Small is still beautiful for pint-sized UK charter op

 - May 21, 2008, 4:26 AM

Some would have us believe that for business aviation the age of “big is beautiful” has arrived. The NetJets fractional-ownership program now dwarfs many airlines, and major U.S. carrier United Airlines has declared its intent to grab a potentially big slice of the fractional pie.

In Europe, fast-growing executive charter firms like the UK’s Gold Air International and ChauffAir have been preaching that only operators with large fleets of the latest business aircraft will have the power to survive in an increasingly competitive marketplace. So where does all this leave the smaller operators, with just two or three aircraft in their portfolios?

For David Antrobus, managing director of Manchester, UK-based Northern Executive Aviation (NEA), there is little new under the sun. The company celebrates its 40th anniversary this year, and Antrobus remembers others making similar claims when it started in the 1960s. “Back then, there were people claiming they would completely dominate the marketplace and it never came to pass,” he told AIN.

Antrobus accepts that critical mass is vital to the survival of fractional-ownership programs, but he does not concede that only large operators can survive in the executive charter market. “This sector has become extremely competitive,” he said, “and some companies will undoubtedly go out of business–be they big or small. Whoever is not genuinely making money will not survive because you cannot keep buying turnover [revenues].”

His contention is that some operations are being kept afloat by financial backers with extremely deep pockets, or by unorthodox accounting practices, but ultimately the squeeze will be felt if genuine profits cannot be generated. In his view, the market is currently experiencing considerable instability and a shake-out is inevitable.

NEA has sought to grow at a measured pace over the past decades, judiciously keeping its capacity tied to fluctuating levels of demand in the changing charter sector. For instance, back in 1989 the firm employed 60 people. This dropped to 32 by the early 1990s but has since recovered to around 50. Staff turnover is low, with several employees having served for more than 25 years.

Today NEA has two Learjet 35As available for charter, and it also manages a Challenger 604 and a Falcon 900 for clients. By year-end the fleet should be significantly enhanced by the arrival of a Global Express. Antrobus is trying to sell one of the Learjet 35s and replace it with an as-yet unspecified larger, rangier model. However, he has found that the current used aircraft market does not particularly suit the seller.

Developing New Business

Newly appointed marketing director Aviva Stein told AIN that NEA will continue to sell on high quality and responsiveness. She is now aiming to significantly expand the company’s customer base by attracting companies and individuals new to business aircraft use.

Another goal is to boost NEA’s handling operations, particularly targeting transatlantic operators needing to make a technical stop for onward flights throughout Europe and beyond. The company is the only dedicated business aviation handling service at Manchester International Airport and currently receives up to 400 movements each month.

Three years ago NEA invested in a purpose-built business aviation center away from the main airport terminal with its own ramp and hangar space. Since the opening of Manchester’s second runway last year, the airport has become much more convenient for all operators with markedly fewer delays.

The NEA facility includes comfortable passenger and crew lounges, as well as a boardroom for customer meetings and on-site refueling service from Air BP (for which the FBO is an agent). The company’s maintenance operation is a factory-approved Learjet service center, and NEA is observing increasing demand for heavy repairs and refurbishment of all models. Labor rates are currently around $56 per hour, despite strong pressure on employers to increase pay to attract and retain qualified mechanics at a time of high demand for their services.

As a board member of the UK’s General Aviation Manufacturers and Traders Association (GAMTA), Antrobus is actively involved in the European business aviation community’s protracted lobbying to avoid excessive and inappropriate regulation.

Testament to the complexity of Europe’s regulatory environment is the fact that, like many other operators, NEA has yet to complete the transition process from a UK air operator’s certificate to the European JAR OPS 1 rules. The company has just hired a former UK Civil Aviation Authority inspector and expects to have the onerous bureaucracy nailed shortly. In the process, it will likely add the Falcon 900 to the list of aircraft available for charter.

Antrobus acknowledged that he and other smaller executive charter firms have lost customers to the burgeoning fractional programs. He argued that in many instances these operations are failing to meet guaranteed availability promises of the aircraft type purchased by clients and expected service standards. This makes him optimistic that the market will have renewed respect for the pedigree and personalized service of firms such as NEA.