During the last two decades, the boom in general aviation has been a home run for the limousine industry. Is this cash cow channel recession-proof? How will the economic downturn affect this market segment, and what will be the trickle-down effects on the chauffeured transportation industry? Is this still the great opportunity for this industry that it once was, and will it keep moving forward? First, let’s look at the growth of the channel to understand the typical consumer.
General aviation grew when private jet charter companies expanded their reach to allow fractional ownership in aircraft. This new opportunity opened the door to a step-down tier of affluence, bringing ultra luxury to more individuals. Private aviation was no longer limited to the one percent of the super rich who could afford not only to own an aircraft but also to hangar it and have a maintenance and pilot staff on call. Now the top 5% could afford to fly in private jets. The initial growth was followed by charter “cards,” which allowed individuals or companies to purchase hours of service based on aircraft type and need.
The wealthy no longer need to own an aircraft to travel in ultra luxury. These companies also targeted business executives with this offering. The marketing approach was time savings for busy executives, who could visit multiple cities in a day and not need to stay over or waste time waiting for commercial flights. This step-down tier used chauffeured transportation at destinations.
The growth spurt in general aviation in the 1980s and ‘90s was the genesis of companies who targeted this niche market. LimoLink, Fortis Riders, Savoya, and Celebrity Jet Charters all emerged on the scene poised to capture the golden calf that was general aviation’s elite traveler. Once on solid ground, the super-wealthy needed to be squired to luxury resorts, vacation homes, road shows, and business appointments. These companies built their services around the demanding needs of general aviation and discerning passengers.
BASED IN MARION, Iowa, LimoLink is a booking service for ground transportation. Through its affiliate network, it services private aviation clients at Fixed Based Operations (FBOs) across the globe. LimoLink was built from the ground up to serve the needs of business aviation. Chad Hartke, who is responsible for LimoLink’s Private Aviation Services, says, “The founders of LimoLink engaged the leaders in private aviation to develop the specialized processes and procedures required to serve this very unique segment. As a result, our business looks and feels very much like major aviation fi rms.” LimoLink’s website explains how it differentiates itself in this market by discussing the fact that private planes fl y higher and faster than commercial aircraft, which causes them to often arrive earlier than first anticipated. Extra diligence is needed with these flights. LimoLink monitors the private aircraft tail numbers, and stays in contact with both the chauffeurs and the FBOs to ensure that the vehicle is waiting for the passenger when the plane lands.
The advent of fractional ownership has helped LimoLink succeed in this market segment. “The growth of business aviation has been tremendous, both in terms of potential end market and our organic growth. Most significant has been the expansion of the fractional ownership space taking meaningful market share,” Hartke says. He sees many of these clients, given the current economic situation, moving from the fractional market to the “card” side of the business.
“Like many other vertical markets served by chauffeured ground, the business aviation industry is under some economic pressure. That said, we believe this will rebound faster than other areas of the economy, as the significant strengthening of the dollar and the decrease in oil should take some of the price sensitivity out of the market,” Hartke says.
ATLANTA-BASED FORTIS RIDERS tends to be the gentle giant of the bunch. Fortis was founded in 2000 to service this market segment. Most operators would not be familiar with the Fortis name, but the FBOs know them well. Fortis takes a different approach compared to its competitors. Nathan Foy, founder of Fortis Riders, explains, “In selling the private aviation companies, the key thing is the relationship. We get 25% of our clients from referrals. Flight professionals tend to talk and share leads. We also do targeted events where we have many of our clients together to network and have fun.”
For Foy, the industry has been changing since he became involved. “In the early 2000s, price was more of an issue. Technology was nil. Everyone phoned in their bookings. Now everyone is looking for a company that can understand technology. Among our clients, service is the issue, not price,” Foy explains.
Foy feels that businesses will continue to use private aviation. “Yes, but it will be more covert and harder to identify.
In down economic times, people hide their planes more. After Enron and the accounting scandals, it was easier to find Bin Laden than someone willing to admit they had a corporate jet.”
DALLAS-BASED SAVOYA’S WEBSITE touts the fact that it was built to serve the private aviation community. Savoya owner Alex Danza explains on the website video that Savoya is “the ground provider of choice for discriminating private air travelers and flight departments. Safety and security measures are built into every process from the thorough screening of our local chauffeurs and fl eet to the advanced technology in the vehicles, including hand-held chauffeur.”
Savoya’s site explains that it was created to “address a void in the ground transportation industry. Historically, chauffeured transportation has been the black hole of travel — the one aspect that easily goes wrong. At Savoya, we’re changing the industry with our sole focus of providing the most discriminating clients with a seamless travel experience.”
Celebrity Jet Charters
CELEBRITY LIMOUSINE AND Celebrity Jet Charters’ founder Dennis Adams sees this segment differently. He believes that there will always be those individuals who need to travel on private aircraft, and his companies are poised to serve them. But Adams is realistic: “I believe that there will be a cleansing in the private aviation industry. Many people are walking away from their planes, as they are no longer able to afford the payments. We are seeing people both in the charter and the limousine industry leave their businesses,” Adams says.
Celebrity Jet Charters allow limousine companies to book not only their clients’ ground transportation but also the jet charter.
Do Operators Still Have Opportunities?
LIMOLINK’S HARTKE FEELS that this is not a segment you just jump into. “Limousine companies need to understand the intricacies of this type of work. We would recommend a tour of local FBOs as a good starting point.”
Fortis’ Foy suggests networking. “It’s not an easy industry to get into, but it’s very lucrative. Relationships are the key. Learn the language of flight departments — this will earn their respect.”
Working with Savoya, LimoLink, and Fortis Riders to deliver service is another opportunity to gain shares in this market. The world is watching how the economy shapes up in 2009. The luxury excesses of the past may still play a part in spending, but companies will become much more creative in justifying them.
Recently, rapper P. Diddy announced that he was no longer using his private jet to travel back and forth from Los Angeles. He would now have to move down to first class on American Airlines. Fortunately, not all private aviation customers are making the sacrifices of P. Diddy.
The Future of Private Aviation
THE CRYSTAL BALL for this segment is unclear. LimoLink’s Chad Hartke says, “Consumers who can afford the amenities will continue to use them, however, those who were leveraging themselves into a product they couldn’t will slow down. It will be interesting to watch the fractional aviation firms and charter aviation companies, as that is where we see significant retail usage. Our belief is that the bottom had already hit the aviation market prior to the financial tsunami that hit the rest of our economy. Certainly CEOs and other top executives have been forced back into the office to monitor the crisis; however, the great leaders will soon be back on the road taking market share.”
But Fortis’ Nathan Foy observes, “[The segment is] flat. The casual charter users are down. The guys that own the planes or the fractional shares are still spending like normal. They are the key to this segment, and they really aren’t too affected by the current economy. If you can afford to fly private, it’s something that’s very hard to give up. When Jack Welch retired from GE, part of his severance package was continued use of the GE corporate jet. It was the thing he couldn’t part with.”