Air Charter Services
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Industry Overview
The air charter service industry includes about 2,500 companies with combined annual revenue of $8 billion. Major companies include NetJets, Flex Jet, Flight Options, and Evergreen Aviation. The industry is concentrated: the 50 largest companies account for 60 percent of industry revenue.
Air charter is the on-demand, nonscheduled transportation of passengers and cargo, and is distinct from the $20 billion commercial airline industry.
Competitive Landscape
Demand is driven by corporate profits and the needs of the US military. The profitability of individual companies depends on effective marketing and customer service. Large companies have advantages in fleet size and name recognition. Smaller companies can compete effectively by serving small local markets and offering lower prices. The industry is capital-intensive: average annual revenue per worker is nearly $250,000.
Products, Operations & Technology
Major services include domestic passenger travel (50 percent of industry revenue); international passenger travel (15 percent); domestic air freight (10 percent); and international air freight (5 percent). Other services include surveying and photography, crop dusting, and aerial advertising.
Charter flights are used by wealthy individuals, large corporations, sports teams, the US military, and government agencies. In general, charter flight is more flexible, extensive, and efficient than traditional commercial air travel. Air charter planes have access to over 5,000 general aviation airports; scheduled commercial aircraft are restricted to the 700 US commercial airports.
Charter aircraft include small pistonprop planes; helicopters; turboprop aircraft; light, midweight, and heavy jets; and large, multi-engine jet airliners. Of the 12,000 charter aircraft in operation, around 85 percent are fixed-wing aircraft and 15 percent are helicopters. The smallest pistonprop charter plane accommodates one pilot and one to five passengers, has a non-pressurized aircraft cabin, and a range of several hundred miles. A typical turboprop is cabin-pressurized, accommodates one or two pilots and eight passengers, has a range of around 1,000 miles, and travels 200 miles per hour. Traveling up to 8,000 miles at 500 miles per hour, pressurized heavy jets are flown by two pilots, can accommodate 18, and include a full bathroom and flight attendant service. Depending on fuselage configuration, large charter jet airliners can transport cargo or accommodate up to 500 people. Jet airliners transporting more than 30 passengers must fly under the more restrictive FAA Part 121 guidelines governing scheduled commercial air transportation.
A charter aircraft typically departs from a military base or a small general aviation terminal known as a fixed base operation (FBO). US TSA employees verify passenger identification but don't screen passengers or luggage. On smaller charter aircraft, pilots may be responsible for non-flying tasks such as checking baggage, seating passengers, and performing minor aircraft maintenance or repairs. Upon arrival, charter flights and crew may wait for the passengers until the return flight to the home base. However, around 40 percent of charter travel is comprised of "empty leg" flights: return trips to a plane's home base with no passengers or cargo. Each chartered plane flies an average of 400 hours annually. Charter flights last an average of one hour, and the average aircraft consumes 25 gallons of fuel per hour.
Common metrics in the industry include revenue passenger miles (the total distance traveled by all paying customers); available seat miles (total number of seats available multiplied by miles flown); and load factor (the ratio of revenue passenger miles to available seat miles). The air charter industry's annual 20 billion available seat miles is about one-fifth the size of the commercial airline industry. The average industry load factor is 60 percent; the commercial airline industry has an average load factor of 80 percent.
Major technical aircraft innovations include incorporating GPS on charter planes; developing prototypes of low-cost very light jets (VLJ); and improving a plane's aerodynamic efficiency and load capacity. Third-party companies provide online software and marketplaces for charter airline booking, billing, and customer service operations.