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Heightened security boosting demand for business jets, but corporate profits remain key

Patricia Micheletti says her charter aircraft company’s phones have been ringing off the hook since a bomb threat aboard a Northwest Airlines flight prompted heightened security and long airport lineups.

"It’s really, really early in the game but I can tell you that I’m getting an increase of about 30 to 40 per cent in phone calls and inquiries," the vice-president of Montreal-based Corporate Aircraft Charters said Tuesday.

The desire to avoid hours of airport waits is prompting business people to consider private jets, she said. While the option doesn’t make financial sense for some, the costs can be competitive depending on the circumstances.

Flying six people from Montreal to Toronto or New York for the day can cost $300 to $500 per person, tax included, Micheletti said. That’s not substantially more than commercial flights and avoids carry-on restrictions, body scans, pat downs and frustrating lines.

"Those are trips that businessmen do all the time and so it does become advantageous and they save so much time. You get off the aircraft and your taxi or your car is waiting for you at the base of the stairs," she said.

Charter aircraft are pre-cleared for entry into the U.S. 24 hours ahead of time and thus save substantial time that would otherwise be spent in airport security. Ever since a Nigerian passenger attempted to blow up a jetliner over Michigan by igniting explosives sewn into his underwear, security lineups for travel into the U.S. have been chaotic as passengers adjust to new regulations that ban carry-on baggage and require pat downs of every traveller.

As a result, charter planes are becoming more appealing to the business set, who travel frequently and are always on the lookout for ways to save time.

Aircraft manufacturer Bombardier (TSX:BBD.B) said interest in its Flexjet fractional ownership and jet card business has soared in recent weeks as people look to avoid travelling headaches that reduce productivity.

With Flexjet, companies or individuals purchase shares in a Bombardier Learjet or Challenger aircraft based on hours of flying time. The company then takes care of aircraft maintenance, flight crews, hangars, fuel and insurance. Meanwhile, the company’s jet cards guarantee availability and a flat hourly rate for a deposit of $100,000.

The traditionally quiet period between Christmas and New Year’s was anything but, says Bob Knebel, vice-president of sales and marketing for Flexjet.

"As long as it remains a highly visible issue – and based on what we’ve all seen over the last two weeks I suspect it’s going to be a story for a period of time – that will sustain the interest," he said from Dallas.

In addition to avoiding the hassles of increased security, some people interested in flying on private planes want to ensure their safety from a terrorist attack and avoid delays caused by oversold flights and travel to busy airport hubs.

Knebel said the stigma of travelling on private planes has waned since U.S. automotive executives were publicly excoriated for flying on individual private jets to testify before Congress in late 2008.

However, while the convenience of private air travel is unquestionable, people didn’t abandon commercial air travel in the aftermath of the Sept. 11, 2001, terrorist attacks and it’s unlikely this time will be any different, says the National Business Aviation Association.

"Member companies spend about US$12 billion dollars each year with the commercial airlines – a trend we expect to continue – because that is often the mode of transport that best meets their travel demands," spokesman Dan Hubbard said in an email.

Meanwhile, business people who need to visit several destinations on one day or travel to towns not served by airlines will continue to choose private jets.

A restoration of corporate profits, not security concerns, will be the primary driver of business jet use and sales going forward, says Richard Aboulafia, vice-president of research company Teal Group.

"This industry is still hostage to the economic cycle. The level of security changes being debated right now won’t affect that."

He said security restrictions would have to become severely onerous before there’s any meaningful move to private jet travel. Right now, many U.S. airports allow premium cabin passengers to pass through shorter lines, Aboulafia said.

Cameron Doerksen of Versant Partners said he doubts anyone will order business aircraft because of short-term security concerns. Over time, however, more people will migrate to private planes if enhanced security makes it very inconvenient to fly.

"There is definitely a case to be made that increased hassles at the airport are going to result in more business travellers especially looking to find alternatives and certainly business jets is something they would be looking at," he said.