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The Future of Short-Haul Business Class
Published by: JetEight
Date: November 2016
© 2016 JetEight | All Rights Reserved
In this paper: Covering the Rise of a New Airline Model and
HowPrivate Jet Travel Will Become Affordable.
JetEight
Artwork kindly released by Embraer Executive Aircraft, Inc. All rights reserved
[ ]JetEight
Executive summary
After the introduction of the low-cost model the
entire airline market has ended up in stagnation.
There is an increased focus on cost efficiency and
less on differentiation. Today full-service network
carriers are competing head-on with low-cost
carriers instead of moving upmarket.
This development is leaving the high-market
business class traveler underserved while increasing
the gap between commercial travel and private jet
ownership.
New entrants with disruptive ideas will jump on this
opportunity. Innovative airline business models will
arise on hyper-local scale aiming to make private air
travel affordable for the business class traveler of
today.
Changed revenue models, partnerships, and cost
structures will make the private jet experience and
benefits affordable for a new audience that is
incentivized by the fact that time is becoming more
valuable and inspired by the sharing economy.
© 2016 JetEight | All Rights Reserved
Introduction
Air travel has become slow
The alternatives are expensive
A call for new airline business models
The all-business-class as a solution
[ ]JetEight
Contents
5
6
7
8
Speed is not the only advantage
Conclusion
9
© 2016 JetEight | All Rights Reserved
4
10
4
Introduction
[ ]JetEight
In 2010 the International Air Transport Association stated that the airline industry is
experiencing a steady and structural shift of business travelers from premium to
economy seats on the within-Europe market. This trend caused carriers to start
transforming their business class into an economy style offer. At the same time the
business aviation market with its luxurious jets and seamless processes is not
getting disrupted leading to a group of high-market business class travelers to fall
between two stools.
On the one hand, the frequent business traveler will have the choice for an
economy-style offer with the inefficient processes and hassle of today’s large
airports. And on the other hand, there is the choice for the fast alternative of
business aviation which has not become significantly more affordable in recent
years. This raises the question whether the European premium class will disappear
and leave the high-market business traveler underserved, or will new alternatives
pop-up?
Looking at the future of short-haul business class travel this paper uses empirical
research to indicate that a new airline model will arise serving the needs of the
current business class. The trends outlined in this paper will inform the business
traveler about the future of short-haul business-class travel and the new
alternatives that are going to fulfill his or her needs better than the current
services.
© 2016 JetEight | All Rights Reserved
5
32%
36%
37%
38%
53%
36%
32%
37%
36%
25%
23%
23%
21%
20%
17%
0% 20% 40% 60% 80% 100%
Very strong preference Somewhat strong preference
Moderate preference Somewhat weak preference
Very weak preference Don't know
Streamlined search and booking
systems that operate industrywide
Improved baggage handling
Improved on-time performance
More enjoyable experience in-flight
Less time in airport
Air travel has become slow
Becoming more efficient and cutting
cost is a key cornerstone for many
airline executives. What many might
not realize is that this does not leave
any negative side effects untouched.
The Economist Intelligence Unit writes
in “The Future of Air Travel” that the
unintended consequences of a
continuous cost-cutting process have
included a reduced focus on issues
that passengers care about, and that
these issues lead to great concerns
when left unaddressed. Airlines are
facing declining brand loyalty as we
can all see that it has become really
hard to truly notice the difference
among carriers. Therefore it is even
more important to differentiate on
these unaddressed issues.
One of the traveler’s major pain
points is the airport experience. When
a giant IT solutions provider asked
customers what part in the air travel
journey they would most like to see
improved, 78% of the respondents
had a preference to spend less time in
the airport [Exhibit 1]. With new
technologies and better usage of data,
aviation parties will and are improving
the travel process, but with only
incremental steps. To make significant
progress a different process is
necessary. For the traveler that truly
cares about speed and super-efficient
processes, there is no choice but to
switch to business aviation.
Preferred improvements in air travel experience
[ ]JetEight
© 2016 JetEight | All Rights Reserved
Source: Sabre Airline Solutions. (2014). The Future of Air Travel. p 3
Exhibit 1
6
The alternatives are expensive
[ ]JetEight
On average travelers using business aviation save
47% per flight over commercial aviation
Business aviation wins at the airport,
not in the air. By circumventing the
inefficient processes of major airports
one easily saves an hour per trip
[Exhibit 2]. A study by one of the
leading consultancies – Booz Allen
Hamilton – in collaboration with the
Deutsches Zentrum für Luft-und
Raumfahrt indicated that the average
time saved on European trips is even
over two hours. It is obvious that
bypassing long security lines, having
only a handful of people boarding the
aircraft, and utilizing small airport
terminals makes the experience
smoother. What might be less
obvious, is that the time saved could
be actually worth more than the
premium paid for this service.
Gulfstream 550 $8,640
Global Express/XRS $8,045
Falcon 7X $7,865
Falcon 900 $6,075
Gulfstream IV $5,884
Challenger 604 $5,053
Citation X $4,533
Hawker 800 $3,582
Citation Excel/XLS $3,388
Learjet 60 $3,347
Citation Mustang $1,674
Average jet charter rates per hour:
Source: Avinode Marketplace
4.5 hours
2.5 hours
47%
The time saved
could be worth
more than the
premium paid for
business aviation
Average commercial travel time
Average business aviation travel time
© 2016 JetEight | All Rights Reserved
Exhibit 2
Source: Booz, Allen, Hamilton. (2016). Economic of business aviation in Europe
Comparison of door-to-door travel time
7
High
Low
Relative
perceived
value
Actual
price-1 Service No frills Comfort Speed
Private Airline
Full Service Carrier
Low-Cost Carrier
Actual
price-1 Service No frills Comfort Speed
Private Aircraft
Full Service Carrier
Low-Cost Carrier
A call for new airline business models
Exhibit 3
Since the introduction of low-cost
carriers, incumbents first ignored their
potential and only after seeing their
success made the decision to go head
on. Instead of moving up-market, the
incumbents started copy-catting the
low-cost model with subsidiaries as
well as making their own business
more efficient. As they are unable to
create new value they are left with no
choice but increase profit margins by
cutting costs (HBR, 2016). Due to the
hybridization of full-service carriers
there will no longer be a clear line
dividing the two airline models. As
illustrated in Exhibit 3, the low-cost
model will move up-market whereas
the full-service carrier will move
down-market.
As a consequence, the gap between
the private aircraft and commercial
travel widens. This space is
represented by the high-market
business traveler offering an
opportunity for new business models
to target an underserved market.
There are already other airline models
out there as for instance NetJets with
its Marquis Jet Card pricing air travel
not per seat, but per flying hour.
Comparable revenue models could be
applied to the commercial airline
industry serving the business traveler
making the private jet experience
more affordable. Exhibit 3 illustrates
that the private aircraft sector will
likely experience the entrance of new
airline models as for instance the
private airline.
The private airline making fast travel affordable
Evolution of airline business models
2015 2025
Source: JetEight corporate vision
[ ]JetEight
© 2016 JetEight | All Rights Reserved
Private Aircraft
15 minutes
15 minutes 15 minutes
15 minutes10 minutes
60 minutes 15 minutes
Trip Time Saved
65 minutes
8
The all-business-class as a solution
Adapted from Booz, Allen, Hamilton. (2016). Economic of business aviation in Europe
Exhibit 4
Commercial air travel
Business air travel
[ ]JetEight
The question arises how this
innovative model would look like.
Next to that it is important to identify
the market characteristics that the
concept needs to sustain. In this paper
we only zoom in on the first question.
It is likely the winning model contains
success factors from existing airlines.
To lower operational costs high
aircraft utilization is required, such as
Ryanair flying many legs per day per
aircraft. Next to copying elements that
were proven successful it would need
to implement new concepts as for
instance the earlier mentioned
revenue models. Moreover, it is
important that all the elements fit and
complement each other.
Next to the price, a key part of the
value proposition will be speed.
Smooth processes that will significant
reduce the time spend in airports are
crucial. The only way to accelerate the
process is to use private terminals and
small airports in order to avoid the
large airport hassles such as long
security lines and slow boarding
processes. Exhibit 4 illustrates the
time savings of not having to wait to
get checked or get boarded and de-
boarded with 100+ people at the
same time. We believe it reasonable
to expect that these new models will
save more than one hour per flight in
travel time, and at the same time be
comparable to current business class
prices.
© 2016 JetEight | All Rights Reserved
Save 65 minutes
per trip. How much
is one hour of your
time worth?
9
Source: Business Jet Traveler’s Choice Survey, 2011.
The survey covered 1,000 executive.
36%
30%
6%
3%
28%
0%
Work-related meetings
with company employees
Individual work-related
tasks
Work-related meetings
with customers
Commercial Aircraft Business Aircraft
Source: Harris Interactive Survey, 2009
Reason for using business aircraft
Time spent aboard business aircraft
Speed is not the only advantage
[ ]JetEight
Exhibit 6
Exhibit 5
Executives who fly business aircraft
understand the benefits of time
savings. When the value-of-time is
quantified as several hundreds of
euros per hour then business aviation
starts making sense easily. But time is
not the only advantage. When 1,000
executives were asked why they
choose to use a business aircraft more
items topped the list [Exhibit 5].
Travelers tend to feel more safe and
secure as airport terminals that are
prime targets for terrorists are
avoided. Instead smaller airports or
private terminals are used. Another
benefit is the more comfortable flights
including fast boarding processes,
more legroom, luxurious seats, etc.
Not only on the ground but also in the
air business aircraft provide value-of-
time benefits. Not because private jets
are faster than aircraft used by
commercial airlines, but due to the
fact that passengers are more
effective and productive. Exhibit 6
illustrates that executives use their
time aboard business aircraft more
effectively and productively than
when they fly on commercial airline
flights. They can easily bring a
customer aboard, or even fly with
multiple colleagues to discuss work-
related matter while travelling.
Interacting with each other is almost
impossible on commercial flights
where you are locked into your
narrow seat. Neither are commercial
aircraft designed to do that. But with
the comfort and space of the business
aircraft cabin this is no longer an issue.
Security 29%
Privacy 37%
More comfortable light 44%
Save time 77%
© 2016 JetEight | All Rights Reserved
[ ]JetEight
Conclusion
© 2016 JetEight | All Rights Reserved
10
In this paper we have looked at the question whether the European premium class
will disappear and leave the high-market business traveler underserved, or whether
new alternatives will arise?
We conclude that the incumbent airlines have made a clear move to pursuit
efficiency and cost-cutting measures, and are to a much lesser extent focused on
improving the quality of service. As incumbent full-service carriers are shifting
down-market, a group of underserved high-market business travelers remains. The
number one preference of this group is to spend less time traveling from door-to-
door.
New alternatives will arise providing a faster travel experience. By alternating
current airline business models, new entrant will find ways to make the private jet
experience affordable for a new audience. These innovative players will start on a
local scale by implementing new pricing models, partnerships, as well as copying
success factors of current airlines, and only if found sustainable will start scaling up.
This development will put incumbent airlines under pressure to move upmarket
and improve their offer, or potentially force them out of business. In any case, the
travel experience for the business class traveler of today is likely to change for the
better.
Whitepaper Series
JetEight
Please contact us for more information
Email: info@fyjet8.com
© 2016 JetEight | All Rights Reserved

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  • 1. The Future of Short-Haul Business Class Published by: JetEight Date: November 2016 © 2016 JetEight | All Rights Reserved In this paper: Covering the Rise of a New Airline Model and HowPrivate Jet Travel Will Become Affordable. JetEight Artwork kindly released by Embraer Executive Aircraft, Inc. All rights reserved
  • 2. [ ]JetEight Executive summary After the introduction of the low-cost model the entire airline market has ended up in stagnation. There is an increased focus on cost efficiency and less on differentiation. Today full-service network carriers are competing head-on with low-cost carriers instead of moving upmarket. This development is leaving the high-market business class traveler underserved while increasing the gap between commercial travel and private jet ownership. New entrants with disruptive ideas will jump on this opportunity. Innovative airline business models will arise on hyper-local scale aiming to make private air travel affordable for the business class traveler of today. Changed revenue models, partnerships, and cost structures will make the private jet experience and benefits affordable for a new audience that is incentivized by the fact that time is becoming more valuable and inspired by the sharing economy. © 2016 JetEight | All Rights Reserved
  • 3. Introduction Air travel has become slow The alternatives are expensive A call for new airline business models The all-business-class as a solution [ ]JetEight Contents 5 6 7 8 Speed is not the only advantage Conclusion 9 © 2016 JetEight | All Rights Reserved 4 10
  • 4. 4 Introduction [ ]JetEight In 2010 the International Air Transport Association stated that the airline industry is experiencing a steady and structural shift of business travelers from premium to economy seats on the within-Europe market. This trend caused carriers to start transforming their business class into an economy style offer. At the same time the business aviation market with its luxurious jets and seamless processes is not getting disrupted leading to a group of high-market business class travelers to fall between two stools. On the one hand, the frequent business traveler will have the choice for an economy-style offer with the inefficient processes and hassle of today’s large airports. And on the other hand, there is the choice for the fast alternative of business aviation which has not become significantly more affordable in recent years. This raises the question whether the European premium class will disappear and leave the high-market business traveler underserved, or will new alternatives pop-up? Looking at the future of short-haul business class travel this paper uses empirical research to indicate that a new airline model will arise serving the needs of the current business class. The trends outlined in this paper will inform the business traveler about the future of short-haul business-class travel and the new alternatives that are going to fulfill his or her needs better than the current services. © 2016 JetEight | All Rights Reserved
  • 5. 5 32% 36% 37% 38% 53% 36% 32% 37% 36% 25% 23% 23% 21% 20% 17% 0% 20% 40% 60% 80% 100% Very strong preference Somewhat strong preference Moderate preference Somewhat weak preference Very weak preference Don't know Streamlined search and booking systems that operate industrywide Improved baggage handling Improved on-time performance More enjoyable experience in-flight Less time in airport Air travel has become slow Becoming more efficient and cutting cost is a key cornerstone for many airline executives. What many might not realize is that this does not leave any negative side effects untouched. The Economist Intelligence Unit writes in “The Future of Air Travel” that the unintended consequences of a continuous cost-cutting process have included a reduced focus on issues that passengers care about, and that these issues lead to great concerns when left unaddressed. Airlines are facing declining brand loyalty as we can all see that it has become really hard to truly notice the difference among carriers. Therefore it is even more important to differentiate on these unaddressed issues. One of the traveler’s major pain points is the airport experience. When a giant IT solutions provider asked customers what part in the air travel journey they would most like to see improved, 78% of the respondents had a preference to spend less time in the airport [Exhibit 1]. With new technologies and better usage of data, aviation parties will and are improving the travel process, but with only incremental steps. To make significant progress a different process is necessary. For the traveler that truly cares about speed and super-efficient processes, there is no choice but to switch to business aviation. Preferred improvements in air travel experience [ ]JetEight © 2016 JetEight | All Rights Reserved Source: Sabre Airline Solutions. (2014). The Future of Air Travel. p 3 Exhibit 1
  • 6. 6 The alternatives are expensive [ ]JetEight On average travelers using business aviation save 47% per flight over commercial aviation Business aviation wins at the airport, not in the air. By circumventing the inefficient processes of major airports one easily saves an hour per trip [Exhibit 2]. A study by one of the leading consultancies – Booz Allen Hamilton – in collaboration with the Deutsches Zentrum für Luft-und Raumfahrt indicated that the average time saved on European trips is even over two hours. It is obvious that bypassing long security lines, having only a handful of people boarding the aircraft, and utilizing small airport terminals makes the experience smoother. What might be less obvious, is that the time saved could be actually worth more than the premium paid for this service. Gulfstream 550 $8,640 Global Express/XRS $8,045 Falcon 7X $7,865 Falcon 900 $6,075 Gulfstream IV $5,884 Challenger 604 $5,053 Citation X $4,533 Hawker 800 $3,582 Citation Excel/XLS $3,388 Learjet 60 $3,347 Citation Mustang $1,674 Average jet charter rates per hour: Source: Avinode Marketplace 4.5 hours 2.5 hours 47% The time saved could be worth more than the premium paid for business aviation Average commercial travel time Average business aviation travel time © 2016 JetEight | All Rights Reserved Exhibit 2 Source: Booz, Allen, Hamilton. (2016). Economic of business aviation in Europe Comparison of door-to-door travel time
  • 7. 7 High Low Relative perceived value Actual price-1 Service No frills Comfort Speed Private Airline Full Service Carrier Low-Cost Carrier Actual price-1 Service No frills Comfort Speed Private Aircraft Full Service Carrier Low-Cost Carrier A call for new airline business models Exhibit 3 Since the introduction of low-cost carriers, incumbents first ignored their potential and only after seeing their success made the decision to go head on. Instead of moving up-market, the incumbents started copy-catting the low-cost model with subsidiaries as well as making their own business more efficient. As they are unable to create new value they are left with no choice but increase profit margins by cutting costs (HBR, 2016). Due to the hybridization of full-service carriers there will no longer be a clear line dividing the two airline models. As illustrated in Exhibit 3, the low-cost model will move up-market whereas the full-service carrier will move down-market. As a consequence, the gap between the private aircraft and commercial travel widens. This space is represented by the high-market business traveler offering an opportunity for new business models to target an underserved market. There are already other airline models out there as for instance NetJets with its Marquis Jet Card pricing air travel not per seat, but per flying hour. Comparable revenue models could be applied to the commercial airline industry serving the business traveler making the private jet experience more affordable. Exhibit 3 illustrates that the private aircraft sector will likely experience the entrance of new airline models as for instance the private airline. The private airline making fast travel affordable Evolution of airline business models 2015 2025 Source: JetEight corporate vision [ ]JetEight © 2016 JetEight | All Rights Reserved Private Aircraft
  • 8. 15 minutes 15 minutes 15 minutes 15 minutes10 minutes 60 minutes 15 minutes Trip Time Saved 65 minutes 8 The all-business-class as a solution Adapted from Booz, Allen, Hamilton. (2016). Economic of business aviation in Europe Exhibit 4 Commercial air travel Business air travel [ ]JetEight The question arises how this innovative model would look like. Next to that it is important to identify the market characteristics that the concept needs to sustain. In this paper we only zoom in on the first question. It is likely the winning model contains success factors from existing airlines. To lower operational costs high aircraft utilization is required, such as Ryanair flying many legs per day per aircraft. Next to copying elements that were proven successful it would need to implement new concepts as for instance the earlier mentioned revenue models. Moreover, it is important that all the elements fit and complement each other. Next to the price, a key part of the value proposition will be speed. Smooth processes that will significant reduce the time spend in airports are crucial. The only way to accelerate the process is to use private terminals and small airports in order to avoid the large airport hassles such as long security lines and slow boarding processes. Exhibit 4 illustrates the time savings of not having to wait to get checked or get boarded and de- boarded with 100+ people at the same time. We believe it reasonable to expect that these new models will save more than one hour per flight in travel time, and at the same time be comparable to current business class prices. © 2016 JetEight | All Rights Reserved Save 65 minutes per trip. How much is one hour of your time worth?
  • 9. 9 Source: Business Jet Traveler’s Choice Survey, 2011. The survey covered 1,000 executive. 36% 30% 6% 3% 28% 0% Work-related meetings with company employees Individual work-related tasks Work-related meetings with customers Commercial Aircraft Business Aircraft Source: Harris Interactive Survey, 2009 Reason for using business aircraft Time spent aboard business aircraft Speed is not the only advantage [ ]JetEight Exhibit 6 Exhibit 5 Executives who fly business aircraft understand the benefits of time savings. When the value-of-time is quantified as several hundreds of euros per hour then business aviation starts making sense easily. But time is not the only advantage. When 1,000 executives were asked why they choose to use a business aircraft more items topped the list [Exhibit 5]. Travelers tend to feel more safe and secure as airport terminals that are prime targets for terrorists are avoided. Instead smaller airports or private terminals are used. Another benefit is the more comfortable flights including fast boarding processes, more legroom, luxurious seats, etc. Not only on the ground but also in the air business aircraft provide value-of- time benefits. Not because private jets are faster than aircraft used by commercial airlines, but due to the fact that passengers are more effective and productive. Exhibit 6 illustrates that executives use their time aboard business aircraft more effectively and productively than when they fly on commercial airline flights. They can easily bring a customer aboard, or even fly with multiple colleagues to discuss work- related matter while travelling. Interacting with each other is almost impossible on commercial flights where you are locked into your narrow seat. Neither are commercial aircraft designed to do that. But with the comfort and space of the business aircraft cabin this is no longer an issue. Security 29% Privacy 37% More comfortable light 44% Save time 77% © 2016 JetEight | All Rights Reserved
  • 10. [ ]JetEight Conclusion © 2016 JetEight | All Rights Reserved 10 In this paper we have looked at the question whether the European premium class will disappear and leave the high-market business traveler underserved, or whether new alternatives will arise? We conclude that the incumbent airlines have made a clear move to pursuit efficiency and cost-cutting measures, and are to a much lesser extent focused on improving the quality of service. As incumbent full-service carriers are shifting down-market, a group of underserved high-market business travelers remains. The number one preference of this group is to spend less time traveling from door-to- door. New alternatives will arise providing a faster travel experience. By alternating current airline business models, new entrant will find ways to make the private jet experience affordable for a new audience. These innovative players will start on a local scale by implementing new pricing models, partnerships, as well as copying success factors of current airlines, and only if found sustainable will start scaling up. This development will put incumbent airlines under pressure to move upmarket and improve their offer, or potentially force them out of business. In any case, the travel experience for the business class traveler of today is likely to change for the better.
  • 11. Whitepaper Series JetEight Please contact us for more information Email: info@fyjet8.com © 2016 JetEight | All Rights Reserved