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Virgin Charter: Ready for take off, by Marilyn Adams (USA Today)
(Credit: Virgin Charter)

For those who can't abide flying with the masses, chartering a private jet may be getting a bit easier, though not necessarily cheaper.

Billionaire Briton Richard Branson, chairman of Virgin Atlantic Airways, is about to dip his toe into the tantalizing but murky waters of the private jet charter business.

STORY: Charter jets aren't just for actors, sports stars anymore

Compared with the commercial airline industry, the private jet charter business is small "about $8 billion a year in sales" but it's growing fast, both in hours flown and revenue.

Virgin Charter, a new Virgin-financed website scheduled to launch this fall, plans to use Internet technology to provide prospective buyers with immediate price quotes for the trip destination, day and time requested. Buyers will also get details about the specific aircraft; pilots and operator; safety audits; and quality ratings from previous customers.

Passengers or travel agents will be able to use Virgincharter.com to book domestic or international trips online with any one of a variety of charter operators using a credit card or wire transfer. Virgin will collect from the seller a commission on each trip sold.

Virgin Charter CEO Scott Duffy compares his travel site to financial website LendingTree, where competing lenders provide online interest rate quotes to prospective borrowers.

Virgin Charter will not be the first charter jet website to link buyers and sellers. But Virgin promises to be the most comprehensive charter jet marketplace and, with the Virgin brand, is likely be the most recognizable.

"No one else has brought everything together with this level of transparency," says Duffy, who is based in Santa Monica, Calif.

Will sell 'empty legs'

Virgin Charter is not planning to own or operate charter jets. It will offer price quotes only from operators that undergo safety audits. Operators will not be charged for giving quotes, and passengers will not be charged for using the site.

Duffy says the site will also offer a dedicated area selling "empty legs," the inventory of trips that private jets will be flying without passengers.

As many as 40 percent of private jet trips are flown empty because jets are shuttling to a different city to start a scheduled trip, or have delivered their passengers and are returning to home base.

That translates into lots of trips that could be sold if the information were available to potential buyers.

Jim Coyne, president of the National Air Transportation Association, a charter trade group, says Virgin's entry into the business shows the charter jet business has a strong future.

Coyne estimates the industry has attracted $1 billion in new capital investment in the past two years.

He attributes that to the improving quality of charter jet operations and the deterioration of U.S. airline service.

"Let's face it: 90 percent of what used to be considered first-class airline service has evaporated," he says.

Some experts aren't so sure Virgin Charter will be a sure success.

Fred Gevalt, founder of the Air Charter Guide, one of the earliest guides to private jets for hire, isn't convinced the clubby charter business will embrace Virgin's concept.

"This is an industry that has defied efforts to commoditize it," he says.

He estimates the jet charter business survives on thin profit margins of 3 percent to 5 percent. Private jet operators tend to resist brokers and other agents that get between buyers and sellers because they trim that profit further.

The price transparency Virgin Charter is promising could put pressure on prices. "If Virgin Charter drives prices down, operators won't like it," Gevalt says. "I don't think it will rock the industry."

Branson's effort welcomed

Virgin isn't the first big commercial airline name to enter the sexy world of private jets. In the spring of 2001, United Airlines launched a unit called Avolar and ordered small jets worth $2 billion.

It planned to sell shares of the aircraft to investors for their use. Six months after the Sept. 11 attacks, United, fighting for financial survival, closed Avolar after investing $100 million.

Some welcome Virgin's entry because it could bring more transparency and competition to a diverse, decentralized industry that, compared with the airlines, is not widely understood or regulated.

"The best thing that could happen is for Richard Branson to come into this business," says Adam Webster, a founder of RSVPair, an air charter directory.

Virgin, he says, may instill greater business discipline into the charter jet world.

Virgin Charter: Ready for Takeoff - In a bid to make luxury travel an upscale commodity, Virgin Group is launching what it hopes will become the Priceline of the private aviation industry
(Business Week)

Last December, Scott Duffy got the kind of offer every entrepreneur dreams of receiving. The 37-year-old former dot-com executive had been trying to raise funds for an online booking site for charter aircraft. Coincidentally British billionaire Sir Richard Branson, founder of the Virgin Group, had been studying the same opportunity. That's when Duffy says the Branson camp called with a tantalizing offer: "We want to give you much more money than you ever imagined you'd need, and we'll put all of our marketing behind it." Duffy quickly forgot about other investors. "It wasn't even a choice," he says.

On June 12, Duffy launched an invitation-only maiden flight of the new business, Virgin Charter. He hopes to have the site open to the public by this fall. Branson and Duffy hope to capitalize on the booming, $10 billion-a-year charter aircraft industry. Private aviation has been in a steady climb since the 2001 terrorist attacks increased the wait time and frustration of commercial airline travel. Not everyone can afford to buy their own planes, of course, and even the folks who do own them frequently try to offset the costs by chartering the aircraft out when they're not using them. That's where services such as Virgin Charter come in, acting as middlemen for travelers looking to charter a business trip or high-end vacation.

EBAY FOR PRIVATE JETS

Private aviation is a crowded, fragmented market. There are some 2,500 charter aircraft operators in the country. Most of them own just three or four planes. There have also been a number of players trying to address the online booking market, among them Blue Star Jets and AirCharter.com. John Maguire, who runs JetTrip.com, says it's very hard to get up-to-the-minute pricing and availability information from the charter operators: "We spend 10 percent of our time on the phone with customers and 90 percent tracking down available jets."

Virgin Charter hopes to bypass some of those problems by creating what's essentially an eBay (EBAY) for private jets. Customers will input their desired trips and charter operators will bid for their business. The customers will then choose which operator they want. Virgin Charter, based in Santa Monica, Calif., will get an unidentified cut of each sale. Richard Aboulafia, a vice-president with the defense and aerospace research outfit Teal Group, said the venture "could produce some interesting results" if Virgin is able to improve the efficiency and fluidity of the market. "Turning a luxury product into a larger near-commodity product is a clear trend with business jets these days," Aboulafia wrote in an e-mail.

Duffy's adding a bit of social networking to the site, which is expected to be available to all customers in the fall. Charter customers and the aircraft owners will both be able to post comments about each other on the site, so travelers will know whether the operator was late and the plane owners will know whether the customer smoked in a nonsmoking plane. Given the fussy nature of private aircraft owners and customers, this could make for some interesting reading.

ENSURING SAFETY

One of the biggest issues in dealing with charter operators is the lack of information about their safety records and the quality of their planes. That's why many private aviation customers tend to choose one charter operator and stick with them. Duffy is encouraging plane owners who list on the site to get their planes certified by third-party observers such as Wyvern Consulting, whose parent company, CharterX, is partnering with Virgin Charter. "Our belief is that if a buyer looks at 10 quotes, they'll gravitate toward the ones with the high safety and quality ratings," Duffy says.

Flying private isn't cheap. Even a two-hour trip from Los Angeles to Denver can cost $20,000 round-trip. Duffy hopes to reduce costs somewhat by establishing Virgin Charter as a clearinghouse for "empty legs," the return trips without passengers that chartered planes often make to their home airports. Duffy gives an example of a recent trip he made from Las Vegas to his home city, Los Angeles, with six friends. To test his theory he called charter operators and found one plane that was returning empty that usually rented out for $5,000 for the one-hour jaunt. He offered $1,000 and the charter operator accepted.

"Today charter companies are quoting you in a vacuum. With us, they'll see what other people are quoting," Duffy says. "We think we'll create price competition in the space."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.

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