How does a private jet service woo customers in the middle of a recession? Go after the first-class airline passenger, of course.
Two fractional jet ownership companies have announced agreements with foreign carriers that would let them pursue airlines’ premium customers.
CitationAir of Greenwich, Conn., has opened its members-only private jet service to British Airways customers traveling in the United States, while Flexjet of Richardson, Texas, will partner with Korean Air. Both private jet operators say success will be measured one new passenger at a time.
“If we got one every day, it would be a home run,” said Woody B. Harford, senior vice president at CitationAir. “At $6,000, $8,000 or $10,000 an hour, that’s massive growth in revenues. We’re not selling coach seats.”
When the economy was good, fractional jet companies did a booming business. CitationAir, owned by Cessna, and Flexjet, owned by Bombardier, were effective sales arms for their parent companies. Customers seeking the kind of luxury, privacy and convenience not available on commercial airplanes could buy a fraction of a business jet, although it was not cheap, as Harford acknowledged.
In the recession, however, aircraft sales stalled and demand for private jet service plummeted. Columbus-based NetJets, the largest operator and the company that pioneered the concept of fractional jet ownership 24 years ago, laid off 1,200 of its 8,300 workers, changed its top executive and found itself buying back dozens of airplanes from its customers that it could not sell off or fly.
“Certainly it has been a difficult time everywhere, from manufacturers to owners,” said David Sokol, chairman and CEO of NetJets.
Ira Riklis, of Lydia Security Monitoring, a home-security firm, said he was cautious three years ago when he decided to buy a Flexjet 25 Jet Card but ended up using the plane so much he traded the card for a share in a Learjet 40.
“Managing is about dealing with limited resources,” he said. “In the case of my executives’ time, it is a much more precious resource to me then the cost of the private jet.”
Riklis is one of a few fractional owners not cutting back on his time aloft. Flight hours have declined 30 percent from 2007, a peak year for the industry, according to David Strauss, managing director at UBS investment research.
“The whole industry got too big for itself too fast,” Strauss said. “They had these airplanes and utilization dropped through the floor.”
Reinvigorating interest so that people will book more hours is what motivated Flexjet and CitationAir to team with foreign airlines. They hope that some first-class passengers on arriving foreign flights will choose a private jet over a cramped regional jet to get to their next destination.
“From our perspective, it’s an opportunity to fly a customer we don’t know today,” said Steve O’Neill, chief executive of CitationAir, in describing his company’s agreement with British Airways.
The airlines will receive a commission when passengers book private jets, and Flexjet will encourage its customers to buy first-class tickets on Korean Air. Both airlines say their premium customers will appreciate knowing whom to call for private jet travel in America.
“The average Korean doesn’t know the private aviation landscape in the U.S.,” said Fred Reid, president of Flexjet.
Monday, 26 July 2010
Sunday, 18 July 2010
Impressing customers with tidy jet displays is central to Bombardier's strategy
When company executives are asked to justify their business jets they will invariably resort to the old cliche that time is money.
Aerospace and Defence
* Dreamliner flies
* Will the world buy the A400M?
* Fighter jet that's a 'spy in the sky'
* Bombardier's challenge
"For most owners it's about productivity," insists Barry MacKinnon, director of market development, Bombardier Business Aircraft.
But although customers always insist their jets are there to save time and thus boost efficiency, the Canadian jet maker is not taking any chances.
The Montreal-based manufacturer is well aware that in order to sell its jets it must win over not just the minds but also the hearts of customers.
So during a recession that saw total business jet sales tumble 38% last year to just 576 aircraft worldwide, Bombardier not only axed about 4,400 jobs.
The company also "invested heavily in product as we wanted to take advantage of the recovery", Guy Hachey, Bombardier's president and chief operating officer, tells BBC News.
Bombardier's Michel Ouellette with Challenger aircraft Mr Ouellette is working to build lasting relationships with customers
But perhaps equally important is the way Bombardier has revamped its customer services operations in order to massage the egos of its clients.
"It's a status thing," explains an investment manager who has Bombardier shares in his portfolio.
"As a chief executive or a rich guy, you want to turn up in the biggest and best airplane."
Emotional bond
In a low-slung, anonymous-looking building in Dorval, on the edge of Montreal's international airport, the company assembles its Challenger business jets.
In many ways, the assembly plant resembles those of UK luxury car makers Bentley and Rolls-Royce, where much of the work is carried out by skilled tradesmen rather than by robots.
The painted concrete floor is so well polished that it displays mirror images of the planes, yet the boss, Michel Ouellette, is not satisfied.
Hide samples sample at Bombardier's Challenger aircraft assembly line in Dorval Bombardier's library of luxuries lets customers choose what they want
In this virtually dust-free environment, nothing short of perfection will do, insists Mr Ouellette, who is general manager of the Challenger programme, as he frets over a couple of step-ladders that have been left out in a hangar used to hand over planes to customers.
Impressing the customers is a central part of the operations here.
"It is not about one-off sales," explains Mr Ouellette. "We're creating relationships that will last for years."
So Bombardier has kitted out a library of luxuries where leather hides are draped across narrow tables, surrounded by catalogued samples in shelves and display cabinets filled with luxurious china - all of it certified by aerospace authorities to be fitted in planes.
Again, this is exactly how the upmarket car companies do it.
Global business jet deliveries
Wood veneer samples are left out for the clients to sniff and touch, though increasingly clients are considering granite as an alternative.
Ultra-thin layers of granite are glued on to lightweight carbon fibre sheets to ensure it is strong, yet light enough to be fitted in aircraft.
Clearly Bombardier believes it is crucial to create an emotional bond with people who buy business jets.
"They say they try to get the wife of the chief executive to spec out the plane," the investment manager grins.
Gaining ground
If the oak-panelled executive suite on the top floor of the drab Bombardier Aerospace Administrative Centre is anything to go by, this is a strategy the company is familiar with. The word is that this too was designed by a wife - that of a former Bombardier chief executive.
Bombardier's Steven Ridolfi The jet market no longer relies on sales in the US, says Mr Ridolfi
It seems the perfect place to discuss the company's strategy with Steve Ridolfi, president, Bombardier Business Aircraft.
"During the last two years, the recession has really hurt the business aircraft market," Mr Ridolfi acknowledges.
"We were left with a lot of cancellations, or customers wanted to reschedule."
Looking forward, however, it is clear the clouds are lifting, Mr Ridolfi insists.
"Business aviation is pretty resilient and in the long term it is a very healthy industry to be in," he says.
Strong growth
Flicking through a stack of graphs, Mr MacKinnon goes one step further, insisting Bombardier's push during the downturn has enabled it to steal a march on its rivals.
"We've been growing our market share substantially during this downturn," he insists, pointing to a chart indicating that the jet maker's market share reached 40% during the first quarter of 2010, up from 33% a year earlier.
Bombardier Challenger 300 interior Flying Bentley: The jets' interiors resemble those found in ultra-luxurious cars
"We've emerged as the clear market leader," he declares, hitting the paper with the back of his hand.
But more important, Mr MacKinnon continues, are the prospects for growth in the future.
True, business jet sales plunged last year, he acknowledges.
But when you look back at the last decade, he points out, you will see that 3,786 sales during the last five-year period is 38% higher than the 2,744 sales completed during the previous five years.
"The trend line is up," Mr MacKinnon cheers, eyeing a graph that surges confidently upwards and forwards like a jet taking off.
The graph suggests that global jet deliveries will more than double during the next eight years.
Increasingly global
To achieve such a steep growth rate, Bombardier is pinning its hopes on growth in countries well beyond the increasingly saturated North American market.
Business jet facts
Continue reading the main story
Bombardier aircraft
* New jets sold: 500-1,200 pa
* Jets in service: 17,000+
* Firms owing a jet: 10,000+
* Jet market segments: light, medium and large
Source: Bombardier
"Penetration rates are still very low in many parts of the world, particularly in China, so we think there is a lot of potential for growth," says Mr MacKinnon.
Mr Ridolfi agrees, pointing to how the US now accounts for about a fifth of the business jet market, compared with four-fifths just a few years ago.
"Business aviation used to be just about North America - the USA," he explains. "Five years ago, this was an 80-20% market, now it is a 20-80% market."
Business jets will increasingly be used by companies as they struggle to keep up with the pace of globalisation, a trend that in turn should result in increasing demand for such aircraft.
"The manpower needed to manufacture these aircraft and the revenues associated with them will create significant economic value," the company predicts.
When company executives are asked to justify their business jets they will invariably resort to the old cliche that time is money.
Aerospace and Defence
* Dreamliner flies
* Will the world buy the A400M?
* Fighter jet that's a 'spy in the sky'
* Bombardier's challenge
"For most owners it's about productivity," insists Barry MacKinnon, director of market development, Bombardier Business Aircraft.
But although customers always insist their jets are there to save time and thus boost efficiency, the Canadian jet maker is not taking any chances.
The Montreal-based manufacturer is well aware that in order to sell its jets it must win over not just the minds but also the hearts of customers.
So during a recession that saw total business jet sales tumble 38% last year to just 576 aircraft worldwide, Bombardier not only axed about 4,400 jobs.
The company also "invested heavily in product as we wanted to take advantage of the recovery", Guy Hachey, Bombardier's president and chief operating officer, tells BBC News.
Bombardier's Michel Ouellette with Challenger aircraft Mr Ouellette is working to build lasting relationships with customers
But perhaps equally important is the way Bombardier has revamped its customer services operations in order to massage the egos of its clients.
"It's a status thing," explains an investment manager who has Bombardier shares in his portfolio.
"As a chief executive or a rich guy, you want to turn up in the biggest and best airplane."
Emotional bond
In a low-slung, anonymous-looking building in Dorval, on the edge of Montreal's international airport, the company assembles its Challenger business jets.
In many ways, the assembly plant resembles those of UK luxury car makers Bentley and Rolls-Royce, where much of the work is carried out by skilled tradesmen rather than by robots.
The painted concrete floor is so well polished that it displays mirror images of the planes, yet the boss, Michel Ouellette, is not satisfied.
Hide samples sample at Bombardier's Challenger aircraft assembly line in Dorval Bombardier's library of luxuries lets customers choose what they want
In this virtually dust-free environment, nothing short of perfection will do, insists Mr Ouellette, who is general manager of the Challenger programme, as he frets over a couple of step-ladders that have been left out in a hangar used to hand over planes to customers.
Impressing the customers is a central part of the operations here.
"It is not about one-off sales," explains Mr Ouellette. "We're creating relationships that will last for years."
So Bombardier has kitted out a library of luxuries where leather hides are draped across narrow tables, surrounded by catalogued samples in shelves and display cabinets filled with luxurious china - all of it certified by aerospace authorities to be fitted in planes.
Again, this is exactly how the upmarket car companies do it.
Global business jet deliveries
Wood veneer samples are left out for the clients to sniff and touch, though increasingly clients are considering granite as an alternative.
Ultra-thin layers of granite are glued on to lightweight carbon fibre sheets to ensure it is strong, yet light enough to be fitted in aircraft.
Clearly Bombardier believes it is crucial to create an emotional bond with people who buy business jets.
"They say they try to get the wife of the chief executive to spec out the plane," the investment manager grins.
Gaining ground
If the oak-panelled executive suite on the top floor of the drab Bombardier Aerospace Administrative Centre is anything to go by, this is a strategy the company is familiar with. The word is that this too was designed by a wife - that of a former Bombardier chief executive.
Bombardier's Steven Ridolfi The jet market no longer relies on sales in the US, says Mr Ridolfi
It seems the perfect place to discuss the company's strategy with Steve Ridolfi, president, Bombardier Business Aircraft.
"During the last two years, the recession has really hurt the business aircraft market," Mr Ridolfi acknowledges.
"We were left with a lot of cancellations, or customers wanted to reschedule."
Looking forward, however, it is clear the clouds are lifting, Mr Ridolfi insists.
"Business aviation is pretty resilient and in the long term it is a very healthy industry to be in," he says.
Strong growth
Flicking through a stack of graphs, Mr MacKinnon goes one step further, insisting Bombardier's push during the downturn has enabled it to steal a march on its rivals.
"We've been growing our market share substantially during this downturn," he insists, pointing to a chart indicating that the jet maker's market share reached 40% during the first quarter of 2010, up from 33% a year earlier.
Bombardier Challenger 300 interior Flying Bentley: The jets' interiors resemble those found in ultra-luxurious cars
"We've emerged as the clear market leader," he declares, hitting the paper with the back of his hand.
But more important, Mr MacKinnon continues, are the prospects for growth in the future.
True, business jet sales plunged last year, he acknowledges.
But when you look back at the last decade, he points out, you will see that 3,786 sales during the last five-year period is 38% higher than the 2,744 sales completed during the previous five years.
"The trend line is up," Mr MacKinnon cheers, eyeing a graph that surges confidently upwards and forwards like a jet taking off.
The graph suggests that global jet deliveries will more than double during the next eight years.
Increasingly global
To achieve such a steep growth rate, Bombardier is pinning its hopes on growth in countries well beyond the increasingly saturated North American market.
Business jet facts
Continue reading the main story
Bombardier aircraft
* New jets sold: 500-1,200 pa
* Jets in service: 17,000+
* Firms owing a jet: 10,000+
* Jet market segments: light, medium and large
Source: Bombardier
"Penetration rates are still very low in many parts of the world, particularly in China, so we think there is a lot of potential for growth," says Mr MacKinnon.
Mr Ridolfi agrees, pointing to how the US now accounts for about a fifth of the business jet market, compared with four-fifths just a few years ago.
"Business aviation used to be just about North America - the USA," he explains. "Five years ago, this was an 80-20% market, now it is a 20-80% market."
Business jets will increasingly be used by companies as they struggle to keep up with the pace of globalisation, a trend that in turn should result in increasing demand for such aircraft.
"The manpower needed to manufacture these aircraft and the revenues associated with them will create significant economic value," the company predicts.
Subscribe to:
Posts (Atom)