Avinode’s white label gamble
October 20:
For several years now, Avinode has dominated the development of online market places for private jet charter transactions. 18 months ago the Gothenburg-based business snapped up its only major rival, US competitor Charter X. Avinode’s core product is its instant pricing and flight time calculations for over 3000 aircraft logged on its system by its user operators. Using this database, charter brokers quickly identify potential carriers for their customers, whom they then contact directly to negotiate availability and pricing.
Avinode generates its revenue from the membership fees paid by its subscriber operators and brokers. Its growth has been self-fulfilling, as its increasing membership has created an ever stronger argument for new operators and brokers to affiliate and interact. Much of its database is indicative not actual; operators do not provide Avinode with guaranteed pricing or availability (although some operators now provide dynamic inventory). Once brokers have identified potential lift, Avinode plays no part in the rest of the transaction.
Charter brokers still almost completely dominate charter inventory purchase, and without any rival offering a transactional platform for them to do so, Avinode is still peerless in the B2B market. Its Achilles heel is in the emerging B2C channel. Lagging well behind the wider travel industry, bizav-dedicated online platforms are finally bringing effective search and booking platforms to customers, linking them directly to operators and cutting out the brokers. So far their impact is small (PrivateFly.com is the largest and generates a few hundred flights only), but the long-term threat to the broker market (read high street travel agent) is also a direct threat to Avinode.
Hence Avinode’s much publicised announcement at NBAA 2011 that it is now offering its brokers a white label B2C platform of their own, which they can use to compete with the likes of PrivateFly. Effectively, Avinode has gambled on sticking with its broker-membership business model, hoping that by extending its B2B market place to consumers via its brokers, it will maintain its key customers’ livelihood and their willingness to find operators on its platform. The risk is that both Avinode and its brokers all rely ultimately on the jet user, and if that customer decides that brokers no longer offer the best access to private jet booking, Avinode will lose its indirect control of this customer and with it its income stream.