So, over the quarter century of business, how have Jet Cards evolved, where is the market growing and what are the perceived obstacles to address in the next 25 years?
The concept of the Jet Card, in which clients prepay for a block of hours at a fixed rate, was launched in the United States – its success came from those looking for a certainty of a cost-per-hour, irrelative of any positioning charges, disposing of the indifferent pricing provided in charter markets for those flying multiple times in the year, and guaranteeing availability regardless of demand.
With success seen in the United States, the concept soon reached Europe, the Middle East and Asia, providing a fixed hourly rate with no payable positioning fees, purchased in blocks of 25 hours.
However, the fortunes outside of United States have been mixed and likely in part to one major reason: the distances between major hubs are a lot shorter. Ergo the economics of short leg charter flights isn’t really profitable, much like driving a HGV to deliver a pint of milk. Using a Gulfstream G550 designed for 12 hour charter flights isn’t really appropriate for a London to Paris or Dubai to Riyadh hop – yet some clients prefer the larger cabin and know that the charter price for a short trip will likely always be higher than electing a fixed rate program. Conversely, using a fixed rate Jet Card program for longer flights will recover the losses, and handsomely so, for the smaller sectors performed.
In time, both the Middle East and Asian market has remained a difficult market to work effectively with the spread of available aircraft and requested routings. Europe, however, has seen some success, but programs have required substantial cash injections over time, likely from their American programs.
So have Jet Cards been worth it?
Seen at the turn of the century as a disrupter to Aircraft Sales and Charter, the Jet Card industry has found a place in the market, but overall the success of these programs have been varied and some, without mentioning names, are carrying substantial debts in billions, which may be a concern of liquidity if not managed carefully.
For the client, the Jet Card has really simplified the way you can book flights – a set amount of hours at a set rate with guaranteed availability (subject to T&Cs of course) makes it an attractive offer, especially if the client is traditionally flying short hops and with little notice. For the operator, the certainty of a block of business is attractive and can help with investors, and the longer the trip the greater the profitability. The problem, however, is the savvy buyer may well be aware of this situation and deliberately only perform short flights on the Jet Card, and look to traditional charter methods for longer trips.
So, what’s changed?
Well, despite the mentioned financial risks on shorter sectors, there has been an appetite for more operators and brokers to enter with their own Jet Card Program, making the market a little more crowded. Some have totally embraced Jet Cards as the mainstay of their operations, whilst others offer it as a product within their portfolio.
The main attraction for providers is the certainty of business and the deposits which come with them. Concerns of the commercial losses, offset with complex terms of usage mitigating the risk, makes a Jet card customer a much more valuable client than a client who charters on a flight-by-flight basis.
But has the concept of the traditional Jet Card expired?
The Jet Card Market remains strong, however the churn rate (by which people don’t repurchase) is higher than many would want. This could be down to a multitude of reasons, such as the ancillary charges, wastage / expiry of unused hours, black out dates, or simply paying a higher price on average for flying than the true cost of chartering, even with positioning fees.
Development of a Capped or Protected Hourly Rate VS Fixed Rate.
The main disadvantage with a fixed rate is just that – it’s fixed and non-negotiable. Which means if you’re in a program already, you can’t take advantage of discounted one-ways, empty legs or round trip discounts, and for some clients this can be a considerable saving lost.
The savvier solution is to change from a fixed rate to a guaranteed Protected Hourly Rate. This ensures your spend never exceeds a certain cost, which is great for sticking to a budget, but also allows you to take advantage of the real market rates and receive the difference between the actual and capped rate back as savings – so as a client, you are never overcharged for a flight.
This is more of a tailored fit and something we feel to be more of a dominant product within the Jet Card Market.
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