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Special focus - Very light jets: Operators develop home markets after grand pan-European designs fly into reality check
Grand designs for pan-European VLJ operations seem to have been largely superseded by the reality of operators focused on more modest ambitions. These include plans to build outwards from suitable home country markets that rely on around half-a-dozen Mustangs, Phenoms or the revived Eclipse.

Grand designs for pan-European VLJ operations seem to have been largely superseded by the reality of operators focused on more modest ambitions. These include plans to build outwards from suitable home country markets that rely on around half-a-dozen Mustangs, Phenoms or the revived Eclipse. Operators in Spain, Austria, Germany and the UK are among those who reported signs of slowly increasing demand as delegates at MIU's fourth annual Light Jets Europe conference at Oxford focused on issues and opportunities such as a shortage of suitable airports and a perceived demand for a short haul business class alternative.

Edwin Brenninkmeyer, ceo of Oriens Advisors, suggested that entry level business jets could well become the future business class on short haul flights. He cited Lufthansa, Swiss, Qatar Airways, Delta and British Airways and its newly-announced partnership with CitationAir in the US as its private jet partner. These initiatives demonstrated that this was "a feasible and growing new trend among the legacy carriers."

This view was supported by Lars Welender from Ventana Aviation, who suggested that passengers are becoming increasingly frustrated by the regular business service. Legacy carriers are looking at serious alternatives to keep their premium passengers loyal. Delegates were told that the competitively-priced new generation of light jets could complement the existing airline carrier offering and dramatically change the lives of business travellers.

But Eurocontrol's Alex Hendriks pointed out that restriction of business growth may rest not in the skies but at the airports. He warned that by 2030 Europe's existing airports could have a capacity shortfall equivalent to around 6,500 flights per day with as many as 50 per cent of all flights facing delays as a consequence.

James Dillon-Godfray, Oxford airport's bdm, said many airfields in Europe cannot actually accommodate light jets as their runways are too short for their limited braking systems but, ironically, many of the larger jets can land at these secondary airports.

Patrick Margetson-Rushmore, LEA ceo, said operators must recognise that key drivers are not just price, but also airfield availability, hold size, comfort, range, performance and environmental factors.

"Understanding client needs is just one part of a complex set of variables that any operator needs to understand if they are to be profitable and scalable," he said.

Glen Heavens, md of Synergy Aviation, said operating costs and pressures for low pricing highlighted the perpetual challenge to building a scalable business. A hybrid model of managing and owning aircraft was one path to successful operations, he suggested.

This is a view shared by UK businessman Ruchir Gupta who has launched an Eclipse 500 and Mustang share ownership scheme (EBAN October). Gupta says: "The air taxi model is extremely expensive in my opinion due to the excessive start-up costs. I believe that a professionally managed shared ownership programme is needed to pass on the true cost savings of the VLJ."

Certain country markets are proving attractive. Charter operator Jet Ready, which launched this summer (EBAN July 2010) and Assistair Business Aviation Handling are among those to confirm that Spain is a country proving suited to the development of VLJ operations.

Ursula Brzoska confirms that GlobeAir, with business established in Austria, is considering developing other countries as well. "Spain is definitely in our focus," she says. "We already do some business and are fully focused on ramping up next spring, in particular around the airports at Palma, Ibiza and Barcelona."

GlobeAir is servicing inbound and outbound services at all three. "There is potential for the service we offer and we see increasing demand in a sector for which the Mustang is specifically designed," Brzoska adds.

Spanish connections

Ignacio Garcia, Jet Ready ceo, points out: "Spain is a good base due to the difficult or non-existent connections from a lot of cities with cities in central Europe. These difficulties mean businessmen have to lose productivity and stay overnight if they attend meetings in the morning in most European cities. Jet Ready wins business by taking them to the city where the meeting is and out as soon as the meeting ends, having them back at home in the same day. The appeal is based on the affordable price of the Eclipse combined with the avoidance of wasting time at airports and hotels."

He adds: "Our clients are mostly businessmen travelling around Europe and northern Africa. We have our FBO in Valencia and are opening a base in Madrid and later on in Barcelona. After that we will start opening bases outside Spain."

Garcia reports a good response to what is billed as Europe's first air taxi operation based on the Eclipse 500. "We met our targets in the summer and there is a very good response to our second aircraft based in Valencia. Our clients up to now are around 80 per cent businessman and the rest leisure. When we started operations we contacted most national and international charter brokers. There is a good interest in our services. Every day we receive several requests for quotations from them and up to now approaching 70 per cent of our flights have been booked through a charter broker."

Catherine Gaisenband, ceo of Assistair Group, confirms: "We are beginning to see a start to VLJ charters in Spain. In fact in one week we handled six separate flights from a Spanish-based VLJ operator. We are also seeing some activity from Mustangs but less as yet from Phenoms. VLJ charter is still quite new for Spain but it is definitely starting to happen."

She adds: "Mustangs and Phenoms are suited to private charter in Spain because of their cost effectiveness. At the moment the economy is still challenging but these types of aircraft are often more cost effective than the regular jets."

Increasing VLJ activity is welcomed. Assistair Business Aviation Handling, the FBO division of the Mallorca-based aviation company, reports that business across its five FBOs of Palma, Ibiza, Barcelona, Valencia and Gerona has seen an increase in activity of 10 per cent compared with the same period in 2009.

"While the economic climate in Spain and Europe generally is still very difficult, we have seen an increase year on year," Gaisenband says. "It has been a very challenging 12 months with a challenging start to the year, but we have seen growth from a variety of sectors including private clients, which now form about 12 per cent of overall handling. We are noticing that corporate business is also slowly developing again having come to a standstill in 2009. We handle commercial flights into Palma too and this has seen positive development with new clients arriving from France and Eastern Europe."

Assistair had one of their busiest weekends this year at Valencia, when the F1 European Grand Prix took place in the summer. Over a four-day period the company handled some 30 aircraft, including private and corporate jets, with passengers varying from vips and celebrities through to those actively involved in the F1 event.

Oriens Advisors' Brenninkmeyer says: "The existing hub-and-spoke system calls for most flights to pass through Barcelona or Madrid which predicates a significant potential for the air taxi model. Following the General Franco years there is a high concentration of airports that can be further developed to support the infrastructure required to develop the light jet model for which there is a growing requirement."

He points out that Spain has been particularly affected by the global economic crisis but says some Spanish banks are showing signs of recovery which will aid financial support for new infrastructure and a steady return to private and commercial business aviation.

It is early days and there are no operators with a sufficient operating history of VLJ operations in Spain to confirm a long-term market. However Brenninkmeyer points out: "The fact that JetReady is now operating demonstrates a genuine need within the business fraternity."

Empty leg returns

LEA's Margetson-Rushmore says: "Perhaps there was a time when people hoped to achieve point-to-point pricing with VLJs - in other words, they assumed that the aircraft would always be flying on with a paying passenger, without the cost of empty leg return sectors. But, at LEA, we really see VLJs as entry-level jets rather than as parts of an air taxi model.

"The reality is that although we can describe VLJs as being available at a 'lower' price than conventional business jets, the price can still not be called 'low'. VLJs are fairly expensive to buy and to finance. Crew training costs nearly as much on a VLJ as it does on a larger aircraft. And organising a four-sector VLJ flight around Europe, for example, requires much the same personnel as flying any other business jet."

He continues: "When you factor in every expense, the charter price for VLJs is inevitably not going to be an insignificant amount of money.

"To achieve what I would call a 'low' charter price for a VLJ, you would need each aircraft to be flying for around 4.5 hours every day, amounting to over 1,000 hours each year. Such figures are not viable for short range aircraft. Usage of 500-600 hours a year is more realistic."

Margetson-Rushmore firmly believes in an optimistic future for well-managed business jet charter operators, with VLJs playing an important role. He believes the Phenom 100 will prove a valuable addition to LEA's charter fleet. "We may also begin operating the Phenom 300 by early 2011. Light jets and VLJs could really start to thrive in the post-recessionary world when the business aviation market recovers but people remain very cost-conscious. VLJs are lowering the price of entry-level business aviation, which is naturally attracting new people."

With bases at seven airports (London City, Stapleford, Biggin Hill, Farnborough, Luton, Stansted and Oxford), LEA currently operates seven Mustangs, within an overall fleet covering the spectrum of business aviation needs up to the transatlantic Dassault Falcon 900EX.

David Fletcher, ceo of Flairjet, based at Oxford says: "The Phenom 100 is proving very popular with yacht owners in the Mediterranean area. The summer was hugely successful with increasing activity from the leisure and business sectors. We find more and more of our clients wanting to organise business meetings during the week and then take their families away on the Phenom to weekend retreats or, increasingly, to their yachts in places such as Cannes, Nice, Olbia and Figari. We are looking forward to the winter season with most ski destinations catered for."

He adds: "The increased speed and range of our first Phenom 300 will open up new markets for FlairJet and the additional seating capacity will increase our ability to compete with other business jets in the light jet sector of the market."

Operators in different countries stress a varied range of appeal. Blink, based in the UK and operating seven Mustangs, sees potential in the event and pleasure trip sector. It is promoting trips such as lunch in the walled old city of St. Malo at Le Chalut seafood restaurant; the Belgian 27-29 August Grand Prix against the backdrop of the forests of the Ardennes and the Palio di Siena Italian horse race.

Streamlined operations

Germany's AirCab says its focus on streamlining operations on the ground, rather than flying faster, saves client time. It operates short, direct routes, generally between 300 and 1,000 kilometers, especially where airlines are virtually absent. "Efficiency, high load factor and price are key. If you think that you can go one hour without food or drinks, then AirCab is for you."

A major VLJ focus might be on developing country markets but there is also profit mileage in developing niches and differentials.

Flairjet says it has received a good response from clients who have been made aware that it offers the first "wide aisle" Phenom 100.

Flairjet first officer Danielle Stoney and PrivateFly's Carol Cork say that the roominess of the Phenom 100 has to be seen to be appreciated. Stoney adds: "Many clients are pleasantly surprised by the space and the competitive price. It is proving very popular for leisure trips to destin-ations such as Nice and Cannes."

Cork says that the price for chartering VLJs such as the Phenom are competitive for business and leisure travellers but that it is a question of managing expectations with regard to what must be charged. "There is a basic cost for four people to travel from, say, northern Europe to Majorca," she says. "I think it has very much turned out to be the case, perhaps because of market conditions, that successful VLJ operator fleets are generally around a compact half-dozen and that they have strong home markets. That is likely to continue to be the case in general at least for as long as the global economic recession affects business levels."

The issues begin with pricing. Oliver Stone of Business Air International suggests that the market is still pretty volatile in terms of light jet pricing although he says the Phenom 100 and Mustang have undoubtedly become the two hottest sellers in the market. The future buyer will be influenced by new technology and design, good range and good value, he predicts.

Aoife O'Sullivan of Gates & Partners says banks are still reticent to finance individual aircraft without recourse to personal assets. Generally lenders must know there is solid financial backing behind the purchaser, she says.

Owners and operators have proved resilient in developing niches, cost-effective business models and strong home country bases as they seek to maximise revenues in difficult business conditions. While there are major challenges to come, such as overcoming airport restrictions, aircraft including the Phenom and Mustang have become an established part of the ever more diverse business jet offering. n

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