The Economics of Private Business Jet Travel

New Ownership Models Expand Available Choices

By Claire Starry and Gerald W. Bernstein

Claire Starry is an economics consultant with over 30 years of experience conducting studies for private sector and government clients, both in the United States and abroad. She currently is president of TDS Economics, a woman-owned research and consulting organization, and frequently contributes to MBA and college economics courses as an adjunct faculty member. She was formerly a program director at SRI International in Menlo Park, Calif. She has a B.A. in economics from the University of Santa Clara and M.A. and Ph.D. degrees in economics from the University of Washington.

Gerald Bernstein is managing director of Stanford Transportation Group, which he co-founded in 1995. He previously held management positions at SRI International in which he was responsible for the company’s civil air transportation and aircraft industry practices. He is immediate past chairman of the National Academies Transportation Research Board’s Aviation Economics and Forecasting Committee. He has been an invited speaker at numerous domestic and international aviation industry conferences. He received a B.S. in aeronautical engineering from Rensselaer Polytechnic Institute and an M.S. in civil engineering management from Stanford University.

The use of private air travel for business trips has expanded rapidly over the past few decades. We estimate that the number of U.S. domestic passenger trips per year on business aircraft exceeded 17 million in 2007, or a number equal to about 40 percent of combined domestic first-class, business-class, and full-fare coach airline trips—travel options for which passengers also pay a premium for timeliness, comfort, or privacy. Once a company determines that it can benefit from private business travel, it generally identifies the most cost-effective option, including the operating characteristics of the aircraft and the options for obtaining this service. This paper examines some of the factors that influence decisions on these options, with particular emphasis on the financial and program alternatives that are making it less costly for business travelers to take advantage of private jet travel, thereby expanding its use. Our findings indicate that the customary view of these options is oversimplified and ignores the new ownership (or non-ownership) models for obtaining use of a business aircraft.

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