In the August issue EBAN highlighted the plans of operators who report that VLJs are proving a sound commercial investment and business proposition. But many charter operators are excluding the VLJ from their business plans, at least for the present. And others believe the VLJ might struggle to establish itself as a popular private charter jet with a significant market share in some parts of Europe. Part II of the focus examines the views of those who are cautious and believe the impact of the VLJs might be slower and less dramatic than anticipated. Many charter operators, however, are simply letting others test the market and monitoring their progress before taking a final decision.
BlueStream Aviation is focusing on expanding its larger jet capability - but it is cautiously responding to overtures from VLJ operators who have identified areas where mutually beneficial complementary business might be developed.
Paul Munro, project manager of the UK-based operator, says: "While we recognise that the introduction of VLJs will be a major milestone in business aviation, our focus has been on expanding our larger jet capability and our managed clients have shown little interest in the VLJ concept so far."
But he adds: "That's not to say that we rule out the possibility of acquiring VLJs at some point in the future - it's just not part of our business plan at present as we move away from the over-saturated light jet market. We will, however, be watching very closely and with interest. In fact we have been approached by several VLJ operators with a view to discussing synergies that could be possible between them and ourselves. Only time and market reaction to the VLJ concept will tell if these possibilities will come to fruition."
VLJs, it is argued, are more economic to operate than larger jets and their lower fuel requirements and competitive pricing structure will attract a new class of customer to private aircraft. But the cautious suggest that pilots will not come cheaper, the insurance cost of a new Mustang is around the same cost as a five-year-old Bravo, and that there will be little or no weight category saving. They also doubt that there will be significant savings on maintenance, catering, parking, landing and handling. Nonetheless some of the cautious are already benefiting from VLJ business.
Gunter Knall, Swiss Executive Aviation Ltd, confirms that the company is planning to acquire a VLJ. "The Mustang is currently our favourite. It will be the only one for now and it will be mainly a private ops," he says. "However we are looking to put it onto the AOC anyway. We do not anticipate that it will be able to effectively compete with business class alternatives. In my opinion this is not worth the cost and margins would be too small. The workload remains the same as a bigger jet. Pilots for a commercial operation will not be easy to find in today's market, in my opinion. However that might change soon. So, if we can charter out some flights for the correct price, that's fine. If not, then it is no problem."
Knall says the biggest expense factor in Switzerland is not fuel but crew cost. "This will be high since there are not many of the necessary highly qualified pilots around. They will only agree to fly a VLJ for the same rate as a Citation Jet and for a commercial operation with all-time availability you need at least four pilots. So, in the end VLJ charter prices will not be as low as anticipated," he predicts. But: "Of course there will be a few operators that can offer charter at a lower than full cost price, because their remaining cost will be covered by the owner."
The VLJ will have to overcome margins that might be too small for operators and cope with the difficulties of obtaining pilots. "The workload remains as high as a 'big aircraft' operation," Knall adds.
Silesia Air's Tomas Karhanek is one of many operators that have decided to adopt a "wait and see" approach. "We do not have plans to purchase VLJs at this time. As has always been the case, our clients regulate through supply and demand the type of equipment we operate. Obviously our light jet tariffs are sufficient for our market at this point in time, which negates the need for VLJs.
"In addition our clients expect high standards of safety and comfort, so we feel it is necessary to wait until the VLJ is established in the European environment and has overcome its teething problems."
Yves Hoffmann, communications manager, confirms that Luxair-Group's priorities also lie elsewhere. "LuxairGroup is currently not interested in VLJs," he says.
And Portugal's Omni Aviaco takes the same view. Jose Miguel Costa, president, says: "Our business model does not contemplate VLJs, instead, we are concentrating on inter-continental capability including the widebody ACJ and our medium haul fleet is comprised of the high performing eight-seat Learjet 45s."
Sweden's WaltAir will also continue to put its faith in larger aircraft. The company's Lars Nordin says: "We are not planning to acquire any VLJs. There are, of course, different segments in the private charter market that need to be serviced with different aircraft." But: "As we operate King Airs, Cessna Citations in the C500-series and a brand new Citation XLS we are able to cover a wide range of those segments. These include the clients who want the convenience but do not necessarily require the latest and fastest jet, to others who appreciate the spacious cabin and features of the XLS. Inbetween we can offer our smaller Citations for fast and comfortable travel but obviously the cabin is a bit smaller."
Nordin says that fuel prices are becoming a big problem. "We'll see, perhaps that will help the VLJ market gain business. I doubt that VLJs will take a large share of the present business jet market though."
Phil Brockwell, md of the Bristol-based Centreline Air Charter, says: "At this stage we have shelved any plans to purchase VLJs. We have one Mustang coming into service at the end of 2008, managed for an existing charter client, however, we will keep an open mind to future market releases. The currently available VLJs are not suitable for our client base." He adds: "The concept of competing with business class of scheduled airlines is a nonsense for us: it is like asking a chauffeur if he competes with National Express. Our services are aimed at high net worth individuals, not corporates. I do not see the two products as competitive so the relative cost bases of each service have little or no relationship."
His doubts are shared by Howard Palser, ceo of DragonFly Executive Air Charter, who favours Super King Airs for his Wales-based operation. Palser says he is not planning on acquiring any VLJs because he has reservations as to the viability of the business model in the UK.
But Avitrans, which specialises in qualified aircraft operations with regional turboprop aircraft in the mid-size segment with a strong focus on the Saab 340, is keeping an open mind according to ceo Mikael Wangdahl.
"We have no immediate plans to introduce VLJs but it is something we will look into in the future. We do believe the VLJs will play an important role in aviation. In the future the VLJ may well be of interest to our customers."
It might be that VLJs will prove to be more popular in some countries than in others. There is enthusiasm in Turkey from Redstar Aviation and in the Middle East from operators including Dubai's Western Aviation. The UK has enthusiastic operators including Blink and London Executive Aviation (LEA). LEA is developing a large fleet of Mustangs but is also responding to demand by offering a second Challenger. George Galanopoulos, md, says the two Challenger 300s fill a niche in the LEA fleet between the midsize Citation Excel and large cabin Embraer Legacy 600.
Bernhard Fragner, md of GlobeAir, reports brisk business in Austria for the company's Mustangs. It has three in operation, two more arriving this year, and a total of 15 on order. "Typically our clients are businessmen travelling to eastern Europe out of Austria," he says. "More than 65 per cent are flying more than one leg a day and so are using the aircraft as a route tool. Some 90 per cent of the bookings are day trips."
Fragner reports a trend for businessmen to use smaller jets to save money. "It is more or less the same comfort in a Mustang as in a CJ2 but the Mustang is 20 to 30 per cent cheaper," he says.
Major airports might not be rushing to attract the business of VLJs but the UK's Pembrey Airport in Wales is among smaller airports that would be happy to attract their business. Capt Winston Thomas, md, reports rising enquiries against the background of the high costs at the large airports and associated difficulties of parking, delays and security.
"The costs of VLJs and medium executive aircraft are very competitive when it to comes to financial justification of ownership," he says. "The volume of enquiries that we are getting from owners and potential owners has increased by 50 per cent during the last five years."
In an economic downturn, operators of the larger private jets believe their customer base is secure because owners and users have the wealth and income that precludes the need to consider cut-backs. VLJ operators believe that they will benefit from businessmen who want to economise and businessmen who abandon business class as too inefficient but larger jets as too expensive to justify.
The operators of large jets and VLJs, therefore, believe their chosen business sectors are well placed to profit in good and in lean times. The coming months and years will put that confidence to the test.