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NEW OWNERSHIP MODELS EXPAND AVAILABLE CHOICES
The use of private air travel for business trips has expanded rapidly over the past few decades. We estimate that the number of U.S. domestic passenger trips per year on business aircraft exceeded 17 million in 2007, or a number equal to about 40 percent of combined domestic first-class, business-class, and full-fare coach airline trips - travel options for which passengers also pay a premium for timeliness, comfort, or privacy. Once a company determines that it can benefit from private business travel, it generally identifies the most cost-effective option, including the operating characteristics of the aircraft and the options for obtaining this service. This paper examines some of the factors that influence decisions on these options, with particular emphasis on the financial and program alternatives that are making it less costly for business travelers to take advantage of private jet travel, thereby expanding its use. Our findings indicate that the customary view of these options is oversimplified and ignores the new ownership (or non-ownership) models for obtaining use of a business aircraft.
Private aircraft, especially jets, account for a growing share of the premium business travel market. Since jets account for the bulk of this market and their share is growing at the expense of turboprops (see Table 1), the discussion that follows will focus on jets. The use of private or corporate jets began in the mid-1960s, when manufacturers started offering smaller jets to meet the demand of those few business travelers who were looking for the convenience of their own jet. Over the ensuing 40 years, the fleet of business jets in the United States has expanded at a faster pace than air travel in general, but not without periods of boom and bust. Factors that affect business jet sales and use include operating costs, GDP, and corporate profits. Moreover, overall growth has been spurred by the increasingly diverse selection of jets available for business travel that provide more options to business travelers and, since the early 1990s, the introduction and expansion of fractional share programs. These programs have lowered the cost of private travel by private aircraft to individuals and businesses that do not have sufficient demand to fully utilize a plane. Another potential...