Demand Soaring for Flights of Fancy Trappings

Leather seats buffed, crystal stemware polished and lint carefully vacuumed from the deep-pile carpeting, a Gulfstream G-IV twin-engine jet at Petersen Aviation awaits its next load of passengers willing to pay about $5,000 an hour to jet off--on business or on a whim--to destinations as diverse as Taiwan and Wyoming.

Growing legions of travelers are paying lofty sums to fly in luxury and security, a trend that has carved out a specialized segment at Van Nuys Airport. Executives of the airport’s fixed-base operators--and owners of more than 100 other aviation-related businesses at the airport--scramble to ratchet up services to retain market share, even as they cast an anxious eye downrange at possible noise curbs that they fear could put the brakes on growth.

For now, however, times are sunny, thanks to soaring demand for the luxury travel offered by planes like Petersen’s fleet of lush living rooms in the clouds.

The firm’s three G-IVs sport spacious sink-down-and-doze-off seats, soothing wood paneling and cut-glass cabin dividers. Passengers can amuse themselves watching movies (on VHS or DVD) as well as graphic displays that pinpoint the aircraft’s location as it wings its way around the globe.

In the galley, chefs prepare escargot, lobster tails--indeed, whatever gourmet delicacies the passengers want.

“It’s a nice way to travel,” said Kenneth J. Curry, vice president and general manager of Petersen Aviation. “You never want to go on an airline again.”

Petersen Aviation, owned by former publishing magnate Robert E. Petersen, has recorded 10% to 15% revenue growth a year catering mainly to Hollywood and sports celebrities. And, increasingly, to corporate and business travelers as well. That reflects the changing demographics in the nonscheduled air carrier industry nationwide, said Jack Olcott, president of the National Business Aviation Assn., a Washington-based advocacy group of more than 5,000 companies that use general aviation in business travel.

“Our members purchase $10 billion a year in airline tickets, but airlines serve 550 airports, and business aviation can reach 10 times that number,” Olcott said. “About 75% of U.S. passenger deployments occur at 55 locations, but business aviation provides access to 10 times that, so it has become an ordinary travel option for many companies.”

The boom in corporate travel actually began in mid-1991 as the country emerged from its last recession, Olcott said--and it shows no signs of flagging. U.S. manufacturers delivered 1,692 general aviation aircraft in the first three quarters of 1999, compared with 1,490 in the same period of 1998, with billings increasing to $5.5 billion, up from $3.9 billion during the same period in 1998.

Given that some passengers are eager to pay premium prices for luxurious travel, Clay Lacy, founder and president of Clay Lacy Aviation Inc., illustrates the economies of chartered travel.

If you have a meeting, for instance, in Casper, Wyo., you could be there in less than two hours on a Gulfstream G-II--a notch less posh than most G-IVs--at a flat rate of $3,500 an hour--the same rate whether you travel alone or take a full load of a dozen staff members. Up and back in less than four hours air time would be billed at something under $14,000.

In comparison, Delta Airlines quotes a price on its Web site of $563.25 one way to Casper on flights that arrive either at 11:20 a.m. or 4 p.m. Return fare is listed at $506.25.

That itinerary is priced at $1,069.50 for one--or $12,834 for 12 staff members.

The Gulfstreams and similar planes available for charter provide an ideal setting for private conferencing. In contrast, holding business meetings aboard scheduled airline flights, most business travelers will agree, usually represents a profound challenge. The private air services also cater to security-conscious celebrities and executives, allowing them to drive their limousines right up to the plane.

“I’d say airlines are our biggest sales people,” said Mark Sullivan, president of Sky Trails Aviation Inc., one of Van Nuys Airport’s six fixed-base operators, or FBOs, a group that includes Petersen, Lacy and three other firms: Raytheon Aircraft Services, Million Air and Jet West International.

The FBOs have a symbiotic relationship with Los Angeles World Airports, the city department that operates the airstrip. FBOs on the one hand act as master lessees, leasing space from the department and subleasing to the airport’s other maintenance, sales and charter companies. For instance, Clay Lacy leases nine acres at $14,800 per acre. The FBOs also have an exclusive right to pump fuel, on which the city collects a 3-cent-per-gallon tax. Fuel tax revenues also reflect the airport’s growth, with $396,000 collected in the fiscal year ending June 30, 1999, compared with $360,000 for the same period last year.

Los Angeles County collected nearly $8 million in property taxes on the planes based at Van Nuys, said David Fischer, a county appraiser specialist. The aircraft is assessed 1.06% of the appraised value, which totaled $750 million last Jan. 1, Fischer said.

But while the FBOs have watched business grow through the 1990s, they also can look out at surrounding neighborhoods where community activists have mounted a vigorous, often bitter campaign against operation noise.

Gerald A. Silver, president of Homeowners of Encino and the Stop the Noise coalition, favors eliminating so-called Stage 2 jets--which fall short of stricter Stage 3 federal noise limitations. About 50 Stage 2 jets--including the heavily used Gulfstream G-IIs and G-IIIs--are based at the airport. The newer Gulfstream G-IV and planes such as the Raytheon Hawker 800 meet Stage 3 standards.

“The problem with the business establishment involved at Van Nuys Airport is they don’t understand the word balance--the balance between the interest and equities of their clients and their airport interests and the community, the residents and the environment,” Silver said. “They see no controls put on their nosiest aircraft.”

Faced with a proposal to limit growth of the Stage 2 planes along with demands from neighbors to ban them outright, the Los Angeles City Council on Nov. 23 delayed a decision, calling for 90 days of more study.

The FBOs, meanwhile, believe that their growth will stall if the city limits Stage 2 planes at Van Nuys.

“If that restriction goes in, my business is on a downhill,” said Lacy, a longtime airline pilot who recalls using a single Learjet to start California’s first jet charter service at Van Nuys in 1968. The business now has more than 100 employees and annual sales of $30 million to $35 million. “I may decide to tell them to go get lost. . . . One thing for sure, it would increase business in places that are more aviation friendly.”

As Lacy sees it, noise control has to factor in economics. A Gulfstream G-II costs about $5 million to $6 million, he notes. The later model G-III costs about $10 million to $12 million. It has the same engine and flies the same speed, but has a longer range.

But the quieter Stage 3-compliant G-IV costs $28 million new and $22 million used, Lacy said.

“The G-IV is the same plane, same speed, same altitude, same cabin--the only difference is the noise,” Lacy said. “It has quieter engines.”

Lacy said his rule of thumb is that a $350-million-a-year company can justify the expense of a G-II, a $500-million company can own a G-III, but it takes a $1-billion company to support a G-IV.

To look at it another way, the cost of capitalization and insurance for a G-II starts at about $70,000 a month. A G-III runs about $125,000 a month, but a G-IV costs about $350,000 a month. Maintenance and fuel cost extra, and a crew to operate a Gulfstream can run more than $155,000 a month.

As is common among the other charter services, many of Lacy’s clients enter into management agreements that allow Lacy to make their jets available for charter when their owners aren’t using them. The owners get the use of other aircraft if they want to fly when their planes are chartered out. That can substantially off-set capitalization and maintenance costs, he said.

“In the case of a G-II, we can often reduce cost to zero cash flow and they have an airplane available,” Lacy said. “In many cases we don’t zero it, but we can pay 80% of it.”

Even so, private jet travel keeps the FBOs scrambling to cater to customers who might not care about such economies.

“This place is constantly being refurbished and rebuilt,” said Timothy Wray, general manager at Raytheon, which invested $8.5 million in an ultra-plush terminal across the runway from Petersen and Lacy barely five years ago.

“Our clients notice the little things and it’s the little things that make a difference,” said Petersen’s Curry, a former Air Force bomber pilot.

“Like a weed growing out of the sidewalk where it shouldn’t be, or a cigarette butt next to the door . . . dust and water spots on the chrome in the restroom. Believe me, that’s the kind of thing that people might complain about, and we pay attention to.”