SIC 4522 Air Transportation, Nonscheduled

SIC 4522

This category includes establishments primarily engaged in furnishing nonscheduled air transportation. Also included in this industry are establishments primarily engaged in furnishing airplane sightseeing services, air taxi services, and helicopter passenger transportation services to, from, or between local airports, whether or not they are scheduled.

NAICS CODE(S)

621910

Ambulance Services

481212

Nonscheduled Chartered Freight Air Transportation

481211

Nonscheduled Chartered Passenger Air Transportation

487990

Scenic and Sightseeing Transportation, Other

INDUSTRY SNAPSHOT

The nonscheduled segment of the air transportation industry includes all companies that provide charter service, airlines carrying passengers and/or cargo, and helicopter services. One major characteristic of the nonscheduled industry is that companies operate on the basis of full-plane sales. Using this procedure, the total aircraft capacity is sold to an organization, such as a ticket wholesaler. In general, these wholesalers are tour operators, military and governmental agencies, specialty charter customers, and sponsors of incentive travel packages. Most charter carriers, either passenger or cargo, are small operations working within a niche market.

After the terrorist attacks of September 11, 2001, the entire air travel industry ground to a halt. According to the Air Transport Association, charter revenues fell from $4.91 billion in 2000 to $4.45 billion in 2001. However, charter services rebounded, as did the economy, during 2003 and 2004. By 2005 charter air operators were actually benefiting from the long lines caused by increased security at major airports, which encouraged more business travelers to seek the convenience of charter services. Operators who provided charter services for the military also saw business increase as the United States engaged in military action in Iraq.

ORGANIZATION AND STRUCTURE

According to the Federal Aviation Administration (FAA), there were about 3,000 charter on-demand operators in the United States in the mid-2000s. Of this total, 2,550 were fixed wing aircraft, and 450 were helicopter operators. There were also 275 air tour operators, with a total fleet of over 960 aircraft. Charter service data is not officially gathered, so the FAA can only estimate the value of the overall industry, which it has pegged to be as much as $13 billion or as little as $4 billion. The Air Transport Association estimated charter revenues at $5.14 billion in 2003.

The nonscheduled airline industry includes charter passenger airlines and air taxi services. Charter passenger airlines provide service to vacation or leisure destinations and market their services through the use of tour operators, travel agencies, or destination resort operators, which include cruise ship operators. With medium- to large-size planes in their fleet, charter carriers also provide service to the U.S. military and other groups. Air taxi services companies provide short-haul, on-demand transportation—in which case they are called "Part 135" operators—and helicopter service. Part 135 operators fly planes with fewer than 30 seats and rely largely on corporate-oriented clientele. Most carriers also utilize their fleets for sightseeing trips, commutes between airports, emergency medical transportation, and the delivery of workers and equipment to offshore oil well sites. Helicopter services provide similar on-demand corporate transportation.

Scheduled Traffic and Capacity

Charter carriers typically board between 1 and 1.5 million passengers annually and log more than 18 billion revenue passenger miles (RPMs), a measurement based on one fare-paying passenger transported one mile. Charter airlines logged 9.1 billion of their RPMs in domestic service and 8.7 billion RPMs in international service. In comparison, annual enplanements for the scheduled airline sector average 554.2 million per 12-month period, producing 547 billion RPMs. While charter airlines fly fewer people, they tend to fill more seats on their planes. Nonscheduled carriers average 70 to 75 percent load factors (a measure of seats filled), while scheduled airlines typically realize much lower load factors.

Load factors for specific charter airlines usually have been higher than the overall industry average, running anywhere from 80 to 100 percent. Load factor directly affects fare structure. With fares based on a load factor of 80 percent or more, each seat can be sold at a deep discount. However, unlike scheduled carriers, if a charter cannot meet these numbers, the flight is canceled. Therefore, charter operators work in high-demand markets and will pull out of the market when demand falls.

Nonscheduled airlines, like charter services, can access approximately 7,000 different airports in the United States. In comparison, scheduled airlines can use only about 600 airports around the country. Charter airlines rarely engage in direct competition with scheduled airlines. Instead, charters usually work in markets not directly served by the scheduled carriers. For example, Passport Travel, a Kansas City-based planner of Las Vegas trips, could not secure transportation through a scheduled carrier once the major hub in their market closed. As a result, PTI Tours, the wholesale division of Passport Travel, chartered...