Uber in the sky
Could flight sharing apps rejuvenate the ailing bizjet market?
I recently read an interview with Embraer’s CEO where he discussed the ‘Uberization of business jets’. As an uber devotee, I started to investigate what this actually means and discovered that we may be on the brink of a structural change in the bizjet industry.
Flying on a bizjet has traditionally been the preserve of the rich and famous; royals, politicians, celebrities, sports stars and CEOs. The very wealthiest own their own jet, whilst others charter aircraft through a broker who sources availability for a particular date, and then negotiates a price with the owner on their client’s behalf. This modus operandi leads to an extremely underutilised asset. It is estimated that approximately a third of hours spent flying were done without passengers on board, and that the average private jet was airborne for 300 hours per year, far below the optimal 1,100 to 1,200 hours.
The 2009 financial crisis caused the second hand bizjet market to be flooded. Currently 10-12% of used aircraft are for sale, where in 2008 it was 4-6%. As a result, demand for new aircraft (which depreciate rapidly) has been subdued. Flight Global Consultancy is forecasting the number of turboprop deliveries to fall in 2016 (the final data are yet to be received).
Enter stage left the disruptors; JetSmarter, Skyuber and Blackjet. Companies that are exploiting technology in order to connect passengers with empty seats on bizjets. Passengers can book seats on shared flights or charter their own aircraft all using an app on their smartphone in return for a one off joining fee and then either an annual subscription allowing unlimited travel, or on a pay per flight basis. Flights can be booked months in advance, or on the day of travel, giving incredible flexibility. The CEO of JetSmarter estimates that opening up bizjet travel to the next tier of passengers – those who would normally travel first and business class – could widen the market from tens of thousands to 2.5-3 million people in the US alone.
The precursor to JetSmarter and its competitors is NetJets, which works through fractional jet ownership. Customers purchase only a portion of the aircraft, a bit like a timeshare. NetJets has undoubtedly opened up the business jet market but the upfront costs involved mean that its customers are mainly large corporates who purchase ownership to be used by a group of executives. JetSmarter, Skyuber and Blackjet are opening up business jets to individuals in an unprecedented way.
This way of flying is still in its infancy and is not yet prolific enough to impact demand for new aircraft. However, if this proves to be a profitable and sustainable business model for what are effectively technology companies, then it stands to reason that we could see a return to pre 2008 demand levels for smaller aircraft. The next question though is who will own the assets. Will high net worth individuals see business jets as an asset they can get yield from through ‘uberising’ it, or will the technology companies acting as the modern age brokers look to lease aircraft in the way that airlines do now? Either way it looks as though the way to rejuvenate the bizjet industry could be through an app.
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