Healthy Prospects Buoy Charter Operations

September 27, 2007
Written by James Careless
333-charterDespite ever-increasing fuel prices, Canada’s fixedwing charter industry is in good financial health. The only disagreement among industry people contacted by WINGS magazine is over just how good their business is. In Halifax, “Business is holding fairly steady,” says Steven Christiansen, president of Maritime Air Charter. MAC flies four prop aircraft: two Piper Navajos, an Islander, and a Beechcraft King Air A-100.

“For us, business has been steady,” says Dylan Fast, president of Fast Air in Winnipeg. “It hasn’t been outrageous, but the market has steadily improved. We’ve just added three airplanes and could easily add another.” At present, Fast Air’s prop fleet is comprised of a Turbo Otter, three Piper Chieftains, a Piper Cheyenne II, and four King Air B200s. Fast Air also flies two Westwind business jets.

“Business is going well,” says Adam Penner, operations manager of Harv’s Air Service in Steinbach, Manitoba. “We have our loyal clientele in northwestern Ontario and central Manitoba, and they continue to stick with us.” Including aircraft used for its flight school, Harv’s Air has 13 Cessna 152s, five Cessna 172s, two Citabria 7-ECAs, a Piper Warrior, a rebuilt 1944 Taylor Craft L2 C-FGER and a Pitts S2B biplane. In the twin-engine category, Harv’s Air has a Twin Beech 95, a Twin Piper Seneca and a Navajo.

“The fixed-wing charter business is excellent,” says Larry Libman, president of Corporate Aircraft Charters in Montreal. “As an international charter broker, we get requests from everywhere.” By virtue of being a broker, CAC’s aircraft inventory changes on an ongoing basis. However, according to its website, the company offers everything from de Havilland Beavers and Bell JetRanger 206s to Navajos and King Airs; plus business jets (Challengers, Citations, Gulfstreams, and Lears). As well, if you should want to book a business-configured Airbus A319, Boeing 727, 737 or 757, CAC can supply them.

WHO’S FLYING CHARTER
So who are the customers who are keeping Canada’s fixed-wing charters busy?

Libman says they come from all over the spectrum. “We do a lot of flying for mining and resources companies, native businesspeople, film and entertainment, sports teams, and emergency and fire crews,” he says. “Overall, we have a very diversified client base.”

“Our customers are mainly business people out of Halifax,” says Maritime Air’s Steve Christiansen. “We also serve a lot of government passengers.”

“We’re flying people all over the north,” says Dylan Fast. “Although a number of people fly with us for the destinations we can reach, many are former commercial travellers who have become dissatisfied with the airlines.”

FACING CHALLENGES
Even in an industry that’s experiencing good times, there are many obstacles that hamper fixed-wing charter operators. Of these, “The biggest challenge is to try to keep costs down in the face of big increases in fuel prices,” says Christiansen. “We also still coping with the huge rise in insurance costs a few years ago, when the rates were effectively doubled. They have stayed steady since then, but the increases haven’t been reduced at all.”

“Fuel costs are a big challenge,” agrees Fast, but they are fairly easy to deal with. That’s because “we just pass the cost onto the customer,” Penner of Harv’s Air says. “They grumble about it, but everyone is in the same boat. Anyone who drives a car understands what we’re going through.”

Government regulations are another headache for Canada’s charter operators. In particular, “the bond that the Americans now require for using their airports is a real problem,” says Penner. “It’s about $2,000 an aircraft, and you don’t get much for it. It’s my understanding that the bond will pay your fine if you do something wrong with US Customs, but that’s about it. They’re just making sure they get their money; meaning that you’re guilty until proven innocent. For us, the $2,000 bond is a cost that pops out of nowhere. It forces you to decide which of your aircraft will serve the States, and which will not. That restricts your flexibility.”

“I don’t have any issue with better security, but the paperwork and bureaucracy that goes with it is such a pain,” adds Maritime Air’s Christiansen. “The system is designed for airline carriers, including the requirement to use very expensive passport readers. For charter services such as ourselves, the cost is prohibitive.”

Making matters worse is that when government officials mess up, it’s the charter operators that end up paying for their mistakes. In one instance, “Maritime Air Charter Ltd. was threatened with a $35,000 fine due to Homeland Security’s incomplete database,” says Chirsitansen. “We were told in no uncertain terms that we would be fined on landing, and it was up to us to prove that the error was theirs. Not all DHS personnel are that bad, but if you get someone nasty or who got out of the wrong side of the bed that morning, their individual powers are scary.”

Then there’s marketing: Although the air charter business is doing well, there’s no doubt that more travellers would use this service if they only knew it existed. To make this happen, “we are trying to educate travel agents as to the benefits of charters,” says Christiansen. “A few of them are onboard, but for most travel agents, charter is a little blip on their radar.”

The next big challenge, as far as Corporate Aircraft Charters is concerned, is finding the leased aircraft space that customers want. “For us, the big problem is inventory,” Libman explains. “It’s hard to get access to enough aircraft, especially jets in the 25-passenger category. They don’t build many aircraft that can hold this number of people. The Falcon 900 can hold 16, but to hold more than that, you’ve got to use a 727-200, 757 or Airbus configured for 50-60 businesspeople. The trouble is that these larger aircraft are expensive; you don’t hold the price down just because these planes have been configured to only hold 50 seats.”

BIG CHANGES AHEAD?
Today, Canada’s fixed-wing charters rely on prop planes. They have to; in most cases, comparable jet transports are just too expensive to buy and maintain. However, this may soon change as VLJs (Very Light Jets) make their presence known in the aviation world. Built to have a maximum takeoff weight under 10,000 pounds, they can seat between three and six passengers. VLJs are meant to compete with prop planes on purchase, operational and maintenance costs.

Among the VLJs that are available now or coming to market soon are the Eclipse 500, Cessna Citation Mustang, the Adam A700 AdamJet, and Diamond Aircraft Industries’ D-JET. Meanwhile, if you’re a charter operator who wants to sell your passengers a thrilling ride, get an ATG Javelin Mk.10. Powered by a pair of Williams FJ33 turbofans, the two-seat ATG Javelin looks like a T-38 jet trainer with an F18’s twin tail, thanks to the Javelin’s seat-behind-seat cockpit arrangement, fighterstyle fuselage and clear fighterstyle canopy.

“We see ourselves moving into VLJs,” says Dylan Fast. “We still have yet to have one certified in Canada, but eventually that will come.”

“When they get VLJs into service, it will be tremendous for the air charter business,” enthuses Larry Libman. “Compared to conventional business jets, they cost 50 per cent less to buy and operate. This should result in us being able to offer a 35-40 per cent lower ticket price for flights from Montreal to Toronto, New York and Chicago. This should increase our closing rate by at least 50 per cent.” Does this mean that VLJs are the ‘Next Big Thing’, as far as fixed-wing charters are concerned? On this point, operators disagree.

“If the VLJs do what their makers say they’ll do, they’ll obsolete the Navajos and the KingAirs,” adds Adam Penner. “People like jets, while prop planes are looked down upon. Plus, the VLJs should go twice as fast and twice as high as props, and be far more comfortable to fly in.”

“I don’t think they’ll put props out of business,” counters Fast. “Yes, VLJs will fill a niche market for two to four passengers. But we are still doing a lot of flights up north where we’re carrying seven to eight passengers. The VLJs can’t replace the props that carry them, but I can see them creating a new market.”

A BUSY, BRIGHT FUTURE
Even with the challenges that they face, it is clear that Canada’s fixed-wing charter operators are well positioned to profit in the years ahead. As commercial airline service declines in quality and coverage, charters are a natural alternative for first-class travellers, and those business passengers who are fed up and willing to pay more for a better travelling experience.

Meanwhile, the advent of VLJs will make jet aircraft more affordable and accessible for air charter operators, allowing them to offer an enhanced level of service at prices customers should be willing to pay. Put it all together, and it’s a good time to be in the fixed-wing charter business – especially if you can justify buying a fighter-like ATG Javelin Mk.10 for your company!

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