Despite rising fuel costs, a healthier corporate sector will boost industry demand
Los Angeles, CA (PRWEB) May 26, 2012
Over the five years to 2012, industry revenue is estimated to grow at an annualized 0.7% to $14.5 billion. The Charter Flights industry, which provides nonscheduled air transport services for passengers and cargo, has started to recover after a disappointing 2009, when industry revenue fell 12.6% due to overall declines in travel spending, particularly among corporate clients. In 2012, revenue is expected to grow 4.8% as per capita disposable income and corporate profit recover. According to IBISWorld industry analyst Andrew Krabeepetcharat, “The state of the economy and a number of travel-related trends are the main factors driving the industry.” In 2009, the decline of the domestic economy and an increase in unemployment forced people to be more selective when spending disposable income. As people and companies cut down spending across the board, they were less likely to spend money on luxuries like vacations and nonessential business trips. When they did travel, they were more likely to fly commercial.
In the past five years, consumers have begun to board commercial airline flights again, leaving the industry clamoring for more passengers. Competition with scheduled air transportation has resulted in fewer operators and downward pressure on profitability. In the five years to 2012, the number of establishments is expected to drop to 14,948, representing an average annual decline of 1.7%. In response to these trends, companies have altered the services they provide in order to attract more customers, including products such as Jetcards, which give the buyer a certain number of private aircraft hours. “The vast majority of operators in the Charter Flights industry are nonemployers,” says Krabeepetcharat, “making the industry highly fragmented.” The two largest firms, Air Transport Services Group Inc. and Atlas Air Worldwide Holdings, account for less than a tenth of the industry’s total revenue.
The industry is particularly sensitive to changes in the corporate sector. A large proportion of revenue comes from business trips made by people like corporate executives, high flyers in the finance sector and miners flying out to work in remote areas. Since early 2009, businesses have taken a razor to corporate budgets and drastically cut funds for chartered and private flights. However, the economy began to improve in 2010, as some of the fears surrounding the state of the economy subsided and a larger proportion of consumers and businesspeople traveled. Over the five years to 2017, industry revenue is projected to increase. Despite these trends, industry profitability and demand will be threatened by rising fuel prices and the corresponding increase in charter flight costs. For more information, visit IBISWorld’s Charter Flights report in the US industry page.
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IBISWorld industry Report Key Topics
Companies in this industry provide air transport services on an irregular or nonscheduled basis for passengers and cargo, which is also referred to as a charter arrangement. Industry operators allow people to fly where they want (in terms of destination and airport) and when they want, as opposed to commercial airlines that operate to a fixed schedule of destinations and times. The industry also includes scenic tours and sightseeing services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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