Air Taxi-Air Charter – What is the difference in prices?
The term “air taxi” refers to an aircraft service that provides transportation to people on demand. That is, you can take a private jet flight when you want to go instead of booking a trip that was previously scheduled. Air charter is a form of air taxi, but a new class of aircraft and new business models are redefining the term “air taxi” to mean something less expensive than traditional charter. The idea behind an air taxi system is that the aircraft operator can reduce the number of empty flights the aircraft must fly.
Air Charter:
Let’s say you book a flight on a Cessna Citation S/II (CE-S550). This light aircraft can be chartered for an hourly rate between $1,500 and $3,100, depending on the age of the aircraft, amenities, and operator qualifications. For our purposes, we will assume a typical rate of $2,000 per hour. This price includes costs associated with operating the aircraft, such as pilot salary and fuel costs, but does not include some additional charges that can significantly increase your expenses, such as:
Taxes – generally 7.5% of the total price.
Repositioning fees: Let’s say you want to fly from Santa Monica, California, but the plane is in San Diego. The aircraft operator would need to ship the plane empty for pickup and then return it empty to San Diego after dropping it off in Santa Monica at the end of the trip. This repositioning adds expense to the operator’s bottom line and is usually added to their cost at a reduced hourly rate.
Nightly and Standby Rates: Let’s say your trip is to fly from Santa Monica to Las Vegas and back the same day. Your pilots would wait for you for several hours and you would be charged an hourly rate for the pilots’ time. If your trip requires an overnight stay, you may be charged for pilot hotel rooms and overnight parking fees for the aircraft. These charges will vary based on local rates.
Minimum Daily Charge: Most aircraft operators have a two-hour minimum operating charge for charter aircraft. If you need to take a flight that takes one hour each way and you complete both legs of the trip in one day, then you meet the minimum usage requirement and only have to pay for the two hours you use the plane that day. If, on the other hand, your trip is scheduled to fly an hour on Friday and then return for the one-hour trip on Saturday, you’ll likely be charged for two hours on Friday and two hours on Saturday for a total of four hours. even though the plane only flew for two hours total. This standard industry practice is in effect for the “time is money” principle. Aircraft incur expenses even when they are idle.
Air taxi:
There are two different pricing structures in the air taxi model that could be used and each aircraft operator would make their own determination as to which they would use, Entire Aircraft or Per Seat:
Entire Aircraft: Again, we will use the Cessna Citation S/II for this example, but the hourly rate will be higher than the charter rate; Let’s say around $2500 per hour for this example, but you won’t be charged for repositioning, overnight, standby landing or other charges. It will be a simple price per hour for pick up and drop off. After they drop you off, the plane can take another customer on a trip. Your return trip may be on the same plane or it may be on a different plane or even a different company. This type of air taxi service may only be available between certain airports that have enough traffic to maintain paid employment of the aircraft.
Per Seat: The Citation S/II has 7 available passenger seats. If they take a flight with fewer than 7 passengers on board, the operator would lose money by dividing the fare by the number of seats. Therefore, they will set their prices in one of two ways:
1) Divide the total price by the number of passengers actually on board the aircraft for each flight. Suppose you are traveling with two colleagues and there is another group of two that will be traveling on this flight with you for a total of five passengers. The price of a seat would be $2,500/5 = $500 per seat. If your group was the only one on the plane, the hourly rate per seat would be: $2,500 / 3 = $833 per seat.
2) Divide the total price by the average number of passengers carried by the operator on each trip. Suppose the operator has been flying the SMO to LAS route for some time and has determined that he can routinely get an average of 2.9 passengers for each flight he flies. If the operator used this pricing strategy, he would charge you $2,500 / 2.9 = $862 per seat per hour. This would be the same price regardless of the number in your group.
Per-seat pricing would only be available between limited city pairs that have the traffic volume to keep the plane full of paying passengers. If you want to fly to an airport outside the city network per seat, you will probably need to charter the entire plane, as per seat prices may not be available.
It’s about efficiency:
The emerging air taxi business model brings more efficiency to the charter model. Less waste will equate to reduced greenhouse gas emissions, more productivity and lower end costs. Air taxis are expected to become more widely available and less expensive as very light aircraft (VLJs) are produced and become available for charter flights and air taxis. These planes promise to provide services at a 20% to 40% discount from existing light jets, like the one in the example. At the time of this writing, about 100 VLJs have been produced and a handful of them have found their way into air taxi businesses along the East Coast and Chicago area. But that is another story.