Wednesday, October 1st, 2014

Fire in Chicago – what it shows is that Europe cannot cope

What do we learn from the fire in the ATM facility in Aurora, near Chicago? There is no doubting the impact on the traffic and the disruption. So once again we can show that ATM is important, and perennially under-appreciated but what a way to do it.

There might be three things we can take from the incident. First, this was not a ‘terrorist attack’ it was a trusted contractor. What can we do to stop the disgruntled? Perhaps the real answer is to build resilience into the system to be able to react and respond as well as possible when the unimaginable becomes the reality.

Secondly, the resilience issue has to be thought through. It is not just having a complete second set, but rather the ability to switch and to address contingencies. With infinite money we could have an infinite amount of spare kit, but that way madness lies.

Finally, and perhaps most importantly, the work the controllers and the FAA generally did to patch things, to rearrange sectors and airspace to allow other centres to take over was both fantastic and completely impossible in Europe. What a badge of shame.

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Friday, September 26th, 2014

ATM: August in Figures

Every month Eurocontrol publishes the results of the work of the Network Manager – currently housed in Eurocontrol. It as good as it gets for working out what is happening to aviation in Europe.

 

Traffic flow and the leading numbers in August

 Positive trends

Due to overflights and growing internal flightsan increase of 2.4% in traffic for August 2014 compared to August 2013 was registered. Given that overflights and internal flights define all the flying that is possible, it is perhaps not surprising that this upward trend was above the high forecast.

The highest traffic increases in August 2014 were recorded in Istanbul Sabiha Gokcen, Athens, London Luton, Brussels National, Lisbon, Ibiza, London Stansted and Istanbul Ataturk

airports.

Germanwings, Aegean Airlines, Vueling, Wizz Air, Pegasus, Norwegian Air Shuttle, Qatar

Airways, Sunexpress and Monarch Airlines were the operators with the highest traffic growth.

Having approximately 500 additional flights per day, Turkey and Greece have placed themselves as leaders in the local European traffic network, closely followed by Italy, Spain and the UK.

It seems like the traffic in moving south-est during summer, due to the popular vacation destinations. UK’s place could be explained by its influential position in making better connections for more exotic preferences and Brussels is a well known important business area where the flow is constantly high.

Low-cost services have recorded a sustained growth of 6.7% in August 2014, while the traditional scheduled and all-cargo segments have increased by 1% as compared to August 2013.

Negative trends

The most significant decline in traffic rates was registered in Lyon Saint Exupery, Bergen

Flesland, Praha Ruzyne, Edinburgh, Marseille Provence and Warsaw Chopin airports.

The operators that have registered the highest traffic reduction compared to August 2013 were Lufthansa, Flybe (affected by fleet downsizing), Aeroflot Russian (affected by Ukrainian crisis) and LOT Polish Airlines.

The sad event of the flight MH17 on 17 July accelerated the ongoing traffic decline for Ukraine, counterbalancinga positive trend in countries like Bulgaria (+31%), Turkey (+27%), Romania

(+22%) and Slovakia (18.6%).

The traffic in Ukraine has decreased by 252 flights daily in August, a fall of 41% compared to August 2013. The sensitive situation of Ukraine has influenced a decrease of the overall traffic of 55% in the country, while reducing the air traveling rates in neighbouring countries (e.g. Moldova: -48%) as well. These changes have had a significant impact outside Europe as well, with a decrease of almost 7% to and from the Russian Federation as compared to August 2013.

As opposed to low cost carrier flights, charter was the weakest of the market segments, registering a decrease of 1.9% compared to August 2013.

Air Traffic Flow Management (ATFM) delays:

Compared to August 2013, August 2014 recorded an increase of 98.1% of total ATFM delays. 89% of the delays are: en-route capacity (ATC) (36.8%), airport weather (16.8%), airport capacity (15.2%), en-route weather (10.3%) and en-route staffing (9.8%).

The rest is industrial, which is a nice way to say ‘strikes’ by staff.

Perhaps what this huge percentage number shows is that we are working at the margins. There are few AFTM delays, so a few minutes here or there had a distorting impact on the percentages.Here is what it looks like:

Blog

 

 

Athens ACC recorded the highest number of delays in August mainly due to en-route staffing (ATC) issues and en-route capacity (ATC). 62.7% of all the ATFM delays in Europe can be attributed to en-route delays, most of them being caused by ATC capacity, weather and ATC staffing issues.

As a result of airspace restrictions caused by Israeli military operations, the highest average en-route delay per flight was recorded at Nicosia ACC, which was closely followed by Athens ACC. It experienced en-route delays caused by en-route staffing (ATC) and en-route capacity (ATC) issues.

 

Airports

 Out of the total August ATFM delays, 37.3% were attributed to weather and airport constrictions

The highest airport capacity (ATC) delay registered was caused by a security issue in Tel Aviv/Ben Gurion. Weather disruptions have particularly affected IstanbulAtaturk, Frankfurt, London Heathrow and Istanbul Sabiha Gokcen airports.

Based on the data collected by the Central Office for Delay Analysis, that covers 60% of the commercial flights in the ECAC region for July 2014, the average departure delay per flight was registered at 12.5 minutes per flight. This represents an increase of 26% in comparison to the 9.9 minutes per flight registered in July 2013. The en-route ATFM delays were counted at 0.6 minutes per flight. In August 2014 the percentage for both early and late departures increased compared to July.

 Special Issues:

 Due to the potential eruption of the Bárðarbunga volcano, between 24 and 25 August 2014 the NM was on a “pre-alert” position and the aviation status was raisedto red.

In August 2014, the NM saved 888 minutes of daily delay at a cost of 141 extra nautical miles, proposing alternative routes to an average of 36 flights per day, out of which 21 were accepted. This is again proof that an optimized network (time saving) is not necessarily the sum of optimized flights (shortest route).

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Sunday, September 21st, 2014

The Scottish Referendum, Aviation and Opportunity

The Scottish referendum has been run and determined, but so far, it seems to me that there has not been enough analysis of the impact of the decision on aviation. This is remarkable – normally there is no end of punditry that we have to wade through – normally, everything has to have an impact on aviation. That is the price we pay for thinking the world revolves around us I guess.

So, what is the impact? Frist, given that the very first thing that new governments seem to want is a new flag and a national carrier, we lost out on the chance to have a new airline. Not British Caledonian, just Caledonian perhaps. Given that what we want is less airlines, not more, that is a good thing, but a good thing that will upset all the consultants and brand designers and advisors and experts that will miss out on healthy retainers.

The Scottish airports will lose out as well. An independent Scotland would clearly need flash airports. Could the revival of the revival of Prestwick have been far behind?

On the up side, and making one possibly heroic assumption, maybe at long last we would have had one, only one, genuinely functional Air Traffic Management Functional Airspace Block, or FAB. If NATS continued to provide ATM for all parts of the British Isles (except, of course, the Irish part of the British Isles) we would have what the Commission has been asking for – cross border sectorisation and a real live FAB with single management and single operations.

The heroic assumption of course, is that the Scottish government did not decide that its airspace should be managed entirely by its very own ANSP. You would not want to bet against that happening of course…

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Monday, September 15th, 2014

The Aviation Advocacy Annual Cryptic Crossword

Once a year, we like to have some fun with the words that we all use.  Nothing is a more fun way to have fun playing with words than to do cryptic crossword, so this is your chance!  Let us know how you get on…

 

 

 

 

Across

  

1   Muddled along to Boston. (5)Crossword 14

     4   Look, no time within to measure speed. (4)

     7   Aviator, tai-less, arranged aircraft. (4)

     8   Indian ruler follows British airline as if mad. (7)

   12   Backward leg and the French airport in Berlin (5)

   15   Area controlled by Christmas tree. (3)

   16   Crazy cricket, gnu and rat delivers food to aircraft. (8,5)

   20   Initially over the counter at Bol. (3)

   21   Taking note of sovereign after reversing vehicle. (8)

   22   Gosh, a rabbit at Chicago. (5)

   23   Give advice to airmen, but never before midday. (5)

   25   Graduate airline. (2)

   27   Polish airline spotted in flotilla. (3)

   28   Edith loses 3.14 but finds her national airline. (2)

   30   South American call signal. (4)

   31   Fighter sounds like a big storm. (7)

   33   Half bake a Korean airline. (2)

   34   Con-trail! (7)

   35   Greek character sends signal. (5)

 

Down

     1   Factor to get on board. (4)

     2   Kit allows speed change. (4)

     3   Surveillance agency at beach resort in Queensland. (3)

     5   Sounds like a story at back of aircraft. (4)

     6   Semi-arid Argentinian carrier. (2)

     9   Two blokes claim son at UK airport. (8)

   10   Take away any tangy Thai. (2)

   11   No Japanese fighter. (4)

   13   European decorating style, less a century, but with an initial night time reading list, defines European agency. (11)

   14   Presidential airport. (3)

   16   Angry side wind. (5)

   17   Mum carries Mexican food to airport near Seattle. (6)

   18   Ego-less road rage? Mad to find traffic. (5)

   19   Three new pieces of silver at Geneva. (8)

   24   Sounds like you should pay attention to the exchange of goods. (6)

   26   Warm? The Spanish call signal. (5)

   29   Increasingly, animal instinct supports an airport in Fiji. (4)

   30   Slack American airport. (3)

   32   Initially passenger builds new way to navigate. (3)

 

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Monday, August 25th, 2014

Towers – Watch this space, or some other remote one…

The European Space Agency’s Rosetta space probe is now in close orbit with comet 67P, perhaps better known as the Churyumov–Gerasimenko comet.  Other probes have done fly-pasts.  Rosetta has taken that one step closer – it is now moving at the same speed as the comet itself and all going well, it will land on the comet.  That is a remarkable piece of space engineering, more than likely involving rocket scientists, but it raises one very simple question:  If we can land a probe on a comet in deep space, what about aircraft on runways?

The answer, of course, is that we can, and we are starting to do so.  By definition, en-route ATM is remote from the area being controlled so it was only natural that we can do it for remote airports too.

Perhaps the real question is why do we continue to think that we need towers at all?

ANSPs, airport owners and airline operators focus on costs and efficiency at all times, so finding safe, efficient and lower cost options is always of interest.    High definition images, state of the art video density, object tracking and alerting, night vision and operative control under low visibility conditions are set to reinvent ATM at airports.

That might be just as well, because the airports have shown that they are more than happy to reinvent ATM at airports too.  And, make it more competitive.  Aviation Advocacy supports increased competition in air transport, so this is a Good Thing.

The UK CAA published an opinion last year that said that the Commission’s SES-driven requirement to put towers above a certain size out to tender was back-to-front.  The risk involved in changing the operation of the towers at larger airports was too great, it decided.  Only the smaller towers were suitable.  The Aviation Intelligence Reporter covered this at the time.

Gatwick did not get the memo.  It has announced that from October next year, DFS will operate the Gatwick Airport tower.  Gatwick is legendary in ATM circles: a single runway that handles a world record 55 movements an hour.  DFS is also legendary in ATM circles: the German ANSP that tried to purchase a share in NATS, only to be defeated by the superannuation fund of the UK’s academics.

There was considerable angst at the time of the NATS sale about what is called ‘the Daily Mail effect’, or what the notoriously rabid UK tabloid newspapers would say about a German entity controlling any part of the UK sky.  A more rational concern was the risk of an outcome that saw the most liberal, privatised ANSP in Europe sold into the hands of one of the least liberal.  The German Constitution, apparently, prohibits the privatisation of DFS.  Apparently it does not prohibit DFS acquiring privatised ANSPs.

The announcement of the transfer was pushed out of the papers, even the tabloids, by more newsworthy events.  The day the announcement was made coincided with the shooting down of MH17.  What hope did faux outrage and a chance for headline writers to show off their particular skills have over Russian perfidy?   The fact that it was a cost saving move from Gatwick – and the savings are reported to be considerable – with the promise of lower charges to airlines would have been beside the point on any other day.

Picking up on the CAA point, the airlines that serve Gatwick are not exactly being overwhelming in their support.  Publically, they are saying nothing.  Privately, they are looking for risk mitigation and contingency plans.  Or, to put that in terms that the Daily Mail would not understand, they are more worried about preserving their operations’ reliability and resilience than refighting the Battle of Britain.

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Tuesday, August 19th, 2014

Gatwick shows that airport competition is real

Did this strike anyone else as strange?  On 27 July 2014 Gatwick Airport dealt with hundreds of passengers whose luggage failed to be delivered on time.

The Gatwick`s spokesman mentioned at the time that the three hour delay was caused by “resourcing issues” of the baggage handling company Swissport.  That would be the airlines’ outsourced baggage service supplier Swissport of which we speak.  Baggage handling is one of those things that airlines are required to provide, along with transport and oxygen, when you buy a ticket (and include the fee for extra baggage etc…).  Some airlines do it themselves, others get suppliers to do it on their behalf, but it is an airline obligation.  The clue there is in the words “on their behalf”.

Arguably, the regulations do not allow airports to be involved in the process of unloading aircraft, but nevertheless Gatwick pulled out all stops and assisted with the transportation of the baggage to the terminal and the unloading of the bags on to carousel belts. Up to 60 extra staff was provided by Gatwick to improve Swissport’s service and to clear out the luggage backlog. The passengers were sent home and delivery of the baggage to their home addresses arranged. A promise of a maximum 48 hour delivery was made.

Swissport has reported that this was an exceptional case caused by “off-schedule” arrivals and that there is no need for concern on the following weekends. Nonetheless, Gatwick has announced that they will continue monitoring Swissport’s performance and offer help as required for the rest of the summer.

What is going on and what does this tell us?

A few days after the incident took place, the Gatwick spokesman said it was about the high standards the airport is demanding. In other words, it was about reputation and it was about service.  This is nothing more or less than Gatwick knowing that their reputation was on the line.  Ask yourself; is that the response of a fat dumb, needs-to-be-regulated monopoly service provider?  Oh no, it does not.  That is the response of an entity that understands the commercial issues at stake.

It puts into context the contention of the IATA study of airport competition.  You may recall, and we covered this in detail in our Aviation Intelligence Reporter at the time, that the IATA study is in response to the ACI study which claimed that airport competition was real.  ACI’s Airport Competition report shows that airports are in the situation of competing with one another in order to draw the traffic they want, as both passengers and airlines are footloose. Aviation has been liberalised, producing higher flexibility and a more open market for airlines and passengers. We should rejoice in that.

Maybe this does not fit IATA’s model because the airlines involved are not IATA members?

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Saturday, November 30th, 2013

Eastern Europe Tries to Think Business Aviation Outside its Box

Eastern Europe Tries to Think Business Aviation Outside its Box

If you are interested in a broad, nuanced view of aviation in all of Europe, you will have appreciated the annual Central Europe Private Aviation (CEPA) conference in Prague in late November. It had over 200 aviation specialists and industry stakeholders in wide-ranging operational, commercial and regulatory discussions. It was a showcase for the dynamic aspirations of the ‘economies in transition’ both in, and beyond, the east of the EU.
One interesting feature of CEPA is that its agenda extends to include commercial airlines. This is an important gesture towards finding common ground between the two sectors. Too often, business aviation suffers from isolated analysis. At best, this relegates it to an out-of-category ´general aviation´ sectors, as the EU refer to it. Worse, it probably encourages the perception of its niche, luxury character, and thus distinctive from the mainstream transportation business.

Of course, business aviation is different from the scheduled airline sector – not least it´s an unscheduled and premium product. But it is surely still about business. Its operators need to be financially viable, its passengers fly, for the most part, for business purposes, and from the most recent study of the economic value of business aviation, the contribution of the business aviation sector to European GDP, in terms of direct and indirect revenues, is an annual €20 billion.

At least €1 billion of that is generated from Central and Eastern Europe. Whilst business aviation activity collapsed in Western Europe during the 2008-2012 recession it surged in Central, East and South-East Europe, with Poland, Russia, Ukraine and the Czech Republic seeing double digit growth. Since 2000, the CEPA territory fleet has grown by a factor of ten. Just in terms of charter activity, that represents a €500 million market. Annual MRO revenues are also in the region of €300 million.

So Central and Eastern Europe is no small fry when it comes to European business aviation. Too often overlooked for the larger leading EU markets, the region´s importance is getting justified, if belated, promotion through CEPA. But now it finds itself in a bit of a rut. While there has been impressive growth in the last decade, 2013 paints a less encouraging picture. This year activity has fallen 6%, and previous growth stars such as Russia and Poland are seeing big declines in flights.

No doubt the slump owes something to the relative spike in 2012 activity when Poland and Ukraine hosted the Euro Football championships. But the underlying economic support to business aviation has darkened in the meantime, at least for Eastern Europe and Russia. And economically, the region remains highly dependent on the Euro zone´s fragile recuperation. The industry also has basic problems, with under-developed infrastructure and shortage in resources dedicated to business aviation, as well as reputedly widespread illegal charter activity.

If there is some truth to the opinion that business aviation is not always 100% business-oriented, it is in its seeming inability to respond to a slump. This is as true in Eastern Europe as it is in the rest of the market. Faced with an obvious decline in customer demand, its stakeholders, in much of the discussion at CEPA, did not seem to be directly concerned with solutions. One rather obvious in particular: how should they go about attracting more passengers onto their aircraft?

Rather, the main topics of debate tend to orientate around technical issues concerning aircraft import and registration. A particular concern is how to reduce taxes and simplify transactions. In other words, there was a strong interest in facilitating aircraft purchases. This tells you that the customer of interest is not the charter passenger but the aircraft purchaser. In turn, this radically reduces the addressable market to the fabled few HNWI (high net worth individuals) sufficiently wealthy to own an aircraft. It ignores the thousands of individuals, entrepreneurs and businesses who make up the charter passengers which float the fleet.

Perhaps the reason the industry is not able to reach out to this audience is that it lacks the scale to market an effective consumer brand. Or it may be that its executives´ operational mentality obscures the commercial reality. But that reality is now urgent. Unless business aviation operators can work out how to appeal to users, not just owners, its growth potential is limited. It is not enough to base future prospects entirely on the impressive growth curve in the tiny number of super-wealthy would-be owners.

This brings us back to the airlines. To its credit, CEPA´s agenda encouraged its delegates to debate potential for integrating commercial and business aviation services. A number of such alliances were cited: Delta, Korean, Singapore and Lufthansa all offer their premium customers jet charters, operated by their business aviation partners.

These are relatively tiny ventures and the consensus is that such opportunities are very limited. But it is not just operational collaboration for which biz-av should look to airlines for inspiration. More broadly, it should look to see how the best airlines have survived and even prospered through the recession. There are lessons to learn.

Those that have prospered most are of course the LCCs. We are all familiar with their competitive advantages: homogenous fleet, scaled-up financing, aggressive marketing, no frills on-board service, high rates of utilization, online distribution… Although business aviation offers a very different experience to easyJet, many of the same efficiencies are potentially available. But whether through lack of imagination or simply because the operators´ traditional business model is inflexible, the lessons are ignored.

Business aviation should not only seek to imitate successful innovation in commercial aviation, it should also exploit the gaps opened up by its scheduled counterpart. Over the last eight years in Europe, this network has provided zero net growth in flights. In fact the huge growth in LCC activity has masked equally substantial declines in the regional networks. As this short-haul coverage recedes, biz-av should have an opportunity to appeal to customers who are increasingly left stranded without a direct connection.

Richard Koe, Aviation Advocacy

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Wednesday, May 29th, 2013

Can IT reshape business aviation: Apples and Oranges?

Aviation Advocacy much enjoyed moderating the EBAA’s seminar on IT tools in business aviation, and specifically, the potential for such tools to change the shape of the way in which we sell and organise business aviation services. It was an appropriate session for the 13th edition of EBACE; all the indicators are that the European business aviation industry needs some serious reshaping.
On our panel we had a number of leading IT providers, ranging from Avinode (Oliver King), which has been in the market for than 10 years, to the Air Club (Christian Hatje), which has only just set out its intention to offer an online B2C channel. In between, PrivateFly (Adam Twidell) has pioneered the private jet’s consumer portal for 5 years, Victor (Clive Jackson) is hot on the heels, FL3XX (Paolo Sommariva) has successfully pioneered the industry´s first schedule optimizer, and Stratajet (Jonny Nicol) is on the brink of launching flight tracking and pricing software following a 12 month beta cycle.
These competing and contrasting suppliers certainly lack no courage. It may not strike someone from outside the business aviation industry as unusual to have online access to searching and purchasing flights. But within the industry, as Avinode attests, the initial proposal that operators, brokers and users start to switch from, or at least combine, telephone sales and internet searches receives a puzzled and sometimes hostile audience.
The same was probably true at the vanguard of e commerce channels for hotels, holidays and airline flights a decade ago, now long overcome by mass adoption of B2C and B2B online platforms. But the inertia in business aviation is particularly strong. After all, these are some of the most expensive and often complex arrangements available to purchase. That’s why ‘offline’ brokers continue to thrive, and the biggest brokers simply don’t see B2C models as a risk to their telephone-centric businesses.
So they’re brave, and in the case of Avinode, adept enough to find an application which brings the efficiency of an online market place without taking on the traditional ecosystem through which flights are marketed and priced. As such, Avinode is now an accepted member of the status quo, and to an extent, it is being challenged as a vested interest by our other panellists, whose business models can only work if the traditional format is disrupted.
As PrivateFly made clear at the outset of our debate, its aim is to address the problematic fragmentation of the industry’s distribution network. Why problematic? Because customers, whose experience of procuring as well as flying business jets ultimately determine the industry’s prosperity (this is often forgotten in our sector). And fragmentation serves to provide these customers with a procurement process which is slow, expensive and inconsistent.
Avinode get this problem of course; its platform consolidates myriad operators’ fleets and provides at least a stamp of standardisation on a market place which any subscribing broker can quickly navigate. But crucially they did not and have not yet addressed the ‘black box’ within which customers and brokers fix a deal.
For it’s within this black box that the perceived value of business aviation is won or lost; undoubtedly there are some brokers who play a valuable role in linking up customer to aircraft quickly and cost-effectively. Even if it’s all arranged by phone, and in fact often only because it’s all arranged by phone. But in most cases, incomplete knowledge and manual processes lead to delays and encourage hefty commissions.
It’s arguable that Avinode have exacerbated the problem, lowering the barrier for brokers and magnifying the bottleneck between operator and customer. Both parties are frustrated as a result. But then again both are innately conservative and it will take time before they are willing to try out alternatives like PrivateFly or Victor in large numbers. Knowing the market will eventually tend towards a B2C platform, Avinode nevertheless need to start developing a plan B. That seems to be where Air Club fit in.
Of course Air Club protest that their proprietary B2C interface, to be powered by Avinode, is not intended to destabilise relationships between member operators and ‘our good friends in the broker industry’. However it is more than obviously disingenuous to claim that the Air Club’s direct sales are complementary to pre-existing broker channels. Perhaps they have in mind some sort of customer carve-up between the big broker beasts like Air Partner and leading operators like LEA, with the mass market of small brokers left to fall through the gap. Difficult to see that suiting Avinode though.
Stratajet and FL3XX make interesting counterpoints to the B2B versus B2C debate. Theirs are not so much e commerce solutions as fleet management hubs. Their contention is that online sales channels, on their own, are little more than catchy websites. They may improve the marketing of some operators over others, but ultimately they simply redistribute market share, rather than reshaping inventory distribution, or, more fundamentally, improving the business aviation product.
The proposition from Stratajet and FL3XX (whose services may be directly competitive in the way that PrivateFly and Victor are) is that only by optimising the many tasks and processes which coordinate flight allocation and management can operators wring out efficiencies and be more competitive. With an integrated operations hub, which makes the most intelligent decision in response to each customer request, operators have a genuine pre-requisite to make a difference with e commerce.
This of course requires a much bigger bite at the cherry; operators have to be persuaded to drop multiple legacy planning platforms to make way for the induction of a single 3rd party’s planning hub. But clearly someone believes in them, for both have raised several million during a protracted software development and beta launch. And to be fair, Avinode have long seen the importance of bringing their operators standardised fleet management and pricing tools.
The flaw for Avinode is that the precision of aircraft designation and pricing is completely lost once in the hands of the broker which intermediates between their platform and the customer. By contrast, Stratajet claim to have the data and technology in place to mirror-image operators’ pricing and pass it on with complete transparency directly to end users. This is the sort of ‘super broker’ approach which threatens to displace traditional brokerage altogether.
We finished our session by asking the panel to forecast the importance of IT tools for EBACE in 2016. Naturally all agreed on progress. The majority agreed that several solutions would start to work in parallel. Air Club is convinced it will break the mould fastest, and who knows, it may provide the tipping point for operators to coalesce; no one likes being outside the club.
But for the geeks to get more show-time than John Travolta, it’s pretty clear they can’t do it alone. Simply adding an online veneer to the status quo won’t do much for the customer. The challenge is to harness efficiencies in the operators’ engine room and ally that to effective e commerce. If that’s cracked, the traditional distribution network will simply subside, as it has done in the many comparable industries from which business aviation should now take a leaf or two.

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Thursday, May 16th, 2013

Bizav online; could the tail wag the dog?

Business and Private aviation in Europe is stuck in a 5 year recession. The business part – read light/small jets which operate most of the flights – has slumped most. The impression given by many leading operators is that the market is dire and won’t recover for some time: too much capacity; customers ever more price-sensitive; ‘desperate’ operators are dumping prices and undermining everyone else’s margins.

In response there has been a marked tendency for operators to shift towards private aircraft management, with less emphasis on building business models around selling charter flights. After all, the very rich still own aircraft, despite the recession. And management earns steady fees, with less risk. This could be seen as a backwards step, as the industry reverts to its traditional image as a provider a luxury VIP service, as opposed to its aspirational identity as a complementary network to scheduled aviation.

If the recession had been short, and we’d bounced back to pre-2008 growth, battening down the hatches and weathering out the storm might have worked. But it’s now clear that the boom was unique, and that to move ahead, operators need new business models. They will need to take a leaf from the airlines, which responded to the fall in demand and rising (fuel) costs by innovating, particularly with low cost models and more sophisticated online sales channels.

The obvious equivalent to the low cost model in business aviation is the VLJ-supported air taxi network. This is beginning to work, but not without fits and starts. Its corollary, internet-based ‘ticket’ distribution, has been slower to develop and badly missed. Enhanced by intelligent data consolidation and information sharing, operators and intermediaries could be using the internet as a proactive tool to move business aviation forwards, rather than fall back on private aviation.

The sector is not without its pioneers. Ten years on from launch, Avinode virtually monopolises the online B2B market for brokers to liaise with operators. Their latest innovations imply they’re firmly fixed on being the GDS for business aviation. Competition to be the Expedia is led by the likes of PrivatAir and Victor. Rival business models such as Stratajet and FL3XX have a more holistic approach, ambitiously aiming to integrate operators’ front and back office n a single intelligent platform for planning, pricing and marketing capacity.

Some may question whether these online solution providers are isolated innovators or signs of an industry step change. Some brokers remain adamant that this industry’s customer relationship will always be led by the human touch rather than the smart phone app. But there are signs operators now see the need to collaborate around their own direct online sales channels – as Air Club has shown. Brokers likewise are initiating alliances which will unify around consolidated B2C online channels.

Some of these online business models will compete directly, others may complement each other. None has yet cracked the B2C channel, and the jury is out as to whether the solution will emerge soon, coalescing a single new approach, or whether various options will evolve in parallel. But what is clear is that the online innovators are the epitome of forward-looking change for the industry. It may even be that this is the tail that wags the dog and genuinely transforms the market.

To get some insight into the online landscape for business aviation, and the competing business models of its leading innovators, come to Hall 11 at EBACE at 9.30AM on Thursday 23rd May. I will be moderating an EBAA session entitled Shape the Market – Can New IT Tools Apply To Change The Traditional Way Of Doing Business Aviation? It could be an interesting one.

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Friday, March 29th, 2013

Business aviation consolidation: confounding the doubters?

In December last year, business aviation operators met in London to discuss the state of the industry. In particular, the theme was the fragmentation of the business aviation fleet and the problems this poses. It makes profitable operations difficult; variable costs are high enough, and the fixed costs associated with each AOC is enough to put most operators in the red, especially with 3rd party flying hours well down. Fragmentation also complicates industry cohesion in countering unwanted regulatory interventions such as APD and ETS.

There was some lively discussion on the possibility of aircraft operators consolidating. After all, many operators have fleets of just 2 or 3 aircraft. The benefits – in terms of shared fixed costs but also expanded geographic coverage, mixed fleet, joint marketing and price leverage – are obvious it seems. But there are equally obvious obstacles. Not least the ‘top gun’ egos who run business jet operators. They’re generally wealthy too. Many mind not being profitable less than they’d mind an acquisition or a merger. From time to time they do go bust, but more start ups come into the market. The barriers to entry are particularly low.

Many industry experts subscribe to this view. Alasdair Whyte of Corporate Jet Investor is a shrewd industry commentator. He does not believe there are many business cases out there worthy of an operator consolidation. His analysis of the ownership structure of business jet operators shows most are in private hands, and may not be driven by transparent commercial motivation. The best the industry can hope for may be something more nuanced, like an alliance. Sure enough, in late December several large European operators joined forces to start the Air Club, the first business aviation ‘airline alliance’ of its kind.

But then last week there was an interesting acquisition, with DC Aviation in Stuttgart buying out Jet Link in Zurich. This gives the German group some two dozen aircraft, from ACJ to Lear 45. Not so long ago DC Aviation expanded operations through a JV in Dubai with the Al Futtaim Group. Its global expansion started with its acquisition by the diversified ATON Group. Back to the present, and it was only 6 weeks ago that Marshall Aerospace acquired Flair Jet, the Oxford-based air taxi operator. Marshall wants to expand the fleet to 20 aircraft and sees further acquisition opportunities in India and the Middle East. Also just this year came the completion of Hangar 8’s acquisition of Jet Club in Farnborough. That added 10 heavy jets to its fleet of 40, now active across Europe and Africa.

In just a few months since December, at least some evidence appears to be weighing towards the potential merits of consolidation.

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