Euro programs shape-shift to meet real-time market needs

 - August 4, 2008, 8:22 AM

What is fractional ownership in Europe? Judging by the way the concept has morphed since it started to appear in the continent during the second half of the 1990s, the answer might well be “whatever sir or madam would like it to be today.”

Fractional giant NetJets was first to establish a European bridgehead back in mid-1996, and seven years later has now signed up more than 200 customers. Many companies have followed in its footsteps over the years, but hardly any have ended up playing NetJets directly at its own game. Instead, mainly small and independent competitors have largely sought to offer myriad options for shared use of business aircraft, most of which can be characterized as block charter.

While NetJets has essentially stuck with a Europeanized version of its orthodox fractional-ownership formula, the other players have tended to alter their offerings at short notice to pounce on market opportunities as they arise. Generally, the European challengers have sought to offer access to aircraft with shorter and more fluid commitments required of its customers than NetJets’ standard five-year agreements.

NetJets is to launch a major new marketing initiative in Europe this fall when Concorde is finally retired from commercial service by British Airways on October 24. “You flew the Concorde–now it’s time for an upgrade” is what the supersonic transport’s frequent fliers are to be told in a bid to lure them away from the first-class cabins of subsonic scheduled flights.

At June’s Paris Air Show, NetJets Europe (NJE) chief executive Mark Booth argued that by operating from more conveniently located and exclusive business aviation gateways NetJets will be able to beat (or at least match) the door-to-door travel times that the rich, famous and powerful previously enjoyed with Concorde. The company is also telling prospective new fractional owners that if they fill half the passenger seats on a transatlantic NetJets flight, the overall cost will be no more than using individual Concorde seats.

Partly to respond to this anticipated increase in demand for long-haul aircraft, NetJets intends to add “several” Gulfstream G400s and G500s (formerly the GIV-SP and GV, respectively) to its European fleet. It already has a couple of its N-registered G400s in Europe most of the time, and these aircraft are increasingly being deployed on flights into and out of Russia and to Asia.

According to a NetJets spokesman, the Europe-based fleet now exceeds 40 aircraft, and with new membership currently being sold at a rate equating to about one additional aircraft per month, this is expected to reach 50 by early next year. The fleet currently includes a mix of Cessna Citation Bravos, Raytheon Hawker 800XPs and Dassault Falcon 2000s. The program more than doubled its number of European clients last year to surpass the 200 mark.

Bite-sized NetJets

London-based Marquis Jet Partners Europe is now offering smaller 25 occupied-hour chunks of NetJets flight time. It is now the official remarketer of NetJets Europe, with a direct link on the fractional provider’s Web site.

Marquis customers pre-pay the 25 hours, and as they use the time it is debited from their “credit” card with no further charges (such as monthly management fees) being applied. By nominating a home base for same-day or next-day return trips, card holders are assigned a 16-percent time credit (meaning four additional hours for each 25 bought).

According to COO Rahul Bakrania, Marquis now has more than 100 European customers and has dropped its alternative all-hours option under which people could opt to pay lower hourly rates for occupied and positioning flights where this made economic sense. All prepaid hours have to be used within a 12-month period and aircraft availability is guaranteed with the standard NetJets Europe notice period of 10 hours.

UK-based European Skytime is also busily remarketing NetJets hours through its Flight Commitment program. It sells blocks of flight hours starting at 20 hours, at all-inclusive rates that equate to about 10 percent more than pro-rata NetJets Europe share purchase prices (but with no monthly management fees to pay). The hourly rates (which cover all aircraft positioning, handling, landing fees and in-flight catering) are as follows: Falcon 2000 (E11,000/$12,650); Hawker 800XP (E7,500/ $8,625); Citation VII (E6,900/$7,935); Citation Bravo (E4,600/$5,290); and Citation Excel (E6,600/$7,590).

European Skytime uses charter aircraft of equal or superior standards whenever this will provide greater value for its customers–largely in the case of day-return flights or those involving an overnight stop. In these instances it simply exchanges the equivalent period of NetJets time for the cost of the charter. According to managing director Steve Westlake, Flight Commitment sales have increased by around $2 million over the past 12 months.

In a bid to drum up fresh interest in block charter, the company also offers a program called First Step in which 25- and 50-hour packages are offered in piston twins from around 25 UK airports. All-inclusive occupied prices, which vary slightly according to the client’s home airport, start at £750 ($1,200) for a four-passenger Piper Seneca or £1,125 ($1,800) for an eight-seat Piper Chieftain. First Step clients can also jump straight into a Citation Bravo for £2,850 ($4,560) per occupied hour.

Flexjet Europe

Bombardier’s Flexjet Europe program abandoned conventional fractional ownership early last year, replacing it with the Jet Membership block-charter formula. Then in March, Bombardier introduced its Skyjet fixed-rate, ad hoc charter service to Europe–offering it alongside Jet Membership, with rates for both applying within a fixed-price area that encompasses all of western Europe, the southern halves of Norway and Sweden (up to 61 degrees north) and most of eastern Europe (with the exception of Bulgaria, Romania, Latvia, Lithuania and Estonia).

At the same time, Bombardier streamlined the Jet Membership formula, doing away with the Premiere, Same Day Business and Intercontinental clauses that had provided for different degrees of flexibility for guaranteed aircraft availability. All members are now assured access to aircraft as long as they request a flight by 4 p.m. Central European Time on the day before departure.

Both Jet Membership and Skyjet Europe now offer occupied-hour rates for one-way journeys, same-day return flights or trips conducted over several days on a by-the-day basis.

Jet Membership clients can also use the aircraft to fly to and from North America. Fixed rates for using Flexjet North America aircraft on an occupied-hour basis for flights within North America can also be arranged.

The Flexjet Europe fleet now numbers more than 50 aircraft, and the Challenger 800 (a corporate version of the Canadair Regional Jet formerly known as the Canadair SE, or Special Edition) and Global Express can also be made available on an ad hoc basis. All jets are operated by the following nine preferred Bombardier European operators: Aero-Dienst, Corporate Jets, DaimlerChrysler Aviation, Eurojet Italia, ExecuJet Scandinavia, ExecuJet Switzerland, Gold Air International, Jet Connection Businessflight and TAG Aviation.

According to Bombardier, Jet Membership now has more than 100 Europe-based customers.

Flying Partners

The Antwerp, Belgium-based Flying Group is offering fractional ownership of both new and used business aircraft through its Flying Partners program. It also provides leases, as well as both ad hoc and block charter from a 10-strong fleet that currently consists of a Dassault Falcon 900C, a Falcon 2000, three Cessna Citation Bravos, a CitationJet, a Bravo, an Ultra and an Excel.

In 2006 and 2007, the operator is due to take delivery of three new Citation Mustangs and a new CJ3. This will herald a move into offering only new aircraft for fractional ownership, and the company said it has already sold almost all the Mustang shares. Owners are required to nominate a base airport within 30 minutes flying time of Antwerp–a radius that actually includes many of Europe’s most populous areas, including major cities such as Brussels, London, Paris, Amsterdam and Frankfurt.

The smallest stake offered in the program is one-sixteenth, which guarantees the owner use of an aircraft on 19 separate days each year. This share in a 2002 Bravo, for example, is currently priced at $378,000.

Flying Partners fractional owners, who currently number almost 30, also pay their share of both annual indirect operating costs for the aircraft and direct operating costs on a per-flight-hour basis. For a one-sixteenth Bravo owner the monthly fixed costs (one-twelfth of the annual indirect operating costs) would amount to E470 ($540), compared with the NetJets Europe monthly management fee on the same aircraft of E4,981 ($5,728). DOCs per flight hour (positioning and occupied time) for the Bravo total E1,335 ($1,535), compared with the NetJets Europe occupied-hour rate of E2,196 ($2,525).

Dutch broker EasyCharter has signed up about half a dozen customers for its new EasyTime block-charter program for a variety of jets and turboprops. It is offering 50-hour packages that never expire, with aircraft availability guaranteed with at least 24 hour’s notice and flights provided by more than 100 operators around Europe.

For example, customers signing up for a Citation-based program will pay E2,725 ($3,135) per flight hour for the use of any of the following: CitationJet, Citation I, II, V, Ultra or Bravo. Packages are also available for the Beech King Airs at E2,244 ($2,580) per flight hour. All EasyTime deals also involve a monthly management fee of E500 ($575).

According to EasyCharter director Ron Vervoort, the company aim is to undercut the average cost of fractional ownership by around 25 percent. The company also offers charter on both ad hoc terms and through “standardized service agreements” using the online reservation system that it launched in March.

Through its ExecutivePlus program, UK operator Markoss Aviation offers 25-hour blocks of charter time in its two British Aerospace Hawker 125-700Bs, having abandoned earlier efforts to market blocks ranging in size from 100 to 400 hours. Sales and marketing director Lyn Tucker said that ExecutivePlus rates are “subject to negotiation” on a client-by-client basis and indicated that these have softened somewhat since last year due to difficult trading conditions.

Similarly, French charter operator Unijet also offers discounts for customers committing to blocks of time (such as a 25-percent reduction for 150 flight hours). At its Paris Le Bourget Airport base, the firm has just taken delivery of a new Citation CJ2. It is due to receive a second of the new Cessna models next March, followed by one of the larger CJ3s in early 2007. Unijet’s fleet also includes a Falcon 10 and 50 and next year is due to add another Falcon 50.

Turboprop Singles Find a Role

Europe’s charter operators are still waiting for approval of single-engine commercial operations in IMC, but two turboprop single types are already finding a niche in privately licensed fractional operations. Quite apart from their attractive operating economics, the singles also have the advantage of being able to operate in and out of some of Europe’s shorter and more restricted runways.

Luxembourg-based Jetfly Aviation now has seven EADS Socata TBM 700s in fractional service, having taken delivery of a C1 model in May to supplement its existing fleet of six TBM 700Bs. Three more of the seven-seat C1s are due to be delivered by the end of next year as part of a 10-ship deal signed in January 2001.

The company has now started to offer shares in Pilatus PC-12s as well and now has two of the big turboprop singles in service.

Jetfly offers both TBM 700 and PC-12 shares in eighths, quarters and halves. An eighth share in a TBM 700 costs E312,500 ($358,800) and provides 62 hours and 30 minutes of flying time per year. The same share in the larger PC-12 is priced at $412,000 (E358,260).

The all-inclusive occupied flight hour rate for the TBM 700 is E1,652 ($1,900). For the PC-12 the rate is E2,122 ($2,440).

The TBM program currently has just over 20 customers, with all but one having bought at least a quarter share. All are companies based in France, Belgium and Switzerland.

Finally, two Swiss operators– Avcon and Lions Air–are offering shared use of PC-12s. Switzerland is imminently expected to permit single-engine commercial IFR operations in anticipation of a Europe- wide approval that could still take until next year to confirm. The country’s aviation authority has approved the use of the Swiss-built PC-12 for limited block-charter arrangements, provided use of the aircraft is restricted to a small, defined “guest list” of passengers.

Avcon’s SharePlane program currently consists of two PC-12s and the Zurich-based operator manages several others on behalf of their owners. Participants pay a $250,000 entry fee, which confers the right to 125 flight hours per year which are charged at an all-inclusive rate of SwFr2,950 per hour ($2,170). This rate falls down to SwFr2,500 ($1,840) if clients commit to more hours. The program does charge for positioning flights, but at a reduced rate that only reflects direct operating costs plus a small profit margin.

The operator has abandoned an earlier SharePlane model under which members paid monthly management fees and operating charges instead of an all-inclusive hourly rate. The program currently has seven clients and most routinely fly out of provincial Swiss airports that have no airline service, such as St. Gallen/Altenrhein, Zug and Stans Buochs (where Pilatus’s headquarters and factory are located).

Lions Air’s TimeJet program uses Europe’s largest fleet of PC-12s, with nine of the aircraft now available. Customers subscribe to packages of 50, 100 or 150 flight hours per year, paying respective monthly management fees of SwFr5,000 ($3,700), SwFr9,000 ($6,670) and SwFr12,000 ($8,900). Holders of 50-hour blocks pay SwFr1,800 ($1,330) per flight hour, while the larger contracts are charged at SwFr1,500 ($1,100) per flight hour.