The sky’s the limit

Once the preserve of company bigwigs, as well as the rich and famous, business aviation is increasingly being utilised by a wider spectrum of corporate traveller. BM tracks down three industry experts for their views on this burgeoning market.

BM. Until recently, the European business aviation industry was growing at a rate of seven percent per annum, according to the EBAA (European Business Aviation Association). What were the main factors driving this growth?

Bob Horner. Business aviation in Europe increased as a result of the overall growth of the global economy, including factors such as the expansion of charter organisations and the emergence of the Eastern CIS countries as important economies. With its comprehensive range of Learjet, Challenger and Global business aircraft, Bombardier was well positioned to benefit from the rise in European demand, which was also fuelled by the rise of the euro.

James Philip Jordan. In the final analysis strong business aviation growth is always the direct result of strong economic conditions which yields strong profits and growth in personal wealth. Historically, growth in business aviation lags growth in corporate profits by 12 to 18 months. Many dozens of analyses have confirmed that this is the most significant variable that accurately predicts business aviation growth and decline.
 
Because the US and European countries have been about 18 months out of phase, Europe dominated total purchases in 2007 and 2008. This yielded a very strong euro which had a very positive effect on purchases in European countries. In addition, the significant expansion of the Russian economy and their massive investments outside the country did much to foster the boom as the need to fly to and from Russia became more essential.

BM. How will economic conditions in Europe affect business aviation operators?

Shane O'Hare. These are undoubtedly very difficult times for business aviation, with European brokers reporting a 30 to 50 percent downturn in corporate market business compared with a year ago. But none of this changes the primary reason for business aviation. The equally significant fall in commercial airline traffic and consequent flight cancellations means that it is now becoming ever more difficult to complete timely business deals at destinations away from the main hubs, with many cities served less frequently than before, and some no longer served at all.

Business aviation in Europe is primarily a business tool both of large companies and governments, who represent some 80 percent of users. Royal Jet's recently opened charter brokerage, based in Dubai, provides travel solutions sourcing appropriate aircraft for charter through a network of carefully audited operators. Already inter-European bookings are showing a high level of uptake. The brokerage service is a key aspect of Royal Jet's growth strategy and is in line with the company's policy of increasing diversification into a range of complementary activities, which also include FBO facilities, an aircraft management and acquisition consultancy, medical evacuation services and the core aircraft charter business.

JPJ. As economic conditions weakened, demand for business aircraft weakened. Demand will increase as economic conditions are seen to be improving. In fact, many observers of the business aviation industry indicate that declining demand has already bottomed and anticipate increased retail sales by the end of the summer of 2009. Another favorably factor affecting purchases by EBAA members is the increasing requirements to travel to and from India and China, two of the most rapidly growing economies.

BH. There is no doubt that corporate jet operators, like all businesses worldwide, are experiencing challenging times and the environment is changing fast. However, we are still seeing strong ownership and backlog from Europe. When the economy picks up, demand for business jet travel will follow suit. The challenge is really how do we best position ourselves to take advantage of the rise in demand when it occurs. 

BM. How are business aviation operators competing against mainstream airlines who are increasingly improving their business class offerings?
BH. A commercial business class flight and traveling on a business jet are two very different experiences. Part of the reason our industry will remain strong is that once business leaders experience our products they recognise both the direct and indirect benefits of travelling on a business jet. Only business jets can offer their passengers the most valuable reward - time. Business jets allow their passengers to maximise their schedules through increased direct flights, access to more airports that are closer to the end destination and eliminating wait times before boarding. Bombardier jets are designed as airborne offices, ensuring that productivity continues in-flight, in a fully functional environment that also ensures the privacy and secure setting required for confidential discussions and the comfort required for executives to arrive at their destination completely rested and refreshed - ready to take on the next assignment.

To meet increasing demand, business jet charter models have adapted the concept of an airline model for the increasing number of travellers who want to benefit from business aviation, but aren't ready to purchase their own aircraft. VistaJet and Jet Republic are European examples, while XOJet and Bombardier's very own Flexjet operate in the US. By offering jet cards or even fractional ownership, these operators are capturing more and more people who would have otherwise used airlines flights.

JPJ. The single best marketing tool business aircraft marketers have is the quality of scheduled airline service. Virtually every decision an airline wishes to implement is contrary to the desires of the travelling executive. The airlines want large aircraft packed with people flying to the fewest possible airports, the fewest number of times.
 
The business traveler wants frequent service to nearby airports with lots of cabin room to work and relax. In summary, I doubt that you have ever met anyone who does not desire to have their own private jet. The freedom and convenience private aircraft offer can never be overcome by commercial airlines. They can only compete against the cost of private ownership.

SOH. The type of bookings we get are not comparable with those of mainstream commercial airlines as they fulfil a totally different need. Businessmen and businesswomen, and those on governmental business, appreciate easy access to a local airport, the elimination of wasted time and the benefit of direct routes and short sectors, allowing more time to be devoted to actually getting business done. The elimination of ticket counters, baggage claim, airport crowds and waiting time all lead to a more pleasant and productive means of travel, as does knowing that a flight is far less likely to be cancelled.

So, a business aircraft enhances the productivity of a company's two most important assets: people and time. An airplane is simply a tool for doing business and the growing accessibility of private jet services has led to an increase in popularity over the past 10 years. In fact, the need for business aviation remains as strong as ever, which is why, after low cost carriers it is still the fastest growing segment in European aviation over the past decade.

BM. What is the typical profile of a business aviation passenger? Would you say the there has been a change in the types of passengers using these services?
JPJ. For several decades there has been a very steady decline in business aircraft use only by very senior corporate officials. Today it is estimated that approximately 50 percent of passengers on private aircraft are middle management staffers, engineers, accountants, sales personnel. The utilitarian use of private aircraft by a vast array of non-corporate executives keeps staffing levels down, improves operating efficiency and greatly enhances employees loyalty. Most importantly, use of business aircraft in this manner is almost always cost effective once you factor in over-night stay costs, and reduced staffing benefits. Interestingly, restricting usage to only senior staffers is virtually never cost effective, just enormously convenient.

SOH. Given the current travel environment, private aviation is no longer viewed as a luxury for the elite few; it is a transportation necessity for corporate and governmental travellers alike. Although Royal Jet is Middle East based, nevertheless, Europe is a good source of business for us. All our African government business - of which we undertake a great deal - comes from European brokers and our geographical location at the confluence of Asia, Europe and Africa also gives us advantage, both logistically and economically, in being able to service the demand for private aviation.

When you add in the unseen costs of productivity, reduced waiting times, the possibility of flying to a business meeting and returning on the same day (usually not possible with scheduled airlines) and the confidentiality that comes with a private booking, then it often actually works out cheaper than sending executives on scheduled flights.

So the private jet proposition is totally different from what commercial airlines offer. As well as the time savings, which are considerable when you compare what you would have to spend time-wise on a commercial flight being processed at the airport, having to fit your work schedule around the airlines' schedules, not to mention your onward journey if the carrier's destination airport is only a main hub and not near your intended destination, there's also the privacy factor to consider as well as convenience. 

BH. The majority of our customers are corporate executives from both public and private enterprises. There are also a number of private individuals and some government clients as well. There hasn't been a drastic shift in the profile of our clients per se, but it varies from region to region. For example, the Middle East is seeing a surge in charter operators, while in Europe, the majority of buyers are private or public companies.

BM. How good are the business aviation facilities and operating conditions at Europe's airports? What improvements are needed?
SOH. Our most popular hubs in Europe are London and Geneva, both of which offer private jet operators excellent facilities.

JPJ. It's all about geography, and politics. Because of customs, immigration and restricted real estate, European FBOs (Fixed Based Operators), in general, are not so good. TAG's Farnborough operation is what European private jet owners deserve.

BH. FBOs are an essential part of the equation when we're looking at the advantages of business aviation. The convenience and timesavings of traveling by private jet would be minimized greatly if Europe's business aircraft fleet was not complemented by equally high-quality facilities. Overall, the current facilities for business jets in Europe are top-notch. They provide a seamless experience from the time a client picks up the phone to arrange their flight, to the time they touch down and are whisked off to their next meeting, hotel or home.

The panel:
 
James Philip Jordan is the founding member of Business Air FBO and Business Air International Global Private Jets. Prior to aircraft sales, he was an aviation insurance specialist from 1988 to1993 and recently served a two- year term as Chairman of NARA (National Aircraft Resale Association). He continues to serve as member of its board.

Bob Horner, SVP of Sales at Bombadier, began his aviation industry career in 1978 with British Aerospace. He joined Bombardier in 1995 as Sales Director for Russia, UK and Europe and was appointed to his current position in February 2008. He is responsible for new and pre-owned Bombardier Business Aircraft sales worldwide.

Share O'Hare, President and CEO of Royal Jet Group, has over over 30 years of international aviation industry experience. He previously held senior management positions in several airlines. O'Hare is an experienced global business strategist with an in depth range of specialisation skills spanning airline management operations, alliance management, services management, complex service brand and marketing knowledge.