Operations

Richard Branson Getting into Private Jet Charter Business

Posted on June 27, 2007 by LCT Staff - Also by this author - About the author

SANTA MONICA, Calif. — Billionaire Richard Branson, chairman of Virgin Atlantic Airways, is about to dip his toe into the tantalizing but murky waters of the private jet charter business. Compared with the commercial airline industry, the private jet charter business is small — about $8 billion a year in sales — but it's growing fast, both in hours flown and revenue.

Virgin Charter, a new Virgin-financed website scheduled to launch this fall, plans to use Internet technology to provide prospective buyers with immediate price quotes for the trip destination, day and time requested. Buyers will also get details about the specific aircraft, pilots and operator, safety audits, and quality ratings from previous customers. Passengers or travel agents will be able to use Virgincharter.com to book domestic or international trips online with any one of a variety of charter operators using a credit card or wire transfer. Virgin will collect from the seller a commission on each trip sold.

Virgin Charter CEO Scott Duffy compares his travel site to financial website LendingTree, where competing lenders provide online interest rate quotes to prospective borrowers. Virgin Charter will not be the first charter jet website to link buyers and sellers. But Virgin promises to be the most comprehensive charter jet marketplace and, with the Virgin brand, is likely be the most recognizable. "No one else has brought everything together with this level of transparency," says Duffy, who is based in Santa Monica, Calif.

Virgin Charter is not planning to own or operate charter jets. It will offer price quotes only from operators that undergo safety audits. Operators will not be charged for giving quotes, and passengers will not be charged for using the site. Duffy says the site will also offer a dedicated area selling "empty legs," the inventory of trips that private jets will be flying without passengers.

As many as 40% of private jet trips are flown empty because jets are shuttling to a different city to start a scheduled trip, or have delivered their passengers and are returning to home base. That translates into lots of trips that could be sold if the information were available to potential buyers.

Jim Coyne, president of the National Air Transportation Association, a charter trade group, says Virgin's entry into the business shows the charter jet business has a strong future. Coyne estimates the industry has attracted $1 billion in new capital investment in the past two years.

He attributes that to the improving quality of charter jet operations and the deterioration of U.S. airline service. "Let's face it: 90% of what used to be considered first-class airline service has evaporated," he says.

Some experts aren't so sure Virgin Charter will be a sure success. Fred Gevalt, founder of the Air Charter Guide, one of the earliest guides to private jets for hire, isn't convinced the clubby charter business will embrace Virgin's concept. "This is an industry that has defied efforts to commoditize it," he says.

He estimates the jet charter business survives on thin profit margins of 3% to 5%. Private jet operators tend to resist brokers and other agents that get between buyers and sellers because they trim that profit further.

Source: USA Today

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