Small Private Plane Market

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Small Private Plane Market

Key Takeaways

  • The market size for the number of U.S. passengers per year who are potential consumers of private jet travel for small jets (chartered) that can hold 2-3 passengers in the middle to upper class is likely between 17,126,851 and 25,690,277 passengers per year. This is a loose, ballpark estimate, based on the triangulations and calculations shown in the 'Market Sizing Potential: Passengers' section below.
  • The estimated potential U.S. market size in dollars for private jet travel for small jets (chartered) that can hold 2-3 passengers in the middle to upper class is likely in the range of $16,133,493,642 and $24,200,240,934 per year. This is a loose, ballpark estimate, based on the triangulations and calculations shown in the 'Market Sizing Potential: Dollars' section below.
  • Existing market opportunities relevant to private jet travel for small jets (chartered) that can hold 2-3 passengers in the middle to upper class have been identified as increasing demands for private jet travel in general, significant forecasted growth in the very light jet market, and increasing demand for luxury travel experiences. These opportunities are being driven by favorable consumer and economic conditions, including increasing wealth, increasing concerns for health-safety while traveling, changing consumer perceptions that its worth it to shell out extra funds to be able to travel without coming in contact with a lot of other people, increasing use of private jet charters by families, increasing levels of disposable income, increasing levels of personal savings, increasing demands for enhanced service standards, and increasing desires among millennials for self-care, relaxation, and luxury experiences.
  • Existing market threats relevant to private jet travel for small jets (chartered) that can hold 2-3 passengers in the middle to upper class include high costs associated with private jet charter operations which lead to low profits, negative perceptions of the environmental impacts of private jet travel, increasing family size and larger average travel party sizes for private jet charters. Drivers of these threats include rising inflation and material shortages, intensifying consumer concerns and demands when it comes to eco-friendliness, recent academic research analyzing the environmental impact of jet travel, public shaming of high profile individuals and others who use private jets while simultaneously advocating for climate change issues, increasing average U.S. household size, and a desire for private jet consumers to help cut costs of charters by splitting the costs between larger travel party sizes.

Introduction

This report covers market sizing and market conditions relevant to small private jets (chartered) that carry 2-3 passengers who are middle to upper class. Specifically, the report calculates the market size of this segment in terms of passengers and dollars, and also presents several market opportunities and threats relevant to the segment. Additionally, a detailed description of the logic and strategies used to compile these findings can be found in the Research Strategy section at the end of the report.

Market Sizing Potential: Passengers

The data and information below present a series of logic and calculations that have been used to triangulate the market sizing potential in terms of passengers that could be applicable to small private jets (chartered) that carry 2-3 passengers who are middle to upper class. It should be noted that, due to limited data availability relevant to this topic, this is a loose, ballpark estimate that has been based on publicly available data. A detailed explanation of the logic used in this analysis can be found in the Research Strategy section below.
  • According to data from Pew Research, middle income Americans make between $41,000 and $120,400; upper income Americans make over $120,400. According to data from the U.S. Census Bureau, there are 122,802,852 households in the United States. Of these, around 57.8% fall in or near the middle income tier ($35,000-$149,000 -- as the Census Bureau income brackets don't perfectly align with the $41,000-$120,400 bracket posed by Pew Research). This equates to about 70,980,048 households (or, 57.8% of 122,802,852). Meanwhile, 15.7% of households fall into the upper income tier ($150,000 and above). This equates to 19,280,048 households (or, 15.7% of 122,802,852). In total, the number of American households that fall into the middle or upper class is approximately 90,260,096 households (or 70,980,048+19,280,048).
  • Data published by McKinsey shows that around 90% of people who can afford to fly privately do not; this suggests that around 10% of people who can afford to fly privately do. Based on this logic, if private flights were affordable to all 90,260,096 households in the American middle and upper class, approximately 9,026,009 households would take them. The average number of people per household in the U.S. is around 2.53 people. This suggests that there could be as many as 22,835,802 individuals in the U.S. that are current or potential private plane passengers (or 9,026,009 x 2.53).
  • The average American takes around 2.5 airline trips annually; this equates to around 57,089,505 airline passengers across all trips per year taken by the 22,835,802 individuals noted above (or, 22,835,802 x 2.5). Around 20-33% of U.S./North American travel bookings are for groups of 2 people, while 10-12% have 3+ people. This suggests that between 30% and 45% (or, 20+10 and 33+12) of travel parties could potentially be applicable to a small private jet that holds 2-3 passengers. This equates to a range between 17,126,851 and 25,690,277 passengers (or, 30% of 57,089,505 and 45% of 57,089,505).
  • Based on the calculations and triangulations above, the estimated market size for the number of U.S. passengers per year who are potential consumers of private jet travel for small jets that can hold 2-3 passengers in the middle to upper class is likely between 17,126,851 and 25,690,277 passengers.

Market Sizing Potential: Dollars

The data and information below present a series of logic and calculations that have been used to triangulate the market sizing potential in terms of dollars that could be applicable to small private jets (chartered) that carry 2-3 passengers who are middle to upper class. It should be noted that, due to limited data availability relevant to this topic, this is a loose, ballpark estimate that has been based on publicly available data. A detailed explanation of the logic used in this analysis can be found in the Research Strategy section below.
  • The cost to charter a smaller jet plane that holds between 4-6 passengers is between $1,300 and $3,000 per flying hour, according to AFAR Magazine in 2020 (although some sources . This equates to an average of about $447 per hour, per passenger [or, (1,300/4 + 1,300/6 + 3,000/4 + 3,000/6) /4 =447).
  • According to Menkor Aviation, private jets in the ultra-light and light categories (ranging from 1-7 seats) can fly between 600 and 850 mph. This equates to a range of about $0.75 per mile to $0.53 per mile, per passenger (or, 447/600 and 447/850), or an average of $0.63 per mile, per passenger [or, (0.75+0.530/2].
  • According to the Bureau of Transportation Statistics, the average distance flown per passenger, per trip across both domestic and international travel is 1,494.6 miles. If all these miles were flown via a small private jet at a rate of $0.63 per mile, per passenger (as calculated above), this would equate to about $942 per trip, per passenger (or, 0.63 x 1,494.6).
  • In the 'Market Sizing Potential: Passengers' section above, the estimated market size for the number of U.S. passengers per year who are potential consumers of private jet travel for small jets (chartered) that can hold 2-3 passengers in the middle to upper class is likely between 17,126,851 and 25,690,277 passengers (Note: This passenger estimate has already taken into account that individuals in the U.S., on average, take 2.5 air travel trips per year and counted them as 1 passenger for each trip). Given this, the estimated potential U.S. market size in dollars for private jet travel for small jets that can hold 2-3 passengers in the middle to upper class is likely in the range of $16,133,493,642 and $24,200,240,934 (or, 942 x 17,126,851 and 942 x 25,690,277).

Market Opportunity:

Increasing Demand for Private Jet Travel Driven by Increasing Wealth and Health Concerns

  • In the first quarter of 2021, Wheels Up's revenue increased by 68%, while active memberships increased 56%. This data suggests an overall increasing demand for financially-friendlier private jet travel options. Company CEO, Kenny Dichter, noted that the increased demand can be found across all fleet categories. This increasing demand is also being witnessed by other private jet charter companies.
  • This demand is being driven in part by a desire for consumers to avoid the pandemic-related health risks of flying commercially, as well as a significant surge in growing wealth among consumers, which is enabling greater numbers of people with the ability to afford to fly privately.
  • Experts have suggested that the demand for private jet travel is likely to continue growing in the near future. Recently published market reports on the global air charter services market further note that the global industry is expected to grow at a CAGR of 4.04% through 2026. Additionally, travel industry data published in the summer of 2021 noted that the private aviation segment is expected to emerge from the pandemic 5% to 10% larger than when the pandemic began.
  • Despite the fact that 2020 was the year when most people reference the pandemic as having peaked, aviation research firms have noted even stronger growth in private aviation in the fall of 2021 compared to the fall of 2020 (with a 32.7% YoY increase from 2020, and a 9% increase compared to the same period in 2019).
  • Various news articles have been reporting increasing demand for private jet travel among the middle-class specifically. This demand appears to largely be driven by middle-class people who have saved up their money over time and now see private jet travel as a wise way to spend their savings.
  • Demand for private jet travel has also been increasing among families, which could bode well for smaller-sized private jets that can fit a family of 3 or 4. For example, one private jet charter company noted that 20% of their recent passengers have been children, which is a clear demographic shift from the traditional consumer base of business passengers.

Significant Forecasted Growth in the 'Very Light' Jet Market

  • Very light jets (VLJs) are the smallest-sized jets on the market and generally hold around 4-5 people who are traveling relatively short distances (up to 2 hours in duration). Their size also makes them among some of the fastest private jets available.
  • At the global level, the VLJ market is expected to grow at CAGR 11% between 2021 and 2030. The ultra-light aircraft segment is expected to grow even faster, at CAGR 12% through 2030.
  • According to a recent market report, "increase in inclination toward private aviation solutions and growing concern toward health among individuals drive the growth of the very light jet market."
  • Increasing numbers of high net worth individuals and increasing disposable incomes are also noted as driving interest in very light jet travel. In the United States specifically, levels of disposable personal income has increased drastically since 2017, and has surged during the pandemic especially, nearing $22,000 in 2021, up from around $14,000 in 2016, and up from around $8,000 in the year 2000. In alignment with this, levels of personal savings have also skyrocketed during the pandemic.

Increasing Demand for Luxury Travel Experiences

  • According to a recent market report, "rise in inclination of people toward unique and exotic holiday experiences, increase in the middle- & upper-class disposable income & related expenditure, and growth in need and interest of people to spend more time with family fuel the growth of the global luxury travel market." In alignment with this, there is surging demand for "enhanced service standards."
  • Between 2021 and 2027 the global luxury travel market is expected to experience a GAGR of 11.1%.
  • Millennials are currently the largest group of consumers in the U.S. According to a joint study conducted by TripAdvisor and Accenture, published in 2021, "millennials in search of luxury are at the forefront of rebounding U.S. traveler confidence." This desire for luxury travel experiences is being driven by the cohort's "strong desire for self-care and relaxation."

Market Threats:

High Costs Associated With Private Jet Charter Operations Lead to Low Profits

  • Although companies like Wheels Up are innovative in the private jet charter market, by way of making private jet travel more accessible to the general public, this company and companies like it are still struggling to turn a profit. This is a critical concern for such companies, as they are relying on investor interest to continue to grow.
  • One reason why affordable private jet companies are struggling to turn is profit is because of the high cost associated with operating private jets and maintaining, not to mention the costs of keeping pilots and related infrastructure going.

Negative Perceptions of Private Jet Travel Environmental Impacts

  • As consumer concerns about climate change, pollution, and the environment have grown increasingly intense in recent years, the environmental impact of private jet usage has come under a lot of scrutiny. For example, "private jet flights produced around 33.7 million metric tons of carbon dioxide in 2016, according to a study published last year in the peer-reviewed journal Global Environmental Change. That’s only 4% of total aviation emissions but still more carbon than the entire nation of Denmark emits in a year. And because private jets carry so few passengers, the researchers from Sweden’s Lund University and the Munich University of Applied Sciences in Germany estimated, frequent fliers can produce up to 7,500 tons of carbon emissions annually — more than 483 times the emissions the average American generates each year."
  • In addition to this, reputational damage is a risk for individuals who espouse sentiments about fighting climate change or advocate for environmental friendliness but then resort to private jet travel, as the media and public declare these behaviors hypocritical. This type of instance has become so common, that it has even been given a name: "flight shaming", a topic so prolific, it was even covered by Reuters. Perhaps the most high profile case of flight shaming in recent memory is that of Prince Harry and Megan, Duchess of Sussex. It can be logically assumed that, as private jet charters become more accessible to the mainstream public, many consumers will be turned-off by the prospect of adopting this form of travel, either because of self-guilt or out of fear of being shamed in their social circles. Further, it can logically be inferred that as Gen Z becomes the leading consumer demographic, that this issue will become an even bigger threat to the private jet industry, as Gen Z is seemingly the biggest proponent of climate change activism across generations.
  • On the plus side, however, advancements in technology are leading the way to more eco-friendly jets, which could help to offset this threat in the future, as early versions of such jets are already in existence.

Increasing Family Size and Larger Travel Party Sizes for Private Jet Travel

  • As families are becoming a more key consumer demographic of private jet travel (as noted above), this could pose a potential threat to any company aiming to cater only to very small-sized travel parties. For example, the average size of U.S. households has been increasing in recent years.
  • Additionally, most private flights in recent years average a higher number of passengers (4+ passengers). This especially seems to be the case where private jets are hired by larger sized travel parties looking to split the costs in order to help make the charter more affordable.

Research Strategy

To estimate the U.S. market size potential in terms of number of passengers for small private jets (chartered) that carry 2-3 passengers who are middle to upper class, our team began by first identifying the total number of Americans who fall into the middle and upper class categories. This was done so that this pool of potential customers could be further widdled down to a more granular level of potential customers that would account directly for the aforementioned market. In doing so, our team first sought a definition (in terms of income level) for middle and upper class. We then quantified this by using data from U.S. Census Bureau which showed the number of households that fall into the given income brackets. It should be noted here that the defined income brackets for middle and upper class and the breakdown of income brackets presented by the U.S. Census Bureau were not precisely aligned with each other, so an exception was made to account for this nuance, given that we were aiming for a ballpark estimate in terms of the market size (this nuance is also noted directly within the calculation where it occurs in the report above). Once we knew the number of households that fall into these income categories, we then attempted to find data showing percentage of Americans who would be interested in taking a private flight, assuming it was affordable to them (or a similar type of data point). This data would logically need to come from a consumer survey, however, this data point was quite elusive, as nearly all the available consumer surveys relevant to these topics are specific to consumers who are already taking private flights. After exhaustive digging through numerous consumer surveys, industry reports, and trusted media articles, our team eventually found a solid data point from McKinsey and company discussing the percentage of people that can afford to fly privately that actually do so vs. the percentage of people that can afford to fly privately that do not. As this was seemingly the best data point available that aligned with our needs, we made the assumption that this percentage could then logically be applied to our potential consumer base, given that they had access to an affordable private flight option (as was discussed in the background of this research project, which focuses on a new business for small aircraft charters that are more cost effective, thereby opening up the potential consumer base to middle class individuals). After applying this data point to the overall number of applicable households based on income class, we were able to narrow down the potential consumer base to the number of households in these income classes that would likely fly privately if they could afford to do so. Since we needed to move from number of households to number of passengers (i.e. individuals), we next multiplied the number of households who would be willing to fly privately if affordable by the average number of people per household in the U.S. In doing so, we arrived at the number of individuals in the U.S. who would be willing to fly privately if affordable. Next, to further synthesize this down into the number of passengers, we found the average number of plane trips people in the U.S. take annually and multiplied this by the number of individuals who would be willing to fly privately, and counted an individual as 1 passenger for each of these average trips. This allowed us to arrive at a figure for the number of middle and upper income passengers in the U.S. who would be willing to fly privately if they could afford to. Next, we found data showing the distribution of travel party size in terms of percentage, as this helped us further narrow down a range of passengers in the middle and upper income levels who are traveling in groups of 2-3 (as to be applicable to a small jet plane that holds 2-3 passengers) who would likely be willing to fly privately if they could afford to.

To estimate the U.S. market size potential in terms of dollars for small private jets (chartered) that carry 2-3 passengers who are middle to upper class our team began by working to identify an average cost per head on a private flight. In doing so, we were able to find an average range to charter a smaller sized private jet per flying hour and divided this by the number of passengers the jet could hold. Doing so gave us the average cost per flying hour, per passenger. Next, we collected data showing how fast a small private jet can fly in terms of miles per hour and applied this to the average cost per flying hour, per passenger, in order to arrive at the average cost per mile, per passenger. Next, we found the average distance flown per passenger, per trip and multiplied this figure by the average cost per mile, per passenger, as doing so gave us a figure for how much the private jet charter would cost per trip, per passenger. We then multiplied this cost by the market size range of passengers we triangulated earlier (as this number of passengers already took into account the average number of trips taken per year, per individual and counted them as 1 passenger for each trip). The result of this multiplication (a range) then served as the final market size estimate in dollars.

Note: It should be noted here that in the case of these market size estimates, only loose, ballpark figures can be arrived at. This is because the publicly available data on this topic is very limited, which makes it unreasonable and unfeasible to account for the many nuances and variables that would lead to a more perfect and exact market size. Despite this, we feel strongly that this is the best set of estimates that can be arrived at using publicly available data, even if they are ultimately imperfect. Additionally, the final market size ranges arrived at seem reasonable within the greater context of the private flight charter market itself as well as in the context that we are presenting a potential market size based on hypothetical situations (i.e. attempting to estimate the ultimate, possible market size based on how consumers may respond if given access to a future product).

When conducting research about market opportunities and threats that are relevant to private jet travel for small jets (chartered) that can hold 2-3 passengers in the middle to upper class it was found that available information specific to this niche segment was again very limited. Despite this, we triangulated an understanding of the opportunities and threats by considering various market conditions and dynamics, as well as key consumer variables, and forming logical connections between these and their relevancy to the aforementioned niche segment. In doing so, we zeroed in on existing opportunities and threats that would most likely be of impact to such a charter service.

Research proposal:

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