Are digital platforms set to transform access to bizav?
Business aviation has really struggled to emerge from its stagnation since 2009. A little like Italy’s GDP, it’s not expected to recover its pre-crisis sales before the mid 2020s. For almost a decade now, as new jet deliveries atrophy and flight activity flatlines, the industry has seemed short of ideas. Surveys suggest it’s failed to get the luxury monkey off its back, with much of its target audience either ignorant of the product or unwilling to be associated with its often toxic image.
A lot of the industry’s misfortune be explained by the anaemic economic growth in its core markets. More broadly, uncertainty in the macroeconomic sphere has rattled businesses, inhibiting any discretionary expenditure. But some of the industry’s problems are of its own making. This is particularly true of access it provides to those wanting to charter business jets. The customer experience is poor, the options are opaque, the products are inconsistent. It seems positively luddite that in 2017 customers still get put on hold for hours whilst brokers take painstaking negotiations offline in order to find an operator to meet the required schedule.
In short, business aviation has contrived to be perhaps the very last service sector not to share an online market place with its customers. But now things are changing. Yes, online charter broker platforms have been around a few years, but without going far beyond the automation of the reverse-auction process brokers have always managed offline. Now the platforms are getting smarter, virtually consolidating the market’s fragmented inventory, patching into scheduling platforms, and accurately calculating pricing on a case by case basis.
In short, the online brokers are making charter much easier to find and pay for right away. With the pricing and availability issues fixed, these platforms should be able to broadcast business jet charter outside the industry silo for the first time. Easily comparable to any other form of transportation, the charter product becomes just another mobility option for someone browsing Expedia. Currently the business jet market is a tiny fraction of premium airline users. Yet it links up more than 5 times the number of destinations. Once access to chartering an aircraft is as transparent as booking a flight, business aviation could easily take 5% share of Premium. That alone would double its market value.
Digitisation has also opened up possibilities for new operator models. Most business jets fly half empty, and utilisation rates are miserably low, less than 10% of an LCC’s airliner. Marketing business jet sharing has always seemed to make sense, particularly on predictably popular city pairs. It was tried and failed 10 years ago but that was an eon ago in technology terms. Today’s customers‘ travel requirements can far more easily be tracked and matched to dynamic inventory availability. This is the essence of the membership schemes behind the rapidly expanding hybrid charter operators like Wheels Up and Surf Air.
In the excitement to see an uber-like platform finally liberating business jet charter from its black box, the would-be disruptors have attracted a deluge of investment. No doubt there’s an opportunity, a glamorous one at that, but we should expect some casualties on the way. No one needs reminding how difficult it is to manage metal profitably. And for the online brokers, the technology doesn’t come much cheaper. And they have to compete with traditional brokers who have all the relationships and none of the cost exposure. Online brokers may have to loss-lead to steal market share, and hope their platforms start to attract sufficient newcomers to business aviation to give their investors light at the end of the tunnel.