Mainline corporate jets: a new business vision May 2001

With an industry recession looming some imaginative marketing to business travellers is needed. So the world’s leading business airlines appear to be developing strategies that will take market segmentation to its logical, or illogical, conclusion.

In the medium term the manufacturers are also pursuing segmentation strategies with Boeing building the Sonic Cruiser aimed totally at the business traveller market while Airbus’s A380 will essentially be the ultimate mass–transit aircraft.

More immediately, airlines are implementing plans to provide their corporate clients with dedicated flights and aircraft. BA has signed an agreement with Air Partner, the world’s largest corporate jet broker, which will provide BA with jets at a pre–agreed rates for flexible periods of time. BA will market its corporate jet services under its own brand, offering itineraries tailored to the clients' requirements. The corporate jets will either meet incoming scheduled BA services at main airports or operate from secondary airports close to main airports.

In the US both United and Delta have announced that they will be setting up corporate business jet subsidiaries. These subsidiaries will operate in the same way as existing executive jet operations with the corporate clients owning fractions of the jets.

The other development is the emergence of new specialist business- only airlines, such as Blue Fox. This start–up is currently seeking financial backing for an all–business class 767 operation from London Stansted to New York and elsewhere. The concept is to provide superior business–class service but at less than half the standard business class fare. The product is aimed at the subset of the business travel market that is price–conscious, does not have the clout to negotiate corporate discounts and which does not overly rely on frequency.

It is difficult to tell at the moment whether these trends will turn out to be a passing fad or a marginal service or whether, like the RJ phenomenon, there is a whole new unexploited market out there. The as yet distant prospect forming in the minds of some airline strategists is for an evolution of the airline industry into a buses and taxis sort of market.

In reality there are some huge obstacles. Mainline airlines need both business cabins to push unit revenues up and economy cabins to keep unit costs down. Then there is sub–segmentation — it is interesting to note that BA’s new super economy class may generate more revenue on a square metre basis than its business class. Finally, there is question of slot availability if these corporate jets are to operate in sync with mainline flights.