FBO Survey: Service Supremos

 - May 1, 2008, 7:34 AM

At face value, there has never been a better time to be in the international FBO business. With North America a mature marketplace, the lion’s share of growth in business aircraft fleets and flying activity is found in Europe, the Middle East and Asia. And according to the latest market forecasts from manufacturers Honeywell and Rolls-Royce, these are just the markets where business aviation’s growth curve will continue to climb in the coming two decades.

FBOs in Europe, Africa, Asia and the Middle East reported business aviation traffic increases of between 12 and 90 percent last year–with the highest hikes generally being in the Middle East and Asia, which had a relatively low start point. Especially in Europe, ramp space and other airport access issues are increasingly stifling this growth trend.

It remains to be seen whether severe difficulties in world financial markets will soften demand this year. However, the long backlogs of business aircraft to be delivered in the next few years–and the high proportion of these going outside the U.S.–suggest that the growth curve is unlikely to dip.

Nonetheless, despite the strong growth, relatively few new FBOs are opening around the world and the pace of expansion and modernization of existing facilities continues to be pretty slow. AIN’s latest annual survey of international FBOs does not indicate a strong upsurge in new service providers moving to usurp the established main players.

Development Continues in the Middle East
This year, the development of the new Dubai World Center Airport is due to unfold with the construction of a dedicated Executive Flight Centre designed to receive as many as 100,000 business aircraft movements annually. It has yet to be determined which companies will move into the new facility to provide handling services, although both Jet Aviation and ExecuJet Aviation have already established new FBOs at the existing Dubai International Airport.

Elsewhere in the wealthy Arabian Gulf states and the wider Middle East, other airports have been attracting new FBO developments.

Kuwait International Airport opened its new executive terminal late last year. The first tenant in the new terminal is an FBO partnership between local company Royal Wings Aviation Services and the U.S.-based Mercury Air Group.

Executive charter group United Aviation built the facility, which will offer extensive, dedicated parking areas for business aircraft. The building will feature several high-end restaurants and stores.

At Jordan’s Amman International Airport, Jordanian Private Jet Services is offering full-service handling for business aircraft. It can also support operations at Aqaba’s King Hussein International Airport.

The Lebanese capital Beirut now has two FBOs at its Rafic Hariri International Airport. The Cedar Jet Center, which is part of Middle East Airlines Ground Handling, is facing competition from a joint venture between Universal Weather & Aviation and local charter firm Imperial (formerly Cirrus Middle East). Both FBOs operate from the airport’s general aviation terminal. Cedar Jet offers maintenance support through the engineering division of its sister company Middle East Airlines.

New Facilities on Tap in Asia
Lack of dedicated airport infrastructure has been a significant obstacle to the growth of business aviation in China. However, some recent breakthroughs have allowed new facilities to open.

In Beijing, Capital Jet completed construction of a 75,000-sq-ft facility last year. This year’s Olympic Games–to be staged in Beijing during August–provided an impetus for the construction of the new FBO, which features extensive lounges for visiting dignitaries. Capital Jet is a subsidiary of Beijing Capital International Airport.

Later this year, Australian group Hawker Pacific–working through a joint venture with the Shanghai Airport Authority–expects to complete a new 27,000-sq-ft FBO at the city’s downtown Hongqiao Airport (with just over 100,000 sq ft of ramp space). The new base has adjoining maintenance facilities and has been built around the airport’s existing VIP lounges.

Douglas Hendry, Hawker Pacific’s general manager for FBOs, predicts that the growing Asia Pacific rim market will increasingly attract more FBO groups. However, in his view, there will likely be insufficient traffic for all the new players, and he expects the expansion wave to be followed by consolidation.

“The key challenge in these developing countries is the relatively small market size especially when compared to the U.S. or Europe,” he told AIN. “There are several locations in the U.S. that have more aircraft traffic in one day than some Asia Pacific airports have in a month. This requires discipline and critical business analysis to ensure that the model employed optimizes the opportunity and ensures a satisfactory return for the investment.”

Hawker Pacific is seeking to provide a level of service consistency that has not so far been available to business aircraft operators in Asia. It expects the new Shanghai facility to be something of a flagship in terms of its facilities and service standards.
Meanwhile, the private Chinese Jinggong group is making plans to develop the country’s first dedicated general aviation airport at Badaling near Beijing. The new airport would feature a flying school and an FBO, but Jinggong officials have given no firm details about the timeline for the proposed development.

Jet Aviation Gets Foothold in China
Arguably the most significant new FBO evelopment in China will be Jet Aviation’s new joint-venture facility with the Deer Air subsidiary of Hainan Airlines, which has a long-established executive charter arm called Deerjet. In late March, the Switzerland-based group announced that it had reached agreement to develop a new business aviation enclave on the north side of Beijing Capital International Airport.

The new facility will trade under the name Jet Aviation Beijing and it will include a 21,500-sq-ft executive terminal FBO and almost 65,000 sq ft of hangar space for line maintenance. Construction has already begun and the partners are committed to being ready to provide at least basic handling and technical support services for the many business aircraft that are expected to flock to Beijing for the Olympic Games.

The FBO is expected to be fully operational with adjoining hangars by early next year. This will include a parts warehouse and will provide Jet Aviation with the platform to provide its full spectrum of aircraft support, management and charter services.

“This development will help to stimulate the growth of indigenous aircraft ownership and operation in China,” Jet Aviation CEO Peter Edwards told AIN. “This will be a major step in addressing the need for support infrastructure in China.”

The exact terms of the joint venture have not been revealed; Jet Aviation and Deer Air, however, are sharing the investment being made in Beijing. Edwards explained that it is a legal requirement for foreign firms to work with a Chinese partner for such a development. “The important thing was to find the right partnership,” he said. “We have a professional and committed partner in Deer Air.”

Deer Air has some experience in handling operations from Hainan’s executive charter and airline services. However, Jet Aviation will be taking the lead in terms of management of facilities and training staff. It will control the technical standards and licenses, with its long-established, full-service FBO in Singapore providing some support.

China’s indigenous business aircraft fleet has been relatively small–about 60 jets today–but is now growing at pace. According to Jet Aviation, the number of aircraft has increased by as much as 30 percent per annum in recent years and over the next five years is projected to grow at more than 20 percent annually.

Jet Aviation is exploring other opportunities for FBO growth in Asia. The planning process will largely be complete by year-end, and Edwards said that one more deal could be in place this year.

The group is also in discussion with several major airframers with a view to establishing an official service center presence in China. In any case, it will be ready to provide line maintenance for aircraft going to Beijing for the Olympics.

Edwards added that Jet Aviation has ambitions of expanding its FBO presence in the Middle East, where it already has bases in Saudi Arabia and Dubai. It also sees opportunities to expand even in the relatively mature European market.

Challenges in Europe
Jet Aviation’s European FBO managers at Geneva, Zurich, Dusseldorf (Germany) and London Biggin Hill reported rising traffic and rising expectations of service standards from a more discerning business aviation marketplace.

The managers also indicated that they anticipate coming requirements for security controls will be among the greatest challenges for European FBOs. All reported plans to upgrade security infrastructure and processes are in a bid to keep within new European border control laws and avoid inconvenience to passengers and crew.

“We must work around this problem to avoid a perceived poor service which is in fact entirely out of our hands,” commented Bernard Ratsira, manager of Jet Aviation’s Geneva facility. “Airport congestion is another obstacle that we must overcome to continuously maintain our service levels.”

Several managers from Jet Aviation and other companies reported that handling fees have had to be raised to address increased staffing costs associated with meeting security requirements and the difficulties of juggling limited space. Some FBO managers said that flight planning groups and fuel companies could do more to improve customer satisfaction and to bolster FBO profit margins.

Generally, many European FBOs reported capacity constraints largely in terms of limited ramp space for parking aircraft, but in some cases also in terms of limited slots at their airports. A significant number complained about an inflexible attitude on the part of airport managements and a continued lack of appreciation for the importance of business aviation to their local economies.

ExecuJet Grows Eastward Too
ExecuJet Aviation is establishing its first FBO in Asia. In February it acquired at Singapore’s Seletar Airport a 30,000-sq-ft hangar that it will use initially to provide maintenance support for five of its fleet (a pair of Gulfstream Vs, two GIVs and a Challenger 604). The company is also looking to provide line maintenance for other aircraft.

The company will be competing with Jet Aviation, which has a long-established FBO at Seletar. It is making plans to open another new FBO in Mumbai, India, scheduled for the end of this month, as well as a new handling and maintenance facility in China by the end of August.

The Seletar hangar can accommodate up to six large-cabin business jets. ExecuJet is considering expansion at the site, which would be possible by relocating to a new aviation business park being developed at the former military airfield.

Seletar is located about 12 miles from Singapore’s city center. It has no operating curfew but immigration and customs controls are currently available only between
8 a.m. and 9 p.m. The airport has a 5,354-foot runway and ample ramp area for parking aircraft.

ExecuJet has had an FBO in Sydney, Australia, for more than a decade. Last year it opened new maintenance bases in Melbourne, Australia, and Auckland, New Zealand. Later this year, it will establish a line maintenance facility in Brisbane, Australia.

The group’s expansion into Asia is being led by Alastair Creighton-Jones, managing director of ExecuJet Australia. ExecuJet also has FBOs in Dubai and Johannesburg, as well as at several locations in Europe, including Zurich, Berlin and Copenhagen. In April, it opened a new base at London City Airport, but initially this will provide support only for ExecuJet’s aircraft. The two-story facility includes a flight planning suite and lounge.

Kuala Lumpur Joins the Jet Set
In Malaysia, construction work was completed at the end of March for a new executive lounge complex for the SkyPark Subang FBO at Kuala Lumpur’s Subang International Airport. This project is part of a $90 million redevelopment intended to transform the facility into one of Asia’s most modern FBOs. The 9,000-sq-ft SkyLounge combines traditional songket tapestry, local stoneware and tropical plants with modern amenities.

The new private enclave features meeting rooms, a 30-seat lounge with food and beverage facilities for passengers, a private lounge, separate crew rest and flight planning rooms, a cigar lounge, a bar, kitchenette, toilets, shower and changing room facilities, a gym and mosque.

According to Subang SkyPark executive director Datuk Ravindran Menon, Malaysia is receiving growing volumes of business jet traffic from throughout the Asia Pacific region, as well as from Europe and the Middle East. Austrian executive charter firm VistaJet is preparing to establish a new Asian operation with a Challenger 605 and a 604 to be based at Subang SkyPark.

Subang SkyPark is developing the former Subang Terminal 3 site into a modern FBO complex under a 59-year lease from the Malaysian government. Subang was formerly the main international gateway to Kuala Lumpur and is significantly closer to downtown than the new international airport. The development is expected to be completed before the end of 2010 and will include new maintenance facilities and hangars.

Meanwhile, Japan’s new Nagoya Airport is seeing growing volumes of business aircraft and is increasingly being viewed as a viable alternative to the crowded Tokyo and Osaka airports (thanks to the country’s high-speed “bullet” trains). The number of jets handled has increased from 95 in its first year of opening, 2005, to 150 last year and the total is expected to reach 180 this year. As traffic volumes increase, the Nagoya handling companies are expecting to reduce fees for business aircraft operators.

Universal Plants People, Not Flags
For global trip planning specialist Universal Weather & Aviation, providing ground support service to its clients is about more than just planting a succession of flags outside new FBO buildings; it’s about developing a chain of trained and motivated employees who can deliver a consistent level of service while taking into account local operating conditions and cultural factors. The Houston-based group is now present at some 60 locations in 51 countries, including 15 in the Asia Pacific region and 21 throughout Europe, the Middle East and Africa.

Last September it rebranded its UVGlobal Network chain of bases as Universal Aviation. This brand will be worn by those facilities that the company either owns directly or through a joint venture partnership. The rest of its network consists of independently owned “certified locations” that work for Universal Aviation customers after the company has audited them for its service and safety standards.

Universal Aviation director of operations Vic Gregg told AIN that local expertise and a proactive approach to developing employees professionally are keys to the company’s service ethos around the world. A lynchpin of this process is a global meeting of staff held every two years in Houston, and anyone who has ever visited the company’s booth at the annual NBAA show will see that it is a veritable United Nations in terms of the diversity of staff available to engage with customers and colleagues alike.

Despite the best efforts of companies like Universal, there are still significant areas of the world that remain unfriendly to business aviation. The potentially mammoth China market is one of these. According to Gregg, the key to making these situations work is gaining and keeping the trust of the local authorities and carefully managing customer expectations by educating users about the realities of operational restrictions.

Universal is increasingly making use of Web-based software to streamline the trip-planning process. But Gregg insisted that there is still no substitute for deep-rooted local knowledge and cultural understanding.

According to Gregg, Universal’s approach to service goes beyond that of a traditional FBO in that it commits to providing full support for clients in every location from “touchdown to takeoff.” In practice, this means being available when unexpected problems occur away from the airport.

Gregg doesn’t expect to see a true global network of full-blown FBOs any time soon because in many locations there will continue to be insufficient traffic to sustain such business models. “Getting the basic handling service right is what matters first,” he concluded. It was with this in mind that Universal in February announced the opening of a new scheduling center in Manila, Philippines, to boost its trip planning coverage throughout the Asia Pacific region.

Swissport Changes Tack
Swissport Executive Aviation (SEA) has abandoned plans to aggressively develop an international FBO network in favor of a more gradual approach to expanding its handling operations for the business aviation market. According to vice president Martin Meyer, the group has decided that it cannot justify the investment costs and management time that would have been required to implement its expansion strategy.

Instead SEA is now establishing new business aviation units as offshoots of its airline handling teams in niche markets such as Algeria. Later this year, it expects to unveil other new handling operations in parts of eastern Europe, such as Bulgaria. However, the Zurich-based group is committed to its existing FBO joint ventures in Geneva (the PrivatPort facility run with PrivatAir) and at Nice in the south of France (a cooperation with Universal Aviation).

Meyer said that SEA is unlikely to pursue new opportunities in the growing Middle Eastern market for business aviation because there are no clear synergies there with Swissport’s airline handling network. However, it does see possibilities in Asia and has been holding talks with Universal about a possible new base at Singapore Changi Airport. It is also teamed with Universal in Brazil.

Signature Makes Its Mark
U.S.-based FBO chain Signature Flight Support is still assimilating a group of European bases that it acquired several years ago. This has seen upgrading of facilities such as Paris Le Bourget (where it now occupies the old Le Terminal building), as well as East Midlands, Aberdeen, South-ampton, Bournemouth and London Luton in the UK. Next on the list for a facelift is Thessaloniki in Greece.
Signature has yet to spread its support network further east to the emerging markets of the Middle East and Asia. However, it does see growth opportunities in both regions.

According to David Best, Signature’s managing director for Europe, the Middle East and Africa, the group also places a strong emphasis on staff training and ensuring consistency in service standards. Last year in Europe it introduced its U.S. electronic survey process to get a better understanding of what really matters to customers.

As the business aviation market continues to expand, Best expects to see FBO groups becoming larger and more transient. In some locations, such as London, capacity constraints are now being felt and Signature is evaluating options to expand its space there. Best said that he would like to see more airports willing to give FBOs longer leases that would strengthen the economic case for them to invest more extensively in their premises.

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