Private jets find airline allies to boost revenue

How does a private jet service woo customers in the middle of a recession? Go after the first-class airline passenger, of course.

Two fractional jet ownership companies have announced agreements with foreign carriers that would let them pursue airlines’ premium customers.

CitationAir of Greenwich, Conn., has opened its members-only private jet service to British Airways customers traveling in the United States, while Flexjet of Richardson, Texas, will partner with Korean Air. Both private jet operators say success will be measured one new passenger at a time.

“If we got one every day, it would be a home run,” said Woody B. Harford, senior vice president at CitationAir. “At $6,000, $8,000 or $10,000 an hour, that’s massive growth in revenues. We’re not selling coach seats.”

When the economy was good, fractional jet companies did a booming business. CitationAir, owned by Cessna, and Flexjet, owned by Bombardier, were effective sales arms for their parent companies. Customers seeking the kind of luxury, privacy and convenience not available on commercial airplanes could buy a fraction of a business jet, although it was not cheap, as Harford acknowledged.

In the recession, however, aircraft sales stalled and demand for private jet service plummeted. Columbus-based NetJets, the largest operator and the company that pioneered the concept of fractional jet ownership 24 years ago, laid off 1,200 of its 8,300 workers, changed its top executive and found itself buying back dozens of airplanes from its customers that it could not sell off or fly.

“Certainly it has been a difficult time everywhere, from manufacturers to owners,” said David Sokol, chairman and CEO of NetJets.

Ira Riklis, of Lydia Security Monitoring, a home-security firm, said he was cautious three years ago when he decided to buy a Flexjet 25 Jet Card but ended up using the plane so much he traded the card for a share in a Learjet 40.

“Managing is about dealing with limited resources,” he said. “In the case of my executives’ time, it is a much more precious resource to me then the cost of the private jet.”

Riklis is one of a few fractional owners not cutting back on his time aloft. Flight hours have declined 30 percent from 2007, a peak year for the industry, according to David Strauss, managing director at UBS investment research.

“The whole industry got too big for itself too fast,” Strauss said. “They had these airplanes and utilization dropped through the floor.”

Reinvigorating interest so that people will book more hours is what motivated Flexjet and CitationAir to team with foreign airlines. They hope that some first-class passengers on arriving foreign flights will choose a private jet over a cramped regional jet to get to their next destination.

“From our perspective, it’s an opportunity to fly a customer we don’t know today,” said Steve O’Neill, chief executive of CitationAir, in describing his company’s agreement with British Airways.

The airlines will receive a commission when passengers book private jets, and Flexjet will encourage its customers to buy first-class tickets on Korean Air. Both airlines say their premium customers will appreciate knowing whom to call for private jet travel in America.

“The average Korean doesn’t know the private aviation landscape in the U.S.,” said Fred Reid, president of Flexjet.