It was a challenge. A big one, admittedly, but as Stuart Oran discovered, much bigger than originally envisioned.
Oran is the president and CEO of Avolar, the business aviation subsidiary formed by UAL Corp. this past spring. In May, UAL committed $250 million to the company’s first venture into the business aviation industry, and by the end of the summer Oran announced total orders for 40 Gulfstream and 100 Falcon business jets for the fractional program. The plan was to begin providing lift for its first shareholders last November, using an interim fleet of two Falcon 50EXs and a Hawker 800XP.
Oran was expecting to launch a major marketing program in late November and had already committed to an official launch of the fractional program to coincide with delivery of the first Gulfstream in April.
He remains committed to that launch date, but admits that it hasn’t been easy, and not all the challenges are attributable to the usual growing pains of a new business venture.
By summer, the economy was already showing signs of a recession. September 11 did little to help the overall economy, though it did stimulate interest in business aviation. But when UAL’s United Airlines commercial carrier announced massive layoffs, employees took a jaundiced view of the Avolar launch. The machinist and flight attendant unions were especially vocal, concerned that UAL was spending “tens of millions of dollars” on the Avolar startup at a time when UAL was losing money and laying off some 20,000 workers.
Oran, however, noted that UAL’s $250 million investment came before economic indicators of a recession were accurately assessed, and well before the terrorist attacks of September 11. He further pointed out that Avolar was seeking outside investors to ease the financial burden on UAL and would give preference when hiring to those laid off by UAL. He also pointed out that while Avolar had placed orders for 140 business jets, the aircraft would be “bought and paid for” by fractional shareholders.
Oran told AIN that in spite of the current recession, individual and corporate interest in Avolar has remained high. Oran said September 11 created an “almost immediate” jump in interest in fractional ownership. “People’s views about why they might buy a fractional share in a business jet will change from safety to convenience, and that will put them in business jets in the long term.”
Economic indicators are mixed, he said. “When those signs move from mixed to positive, the industry will quickly be back on all cylinders and we can expect some explosive growth.”