ExecuJet Aviation wants clients to ‘Simply Fly’

 - May 17, 2008, 11:13 PM

ExecuJet Aviation will receive the first aircraft for its new Simply Fly program within the next three to four months, and expects to have 10 large-cabin jets in service by year-end. The company launched its wet-lease alternative to fractional ownership, block charter and traditional aircraft management in March. It is working with prospective clients to confirm a pricing structure that will include a lease rate, monthly management fees and fixed flight-hour costs before signing the first contracts.

Unlike competing programs, such as NetJets and Bombardier’s Skyjet, ExecuJet does not intend to publish its prices, terms and conditions. Prices will be customized according to each aircraft’s age and type, but the management and hourly fees will be fixed.

According to ExecuJet group managing director Gerrit Basson, Simply Fly is attracting a mix of large companies wanting off-balance-sheet access to business aircraft and wealthy individuals wanting them for private use.

Under Simply Fly, the Swiss-based group will acquire business jets on behalf of individual clients and operate them on a full turnkey basis, covering crew, insurance, maintenance and handling. Customers will have exclusive use of an aircraft and a dedicated crew.

The aircraft will be operated under one of eight aircraft operator certificates (AOCs) ExecuJet holds in Switzerland, Germany, Denmark, the UK, South Africa, Australia, Mexico and the United Arab Emirates. The group already operates more than 110 aircraft around the world.

As a Bombardier distributor in 35 countries, ExecuJet is negotiating with the Canadian manufacturer to buy an initial batch of its Global Expresses and Challengers. It plans to begin Simply Fly operations by September with a pair of used Challenger 604s.

Customers will have the choice of an operating lease or lease-finance terms that would result in them buying the asset at the end of the standard 60-month term. In either case they can choose to offset their costs by allowing their aircraft to be made available for third-party charter by ExecuJet (Booth No. 1065).

ExecuJet chief executive Niall Olver said Simply Fly is aimed at the upper end of the business jet market and specifically at NetJets customers who are approaching the end of their fractional ownership agreements. The company believes this part of the market is less vulnerable to the current financial downtown than the entry-level very light jet sector.

ExecuJet believes that at least 10 percent of existing NetJets share owners could opt to have direct control of a full aircraft, particularly when their annual flying requirements exceed 200 hours. “Until now, full ownership of aircraft has lacked the simplicity of fractional ownership,” said Olver.

The finance for the aircraft and the lease terms are being offered in conjunction with Dublin, Ireland-based finance company QED Equity. Both companies are majority owned by Irish entrepreneur Dermot Desmond.

According to Brian Foley, managing director of QED’s new corporate aviation arm, it makes more sense for high-net-worth customers to put less of their own equity into aircraft and invest this money where higher returns can still be had–even allowing for the relatively higher management costs associated with Simply Fly’s lease terms. He said the Simply Fly lease payments will be tax deductible in most fiscal jurisdictions.

Simply Fly clients will pay an initial deposit that will probably amount to six monthly management fees. In addition to flight-hour charges, they will be liable for fuel surcharges, special catering requests and additional fees for airports that levy high landing fees. “There will still be some variable costs, but no surprises,” explained Olver.

In calculating fixed costs for the new program, ExecuJet will assume that each aircraft will be flown up to 600 hours per year. Clients will be free to fly more hours up to a ceiling of around 800 but will face surcharges for additional hours because of the increased costs associated with the need for more crew and faster depreciation of the aircraft. They will be able to terminate their lease agreements early, but they will be subject to penalty payments.

Each client will have an account manager responsible for handling operations of their aircraft anywhere in the world and will be assured around-the-clock concierge services. The home base of the aircraft will be established by mutual consent, as is already the case with ExecuJet’s managed aircraft fleet. The Swiss-based company operates more than 100 aircraft and has bases on five continents.