us asking if we have any trips,” says one large broker.

He says it’s good for his business because consumers need more guidance than ever.

He puts it this way: “There are deals, and there are bad deals. The so-called sophisticated consumer doesn’t really know until it’s too late.”

READ: 16 reasons to use a private jet charter broker

Who’s doing well?

One executive in the used parts business says his business has never been stronger – and more profitable.

His focus has been buying and harvesting parts for Hawker 800 models.

The popular charter jet is both out of production and no longer supported by its OEM.

AOG maintenance providers say their business is good, too.

AOG is lingo for aircraft on the ground. It refers to a private jet that has a mechanical away from the base.

Flyers also seem to be doing well.

Over 96% of subscribers to Private Jet Card Comparisons said they are positive about their personal financial outlook for the next 24 months. 76.6% who are extremely/very confident.

They also expect to utilize private jets at similar levels to a year ago, with an average of 42.4 flight hours, up slightly from 41.3 hours.

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