A rising number of air charter brokers is putting pressure on flight prices to an extent that concerns some operators. During Air Charter Expo (ACE) conference sessions at London Biggin Hill Airport today, several operators warned of a “race to the bottom” trend in which declining margins threaten the viability of services.
“We find we can be up against eight, nine, or even 10 brokers for each flight and you have to ask how service levels can be maintained,” cautioned Simon Cooper, a director with UK-based brokering group Hunt & Palmer. “We have to be willing to back away from some flights.”
At aircraft management and charter group TAG Aviation, client support manager Nicole Gurney pointed to significant geographical variations in the supply and demand balance. “Europe hasn’t grown as a charter market, but the Middle East and U.S. markets have increased, so we are looking to grow there rather than just focusing on where it is static,” she commented.
Brokers and operators at ACE indicated strong demand from charter clients in the music and sports industries. By contrast, they said that they now see fewer flight bookings for product launches and just-in-time deliveries of industrial equipment and materials.
Meanwhile, TAG is now finding that new private aviation consumers buying aircraft are tending to be more eager to charter to third parties as a way of covering some of their costs. Gurney told the ACE audience that this has helped TAG to expand the scope of its charter operations, adding a more diverse range of smaller jets such as the Pilatus PC-24 and Embraer Phenoms into its fleet alongside the larger aircraft.
High Costs Squeeze Margins
However, with wider business costs rising, pressure on charter flight margins has intensified, which some owners appear to find difficult to accept. This is increasing the pressure on both brokers and charters, prompting the Air Charter Association (ACA), which organizes the ACE event, to redouble its efforts to promote recruitment and training through initiatives such as its internship program.
Labor rates for skilled aircraft maintenance personnel are spiking according to ACA chairman Kevin Duckbury. “They will keep increasing for now, but some progress is being made with the supply chain issues for materials and resources that have kept costs high,” he commented.
According to Glenn Hogben, the group’s chief executive, levels of charter activity are now above those seen in pre-pandemic 2019. “It’s growing in a way that gives us confidence that the industry is in a strong position,” he told AIN. “The industry reacts well to changing events and it is really good at pivoting to respond to shifting demand at short notice.”
During the conference discussions, an abiding theme was an element of tension between more established players and an influx of newcomers seemingly prioritizing short-term profit. “In some sectors there is a race to the bottom, and some of the smaller brokers need to try not to quote and bid on absolutely every flight, but to look for better revenues and margins,” said Daniel Carriett, a director with Charter Sync. “Brokers are having to adjust their strategy and diversify. Enhancing relationships with operators and charter customers is stronger than chasing the bottom for a few hundred dollars.”
Suspiciously Low Bids
In some instances, when bids for charter bookings are suspiciously low, members of The ACA are filing reports about possible illegal charter operations with national regulators. Lindsay Oliver, managing director of the British Business and General Aviation Association, told AIN she encourages legitimate operators to keep filing reports, even though regulators are rarely able to provide much feedback on specific cases due to legal constraints.
With attendance at the ACE show once again high, ACA is prioritizing efforts to expand its presence in the U.S. market. It has just staged its first regional forum on that side of the Atlantic with an event three weeks ago at Fort Lauderdale Executive Airport, supported by multiple operators and brokers, as well as Embry-Riddle Aeronautical University.
“There is a lot focus on raising standards in the industry, and also about recruitment challenges,” Hogben said. “We want to build a bridge between the quality U.S. brokers and operators and their counterparts in Europe, because that would benefit everyone.”