Private Jets a Growing Airport Trend

MARCH 13, 2004

Silicon Valley businesses are slowly, cautiously, putting their executives and salespeople back into the air in order to meet with clients or woo new ones. However, many are turning from commercial airlines to private corporate jets -- their own and, increasingly, someone else's.

While commercial business traffic is off about 20 percent at Mineta San Jose International Airport since the Sept. 11, 2001 terrorist attacks, corporate jet traffic has increased. Exact local numbers aren't available, but corporate jet traffic was up 25 percent nationwide in 2003 and locally accounted for nearly one in every three flights taking off or landing in San Jose. "We see a business jet resurgence in the West," says Amanda North, regional vice president for Executive Jet Management, which opened an office at the San Jose Jet Center recently to take advantage of Silicon Valley corporate jet traffic.

Plans are already underway to expand or build three new facilities for corporate jets and their clients. The three projects will take over most of the airport's western edge, south of the air traffic control tower. San Jose State University also has been contacted by companies wanting to know the availability of its five-acre Aviation Department center on the airport's western edge, says Scott Yelich, an SJSU assistant professor of aviation. "Jet Blue and Southwest are profiting on business travel on the low end and corporate jet traffic is increasing on the top end," says a corporate jet manager for a large Silicon Valley company who spoke on the condition that neither his name nor his company's is mentioned. "We charter our plane out to get maximum use of it."

The secrecy surrounding corporate jet travel is increasing as rapidly as the traffic. One company contacted by the Business Journal threatened to sue the paper if its name was mentioned in relationship with corporate jet traffic. "There is still that stigma of luxury," Ms. North says. "There is a worry that it won't seem like it is the best use of corporate funds. There is worry about shareholder concern."

While corporate jet traffic will never be as cheap as commercial travel, when the value of an executive's personal time and convenience is factored in, private corporate jets can become cost effective, Ms. North says.

Charter service is gaining in popularity as smaller companies seek ways to take advantage of idle corporate jets. While companies such as Intel Corp., Oracle, Hewlett-Packard, Apple Corp. and others own their corporate jets either outright or through a wholly-owned subsidiary, many smaller companies purchase a share of a single aircraft that guarantees them a certain amount of flight time annually. Companies like Ascend and NetJet, of which Executive Jet Management is a subsidiary, often keep these planes housed as far away as Fresno and fly them in when a company needs them. The Jet Center provides maintenance and fuel for these aircraft.

Executive Jet Management and Silicon Valley Express at Mineta San Jose and others nationwide help these companies rent out either their wholly-owned or fractional aircraft when the planes aren't being used. "For the owners, it allows them to get a bigger bang for their buck," Ms. North says. "For those chartering, they get the advantage of a corporate jet without the hassle of ownership."

Increasingly, that hassle is where to store the aircraft. There are long waiting lists to get corporate jets into a Mineta San Jose facility. Businesses are expanding and new ones are moving in to handle the load. The San Jose Jet Center has 65 corporate airplanes using its facilities -- including General Electric, Oracle, and Apple Corp. -- and has at least 40 more on a waiting list. The Jet Center has begun construction on a new hangar that will increase its footprint to 22 acres, from its current 15 acres. ACM Aviation Inc., now located on the Mineta San Jose's southeastern edge, has plans to construct a modern 59,186-square-foot corporate jet facility on Mineta's western side. It is scheduled to open in 2005. ACM has 35 planes in its hangars with more on a waiting list. Meanwhile, AvBase, which would become Mineta San Jose's third corporate jet service provider, has submitted plans for 96,000-square-foot hangar as part of a new five-acre westside facility.

Some planners have begun eyeing the 100 acres on the airport's northwest side -- now dedicated for future air-cargo services -- for corporate jet services. However, that would take a change of the airport master plan and likely would face stiff neighborhood opposition. "SJJC has remained at or above capacity for the past three years, in spite of a soft regional economy," says Dan Ryan, president and chief executive officer of the San Jose Jet Center. "We've seen the demand for business air travel continue to increase considerably, especially in the aftermath of Sept. 11. Demand for our hangar space remains high and we've already taken deposits on space in the new facility."

The new construction shows that corporate jet traffic is only going to increase, says Carl Honaker, chairman of the San Jose Airport Advisory Commission. "It's a signal that corporate jets are getting more popular," Mr. Honaker says. "As more corporations are seeing the advantage of owning their own airplanes, the demand is only going to increase."

Corporate jet traffic has become increasingly popular in Silicon Valley as security concerns has made commercial airport traffic more cumbersome, says John McLemore, a commissioner on the Metropolitan Transportation Commission. "It's critical to the lifeblood of Silicon Valley businesses to be able to jet back and forth," says Mr. McLemore.

Source: The Business Journals