BAN's World GazetteerGermany
Germany's FAI rent-a-jet is focusing on its ACMI and air ambulance projects and believes that charter is unsustainable in the current climate. Says ceo Siegfried Axtmann: “We currently have eight aircraft running under ACMIs, and the ambulance fleet is of course running on ad hoc, because nobody can know today that they will be airlifted three days later. We are going to be continuing with this strategy.
“I think the charter market for small and medium sized aircraft is not good in Europe or the Middle East, and therefore we are concen-trating on contract work. The prices are too low and number of aircraft in the market too high to generate the level of income needed to finance aircraft and compensate for loss of value on an aircraft.”
He explains that with air ambulance the age of the aircraft is practically irrelevant, but despite this he maintains one of the youngest air ambulance fleets on the market. “In the US all the Learjet 35s are still flying but we are phasing out our last one next month. Then we will have four 55s remaining, which will also be disposed of within the next 12 months, leaving only Learjet 60s and Challenger 604s. This will mean we only have ambulance aircraft younger than 20 years. Nobody else has this.”
The operator used to conduct rotary air ambulance throughout the 1990s and the beginning of the 2000s, but then the legislation in Germany changed and such transport was placed under government control. In Germany, all air rescue is performed either by government agencies or by non-profit organisations and private clubs. Axtmann says that they 'fly with losses' from the rescues, but the advertising coming from the rescue work is a plus.
As far as Germany is concerned, he says there is far too much supply and not enough demand for private aircraft: “The number of landings and amount of airtime provided by Eurocontrol does not change significantly. The statistics we have say that the number of hours flown is up by two per cent for example, but these hours were flown by 10 per cent more aircraft, therefore the time utilised per aircraft is actually decreasing. New aircraft are delivered and the used ones are not scrapped, so the fleet for dispatch is permanently increasing. I estimate that for every ten deliveries, eight go into the used market.”
To enter the air ambulance business is not easy in Axtmann's view, whereas with charter anyone can enter it 'tomorrow' because in the charter business only the age of the aircraft counts, not how long you have held the AOC. But generating business from that point is not a straightforward process: “If an aircraft is on an AOC then the brokers are happy. Then it is a question of what year the aircraft is from. You may have an aircraft that is five years old but your Russian client only wants an aircraft that is younger than three years. All these factors are affecting the charter business.”
As for consolidation in the industry? He struggles to see the savings that are made and the commercial advantages in the business model: “This consolidation is not wiping out one aircraft. Is the plan to kick off 50 aircraft from a fleet of 250 in order to generate higher utilisation and therefore higher profit per aircraft? I do not think so.
“Brands are to 'continue indep-endently' but I think that major savings can come only from higher utilisation per aircraft. The same number of AOCs is kept open, which from my point of view is the biggest money burning factor. When you make one AOC from putting two together you will generate real savings. Where are the savings for the management company in fuel, handling and other DOCs? I'm willing to pay a pretty high premium if someone comes to me and explains how such a business model works.”
According to Axtmann, chartering a midsize or small jet could work if the utilisation was as high as 1,000 hours per year. But, he adds, to make this happen is not realistic. “The charter of small and midsize jets involves so much parking and waiting time for the client, that you cannot theoretically accumulate 1,000 hours. A year only has 365 days, and out of this you are a month in maintenance, so it only has 335 days. It is not possible to generate on average three hours per calendar day to get 1,000 hours.
“However, the possible utilisation per year per air ambulance jet is up to 1,500 hours. The basic costs of an ambulance jet are the same as a corporate jet. Instead of catering there are medical supplies and instead of cabin attendants there is a medical team but the fuel and pilots are the same. So now you can imagine why it makes more sense to fly 1,500 hours air ambulance than 500 hours charter.
“Anybody can do charter, but the air ambulance industry does not work with start ups. This is a good thing, because insurance companies want to show proof that they carried out maximum evaluation on the operator in respect to the liability they have for their patients. It took me more than 20 years to take the air ambulance brand FAI to the market position we occupy today.”
FAI receives ten times the number of enquiries it is able to fly, and minimises positioning legs by 'flying in triangles' and accepting the work which is closest at hand and makes the most economic sense. “This is a tricky thing. It looks simple from the outside, but if you don't have the volume of enquiries coming in that you need for this way of dispatch, it does not work. That's the simple reason why there is nobody who wants to spend the money to build up an air ambulance brand for ten years before it becomes profitable,” he concludes.