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Planning to Charter Your Jet? Assess the Market
Following on from the previous discussion ‘Is it worth chartering out your jet?,’ René Armas Maes provides a sample market analysis to provide guidance on determining charter demand for your aircraft…
For those business aircraft owners, or prospective owners, planning to charter their aircraft out when it’s not being used, it’s important to assess the market size and understand the importance of the charter market both domestically, and internationally.
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By having a knowledge of the leading players and market size, you can identify the best Part 135 players that could help you offset some of the fixed costs of ownership by placing your aircraft under an aircraft management agreement with them. You’ll also form a good idea of the most common areas of charter demand, and how your aircraft can possibly help meet that demand.
But how can you approach such a market analysis? Within the following article, we have utilized some historical data on the Canadian charter market in 2019. This data is not intended to provide up-to-date charter market analysis, but is simply included with the intention of sharing insights on how to do an effective market size analysis.
How to Conduct a Charter Market Survey
Conducting a detailed analysis of the size of a country’s corporate jet charter market involves a number of different steps.
Several databases, including ARGUS TRAQPak, AMSTAT, Cirium fleet analytics, and annual statistics collected by industry trade groups should be reviewed for accuracy against independent data collected directly from airports and civil aviation authorities.
To develop our sample ‘2019 Business Jet Charter Market Size Survey’ for Canada, first we needed to identify the current charter fleet in the country, the number of aircraft movements, and hours flown.
The focus of this analysis was exclusively on Canada’s C-registered business jet activity. For simplicity’s sake, we excluded from the analysis any US and international inbound and outbound charter traffic to or from Canada.
Based on data from Cirium fleet analytics, Canada had 489 C-registered business jets in 2019, and 57% of those were actively flying charter services, either on a full-time or a part-time basis (i.e. when not being used by the aircraft’s owner).
Taking the fleet size into account, and using ARGUS TRAQPak data from 2019, we were able to discover that close to 36,000 hours were flown on domestic and international charter services in Canada by Cregistered business jets over the course of the year. The split was 32% domestic flights, and 68% international.
CHART B: Domestic vs. International Canadian Charter Travel in 2019, by Cabin Segment
Source: Cirium; Consultant analysis. Note: Tier 1 is defined as fleet operators with eight or more jets
By understanding how large a charter market is, and whether it has grown over the years, aircraft owners are better positioned to understand the potential demand from charter users for their aircraft, and to negotiate not only charter rates, accordingly, but also comprehensive aircraft management agreements that will defray a portion of the aircraft’s costs.
Potential Revenue Analysis
To come up with a historic domestic and international Cregistered business charter market size estimate in 2019, the first methodology involves conducting a survey and understanding average charter rates in the business jet segment, to calculate the revenue that could potentially be generated.
Using this method, and after making a number of assumptions, the estimated annual charter revenue generated by Canada’s C-registered business jets ranged from CAD$255m to CAD$265m during 2019, in a conservative scenario. (This estimate takes into account the cabin segment breakdown shown in Chart B, below).
Three scenarios (including pessimistic, conservative and optimistic/aggressive), based on a number of assumptions, should be built into the Market Size Analysis. In the case of our sample analysis of 2019 Charter in Canada, estimates ranged from CAD$260m in the conservative scenario to CAD$285m in the optimistic/ aggressive scenario.
Having understood the total market size, aircraft owners can potentially negotiate a better per-hour rate and overall contract terms and conditions with the management company.
Movements & Flight Hour Data
Next, we evaluated these same aircraft’s movements and flight-hour data, but rather than applying an average charter rate per cabin segment, the revenue that must be generated to cover the aircraft operating costs plus a profit margin are estimated, for which AMSTAT’s operating cost data is used.
Assuming a profit margin, the estimated annual revenue generated by C-registered business jets ranged between CAD$264m to CAD$280m in 2019.
Note: Market size estimates in this analysis covered only a subset of the entire Canadian C-registered annual charter revenue in 2019.
Next, Toronto, Calgary, Montreal and Edmonton accounted for 43% of all business jet charter departures in 2019, while the average domestic stage length, by cabin segment, was approximately 450nm.
Interestingly, no clear difference was found across multiple cabin segments. In fact, Light and Very Light Jets’ average stage length was 455nm, while Midsize/Super Mid-size and Large/Ultra-Long-Range Jets averaged 450 and 446nm, respectively.
On the other hand, the top five international citypairs for charter services are shown in Chart D, overleaf. The average international stage length (in nautical miles) by cabin segment in 2019 was 545nm for the Light and Very Light Jet segment, while the Mid-size and Super Mid-size Jet, and Large and Ultra-Long-Range Jets averaged 875nm and 1,111nm, respectively.
This information is key to understanding how many potential hours per trip your aircraft may fly, how much revenue you may derive per agreed charter trip, and whether any extra wear and tear budget should be built into an aircraft owner financial model.
CHART D: Top Five International Canadian Business Jet Charter Markets in 2019
Note: CYEG – Edmonton; CYYC – Calgary; CYUL – Montreal; CYYZ – Toronto; and CYOW – Ottawa Sources: ARGUS TRAQPak and Great Circle Mapper.
Future Market Potential Estimates
In order to estimate the future growth of the market, it is key to collect annual statistics by industry trade groups such as the Airports Council International and Canadian airports. In addition, corporate charter information needs to be collected from Transport Canada, and they must be cross-checked and validated with the multiple data sources available.
While our sample study covered the Canadian charter market, your own study will focus on the region your aircraft is based in. Regardless of geography, the information you source should be detailed. At the very least it should include operation type, aircraft category, routing, and flight time as filed in the flight plan. Passenger loads will add an extra layer of detail, but may not be easy to access, due to confidentiality.
From this sample market size analysis, it is clear that aircraft owners can understand the size of the existing charter market within their region to determine how much market demand there is likely to be for their aircraft, using the information to leverage favorable rates with a prospective management company.
We have also demonstrated how to analyze average stage lengths the aircraft may fly when chartered out, the most common airport hubs, how many hours were flown historically, and how demand may look in the future. It is hoped this analysis sample further quips you to answer the question, ‘Is it Worth Chartering Out Your Jet?’ (AvBuyer, December edition, p34; January edition, p62). ❚
Note: CYUL – Montreal; CYYZ – Toronto; KTEB – Teterboro; KPBI – Palm Beach; MYNN – Nassau; and KAPF – Fort Lauderdale Executive Airport Source: ARGUS TRAQPak and Great Circle Mapper.
RENÉ ARMAS MAES
is Vice President Commercial at Jet Link International LLC, an international aviation consultancy. He has built a successful track record for delivering Business Aviation consulting projects for Fortune 500 companies, Venture Capital firms, and HNWIs in North America, the Middle East, Europe and Latin America. His expertise includes corporate travel assessments, business aircraft analysis, aircraft financing and sales.
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