Smaller Providers Climbing Most Strongly

 - October 4, 2006, 11:25 AM

While the major fractionals–with the exception of CitationShares–experienced flat or negative growth, smaller providers have really climbed strongly. Over the past year, the 16 minor players that AvData tracks have–at the expense of the major fractionals–increased their combined market share (measured by shares sold) from 3.6 percent to 5.6 percent, mostly due to gains at Fairfield, N.J.-based Avantair and Manchester, N.H.-based PlaneSense. Interestingly, both providers sell shares in turboprops–Avantair in the Piaggio Avanti twin and PlaneSense in the Pilatus PC-12 turboprop single.

Fractional Insider president Mike Riegel explains the popularity of the regional fractionals: “The smaller providers are a useful adjunct to the major programs. They’re an excellent choice for those customers who need to fly short legs, meaning less than an hour trip time.” Shaircraft CEO James Butler agreed, saying it’s not all that uncommon for shareowners with a major provider to supplement their lift solution with a share from a regional fractional for short hops.

Of all the minors, Avantair has grown the fastest in the past 12 months. As of late June, it had 18 Avantis in its fleet, a year-over-year increase of 11. In addition, in June Avantair added two Raytheon Beechcraft Premier Is as core aircraft.

According to Avantair CEO Steven Santo, “We added the light jets solely as core aircraft to reduce charter outsourcing, which was still low at 2 percent of our customer’s trips. The problem is that the Avanti cabin is comparable to that of a midsize jet, but when we do a charter sell-off we book light jets. Customers don’t like the smaller cabins in the light jets, so we decided to add the Premiers, which have near-midsize cabin dimensions.

“Currently, we’re not offering shares in the Premier Is, though we are watching customers’ perceptions of the aircraft. If the reactions are favorable, we could in fact decide to sell shares in the light jet at some point.”

Avantair is in growth mode, big time. Last month it officially opened a new 105,000-sq-ft complex at St. Petersburg/Clearwater Airport, Fla., with 70,000 sq ft of hangar and 30,000 sq ft of office and shop space. A customer lounge will be completed by year-end. Avantair also installed a fuel farm at the complex in an effort to contain jet-A costs, savings that Santo said he plans to pass on to shareowners. (Fuel surcharges at the provider currently average only $60 per flight hour, Santo noted.)

This new 24/7/365 facility–which serves as Avantair’s maintenance, avionics and completions base with limited paint capability–sits on a 22.5-acre airport leasehold, leaving plenty of room for expansion. It appears that Avantair will need to use this room soon–it’s taking deliveries of nine more Avantis this year, 14 next year and 16 in 2007.

Share sales don’t seem to be a problem. If anything, Piaggio can’t deliver Avantis to Avantair fast enough. Santo told AIN that Avantair consistently has a one- to two-month backlog of deposits from customers, adding that he could sell shares further out into the future if he wanted. Instead, Avantair keeps waiting lists so these customers don’t have to put a deposit down for an aircraft that won’t be delivered for several months.

According to Santo, Avantair will be a national (read major) fractional program within five years. The company currently has three operating bases–Fairfield, N.J.; St. Petersburg/Clearwater; and Reno–and it plans to add operations hubs in Texas and the Midwest. As for the latter location, Santo mentioned Chicago or Grand Rapids, Mich., as potential bases.

PlaneSense, too, is experiencing strong growth, noted company president and founder George Antoniadis. Like Avantair, PlaneSense is also hamstrung by its inability to get more new aircraft inventory.

As of late June, PlaneSense had 18 turboprop singles in its fleet, a year-over-year increase of eight airplanes. Antoniadis said his company will take delivery of two more PC-12s from Swiss-based Pilatus by year-end and about 10 airplanes next year.

“We’d like to get more airplanes from Pilatus, as we could easily sell shares in them,” he said. “But the manufacturer will not raise production rates, and we will add only new aircraft to our program. In perspective, this helps us to manage program growth, which is very important.”

Asked if he’d consider adding another fleet type to accelerate growth at PlaneSense, Antoniadis said he’d do so only if the aircraft “made sense in the fleet.” At present, he strongly believes that the PC-12 is the only “right” aircraft for the fractional provider.

PlaneSense is currently an East Coast-only program with a sole base in Manchester. Several years ago Antoniadis considered adding another base in the Atlanta area but eventually decided not to pursue that avenue.

But that’s not to say that PlaneSense doesn’t have big expansion plans. Antoniadis told AIN that he is currently evaluating a West Coast program, though he doesn’t yet know when he might launch such a venture.

Riegel notes that Avantair and PlaneSense–both young programs–are in a “critical period” because they are transitioning from a start-up to a mature phase. “They’re going from small fleets to larger fleets, which adds a layer of complexity to operations,” he said. “It’s easy to manage just a few aircraft efficiently, as they’ve proved. Large fleets are an entirely different story–it’s very complex.”

Noting that Avantair is going through such a transition, Santo told AIN that he spent “a lot” of money on fleet scheduling and optimization software from Bitwise Solutions. This software is a newer version of what Flexjet and Travel Air used when they started some 10 years ago.

But Riegel points out that Avantair’s biggest problem could be what attracts so many customers to it in the first place. “Avantair’s fees are too low to sustain profitability during this transition,” he says. “It needs to increase hourly fees by 20 percent. PlaneSense does as well, for that matter.”