Air Alsie eyes the backlog fleet in response to industry decline

 - May 18, 2008, 12:03 AM

The next two years seem certain to see a softening in demand for business and private aviation, according to aircraft management and charter group Air Alsie.
Nonetheless, the Danish operator is staying focused on prospects for long-term growth, encouraging its owners to consider buying more modern and longer range aircraft that would hopefully be delivered just in time for a recovery from the current economic downturn.

The 20-year old company operates 18 aircraft and its fleet is a varied mix of the following models from the Cessna Citation, Hawker Beechcraft and Dassault Falcon stables: a CitationJet, two Citation VIIs, a CJ2 and an XLS; a Hawker 700B and an 800B, a Hawker 800XP; five Falcon 2000s, three 2000EXs and two 900EXs. These jets are averaging between 400 and 900 flight hours per year.

As it advises clients on possible new aircraft choices, Air Alsie tries to get them to see the benefits of fleet commonality. “We try to persuade them to buy something we know well so that we can focus on [aircraft] families,” said managing director Henrik Therkelsen. “This brings efficiencies for crew training and maintenance, and without these it is hard to be competitive.”

One option that Air Alsie finds interesting is Dassault’s expected new super-midsize jet. The company’s owners already have three Falcon 2000LXs on order, two due for delivery this fall and the third in 2011. They also have ordered five of the new Falcon 7X, which will replace some of the existing 2000s and the pair of 900s.

The older Hawkers are due for replacement over the next two years, most likely by the 800XP. The existing 800B is operated as an air ambulance for Norway’s Global Medical Support group and routinely logs around 1,200 hours each year with a diverse flight profile that spans Australasia, Africa, Afghanistan and the Americas.

According to Therkelsen, the past three years have seen substantial growth in the charter and management sectors. “But since the fall of 2007 we have seen a decrease in [charter] requests,” he told EBACE Convention News. “This is certainly due to economic uncertainty and there are also many more aircraft in the market now. We used to fly a lot of Russian clients, but many of them now own their own aircraft.”

Nonetheless, Russia is one of the markets that Air Alsie is targeting for growth. It has previously been deterred from putting down roots in the country because of the apparent lack of a sound regulatory foundation, but it feels more comfortable about seeking a partnership there today.

Barriers to America

Another market that has presented obstacles to Air Alsie is the U.S. As a foreign operator, it was constrained to just six (rising to 12) flights per year and decided to take on the formidable challenge of securing a full Part 121 operator’s certificate to allow it unrestricted access. The process entailed large legal bills and interminable meetings with the Federal Aviation Administration, Department of Transportation, Transportation Security Administration and Immigration and Naturalization Service (to deal with related visa issues). Many non U.S.-companies bitterly resent the fact that U.S. charter operators can effectively come and go as they please into Europe without equivalent restrictions.

“The fact that we had to go through this did concern and annoy us until we got the approval but now, frankly, it is good because it has raised a competitive barrier between us and other operators,” said Therkelsen. “We are not concerned with being able to fly [charter customers] within the U.S.; we just want to be able to take Europeans to America and let them do their business there.”

But Europe presents other frustrations for operators, most notably airport access. “Airport slot issues are becoming more and more annoying,” said Therkelsen. “Until around 2004 we could fly almost wherever we wanted, but now places like Geneva, London, Moscow and Nice are becoming more and more restricted.”

The new Subpart Q limits on flight-crew duty time that will come into force later this year through the European Aviation Safety Agency (EASA) is another headache waiting to happen. The main challenge is the requirement for a 12-hour rest between duty periods, which starts when a crewmember leaves his base airport.
Many executive charter operators feel it is incompatible with their pattern of operation since it was drawn up with mainly scheduled airlines in mind.
“We typically leave in morning and return in evening but our crews are flying only four or five hours,” explained Therkelsen. “It will be hard to plan for the 12-hour rest and duty period, especially due to the ad hoc needs of our customers. Crew availability could be an issue and there will just be a lot less slack in our operations.”

However, Air Alsie does welcome the move for EASA to take over Europe-wide responsibility for regulating operations because it should remove existing barriers to the company operating aircraft on other European registers. As a holder of a Danish aircraft operators certificate, it should now be free to operate jets that are on, for example, the French and UK registers.

Air Alsie’s headquarters at Sonderborg in southern Denmark is its technical base. The company is considering the business case for expanding into providing maintenance repair and overhaul for other operators. It would like to specialize in supporting the Falcon family of aircraft.

Most of the aircraft the company operates are based throughout Europe, according to their owners’ preference. Air Alsie  has sales offices in both Austria and Switzerland since many of their management customers are based in or close to these countries.
Overall, Air Alsie is fairly sanguine about the impact of the current economic uncertainty, despite predicting slower growth or even a decline in demand during the rest of 2008 and into 2009, on top of unrelentingly high fuel prices. “These will be tough years with more and more competition and fewer flights,” said Therkelsen.
“Some customers will feel the pinch, but most of our clients are old established industrial groups or private individuals and we have been through downturns with them before.

“We have been so lucky to have the recent upturn [in business aviation],” Therkelsen concluded. “We knew it couldn’t continue, but we have enjoyed more than 30 percent growth for three or four years and we are now prepared for a consolidation.”