Private Plane Business Takes Off in Aftermath of Sept. 11 Aviation: Charter plane business recoups losses since rough 2000. By JACQUELINE FOX Staff Reporter Post-Sept. 11 airport security mandates, longer lines at ticket and baggage counters, fare increases and what many have characterized as an overall decline in the quality of business travel services are prompting more executives to buy or charter their own jets to avoid tie-ups at commercial airports. And San Fernando Valley companies are benefiting, despite a slow economy and what appears to be a widespread aversion on the part of much of the public to travel this year. Van Nuys-based The Air Group Inc., launched in 1980, buys, sells, manages and charters corporate aircraft out of the Van Nuys Airport. According to the company’s CEO and co-founder, Jon Winthrop, prior to Sept. 11, Air Group was looking at a 30-percent decline in sales from 2000, primarily due to the weakened economy and cutbacks in corporate travel relating to the dot-com bust. But by December 2001, all but about 8 percent of the lost business had been recaptured, said Winthrop. By January of this year, sales exceeded revenues for the same month in 2001 by as much as 22 percent. Even small operators, such as Visionair Inc., which has only three jets in its fleet, are making plans for growth. The eight-year old company, also based at Van Nuys, is preparing to purchase a fourth jet to add to its fleet some time this year. “The events of Sept. 11, no question, have changed the way the world will travel forever,” Air Group’s Winthrop said. “And we are certainly seeing the positive impact of those changes.” To accommodate the growth, Air Group has added 15 jets to its fleet since November of last year, bringing the total number of planes it has available to 54. The company has 167 employees, 110 of them pilots. It also provides in-flight crews for charters of nine or more passengers and a full-service ground maintenance crew. Interestingly enough, despite the conservative mode corporate spending has slipped into, Winthrop says acquisition revenues have outpaced charter activity, an indication many view ownership as a solid long-term investment not likely to be outdone by the commercial airlines any time in the near future. “The charter business is generally improving since 2001, primarily because those sales are economically driven,” said Winthrop, “but the biggest spike for us has been in acquisitions. We typically manage about eight acquisitions a year. But in our best year for acquisitions, which was actually during the slowdown of the economy in 2000, we did 10 acquisitions, which is where we are right now at mid-year. We project, if the trend continues, to do about 15 for 2002.” Fred Thomas, president of Chatsworth-based Aaron, Thomas & Associates, is a political consultant who travels frequently. He recently spent $3,800 to take three clients from Van Nuys to Arizona. As he tells it, the four were in their seats, airborne, down on the ground and in a waiting car (provided by Air Group) in all of about 45 minutes. Oh, and they managed to get a little work done on the way. “We all took the same view that we’d still be sitting at a terminal back at LAX in that period of time, had we flown commercial,” said Thomas. “I’m definitely sold on the concept. I was just trying it out and the whole experience was not only very positive for myself and my clients, but it turned out to be a very productive flight because we were able to get so much accomplished in a 24-hour turnaround.” Thomas said he has no plans yet to purchase his own plane but, aside from when he’s traveling alone, intends to charter on a regular basis from here on out. “Although things have improved since 9/11, it’s still a little annoying dealing with the delays in the airports,” said Thomas. “My time is worth a lot to me and I only have so much of it to invest, and what I calculate it to be worth makes the cost of the charter inconsequential. They spoiled us rotten. And that made a lasting impression on my clients too.” Big commercial airlines took a serious hit in the months immediately following the attacks and, despite receiving some federal assistance, they clearly continue to struggle to regain earnings and full-fare passengers, particularly first-class business travelers. Last year, for example, UAL Corp., parent company of United Airlines, sank about $84 million into plans for its own corporate jet division, a project that never got off the ground. On June 28, Standard & Poor’s lowered its corporate credit and other ratings on five large U.S. carriers, including UAL, which dipped from a B-plus to a B due to disappointing revenue projections. “The pace and strength of the revenue recovery for large U.S. airlines has weakened, prolonging losses and further eroding their weakened balance sheets,” said S & P; credit analyst Phillip Baggaley. His report went on to state that business traffic remains soft, reflecting a cyclical downturn but also “an acceleration of existing trends unfavorable to the large hub-and-spoke carriers.” Visionair co-owner Joe Ware said, “From what we’ve seen, there are a lot of planes on the market right now, which indicates that there’s a lot of activity in the corporate travel business. When there’s a lot of airplanes on the market, prices are soft. Part of the reason we haven’t been expanding is we haven’t staffed up. But yes, there has been an increase in both charter business and fractional ownership sales (where as many as eight people can co-own one jet) and we will be expanding.” Or not. Although Winthrop declined to name names, he said Air Group has its eye on some of its smaller competitors and is planning a number of acquisitions over the next year to raise the capital he needs to take his company public. “We really need to probably consolidate a couple of companies,” said Winthrop. “Equity markets tell us we need to be earning $150 million in order to do that and we anticipate hitting the $80-to-$84 million mark by the end of the year.” He said Chicago, where the company currently has an office, will likely be the biggest target market for expansion. Air Group also has operations in San Francisco, Orange County, Santa Barbara, Denver, St. Louis, New York and Honolulu.
