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Time for a new approach

Richard Koe The airline industry is not known for its consistently blooming health. In fact the decade after 2001 was mostly terrible for its operators and shareholders. But at least there has been some recovery since. Not the case with business aviation. At least not in Europe, where the market’s been in the doldrums since its boom years were put to rout by the Great Recession. Optimists have every year since pointed to green shoots. It’s true that the ‘top end’ has flourished, representing strong demand for heavy, premium jets. But that’s mostly developing market demand, most notably in Asia. It also seems that corporate America is coming back to business aviation after a long hiatus. But that still leaves the European market deep in its slump. Very obviously the sovereign debt crises within the EU are undermining the economic vitality which is business aviation’s core driver. The industry has been further burdened by a raft of taxes and levies, hastily imposed by governments looking to refill their coffers and exploiting the private jet’s ‘fat cat image’. But as we have emphasized for several years, the biggest burdens on the industry are self imposed. In short, its supply side fragmentation, its dependence on intermediary sales channels, and the significant lack of transparency – for participants, users and potential investors – have seriously held back development. EBACE 2012 is now around the corner and there’s the usual excitement and optimism associated with an annual convention. But there are signs of change this year which may reflect the industry has reached a critical stage. It’s been sick long enough, it seems, to have encouraged new entrants to break the status quo. A few examples suffice: Avinode has been around a while of course, but its SchedAero scheduling software is newly launched and could take its operator platform to the next level. To-date, Avinode is principally a useful but limited ‘online yellow pages’, for operators to advertise fleet performance and pricing, and brokers to find operators to quote for customer requests. The risk for Avinode is that its operators could unsubscribe if they find a better route to market. If SchedAero succeeds in integrating operator members’ operational management into Avinode, the relationship will become far more solid and profitable for Avinode. And the industry demand-side, whether brokers or ‘end users’, would begin to have a single centralised platform to access all private jet schedules. That sounds like the beginnings of an airline-style GDS. Fly Victor has a good story and is evidently selling it very well (few business aviation start ups make it onto CNN). They’ve variously been described as the industry’s first effective price-comparison platform, its leading B2C channel, its largest fleet consolidator, and first demand aggregator of business jet customers. Not bad for a 2011 start-up. The PR is of course outrunning the reality, and Fly Victor has much to prove: other brokers with inventory (typically ‘empty legs’) can provide price comparisons; Fly Victor is still a broker in that it intermediates between customer and operator for which it takes a commission on the trip value; its fleet is strictly ‘virtual’ (in this sense Air Partner could claim a bigger fleet). Fly Victor’s aggregation of individual seats on jets is the most interesting initiative. It has however been tried before without success. Perhaps its time has come. Another newcomer to EBACE 2012 has come in under the radar, but has promised to unveil its offer at the show’s first press presentation. It’s called Stratajet, and its launch product Stratafleet promises operators a new platform for managing charter opportunities. Based on several years research, Stratajet claims to have researched every flight permutation in Europe, integrating all associated cost parameters. The resulting calculator should inform instant and ‘penny perfect’ pricing for any new trip request. If Stratajet works it could move the industry forward towards the transparency taken for granted throughout the rest of the travel sector. Customers would be able to use an online platform to query any route and get an immediate price comparison. This would inject a level of competitiveness that would quickly remove less efficient operators, and potentially by-pass much of the intermediary market. Notwithstanding the bloodbath, the industry and its customers would certainly be better off. Stratajet, Fly Victor, Sched Aero – these are three of several new initiatives seeking to unlock the business aviation industry’s black box. If some succeed, even with the market caught in a recession, the business aviation industry will be much enhanced. In fact it is precisely the prolonged recession, and increasing sense of crisis, which makes it a good time to disrupt the status quo. We hope to see in the next few months that necessity is the mother of all invention.

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