Sao Paulo helicopter frax capital of the world

 - August 4, 2008, 8:19 AM

The only really successful helicopter fractional operator is not in the U.S. as one would expect, but rather in South America–or, to be more precise, in one city in Brazil. That city is São Paulo, the financial capital of the wealthiest state of Brazil. With nearly 20 million people, São Paulo is the most populous metropolitan area in South America and, according to some census compilations, the fourth largest in the world. Its concentration of people and the consequential urban problems of heavy traffic, crime and wealth distribution make it perfect for helicopter operations. Not surprisingly, São Paulo hosts about half of Brazil’s nearly 900 helicopters and has more elevated helipads–estimated at more than 200–than any other city in the world.

Formed in December 1999 after three years of study, HeliSolutions operates a mixed fleet of Robinson R22s and R44s, single-turbine Eurocopter EC 120s and AS 350B3s and twin-turbine Bell 430s. The company does not release precise numbers of aircraft or shareowners, citing shareowners’ desire for anonymity and security. Said HeliSolutions founding president Allan James Paiotti, “I will say we are number one in the world in number of helicopter fractional shareowners, and that we have more than a dozen helicopters.” The fleet averages about 500 flight hours per month. Last month Paiotti left his executive position as president to become a partner at Phoenix Strategic Financial Advisors, the largest individual equity owner of HeliSolutions. He continues to oversee HeliSolutions at the board level, and is involved in other investment activities.

Most of HeliSolutions’ flights during the week are short, averaging only 11 minutes, for the most part shareowners commuting to and from work. Weekend flights, said Paiotti, average closer to 30 minutes, because many of the flights are to the coast, where owners have vacation homes. Owners average less than seven hours of flying a month, even though they are guaranteed 15 hours. One-tenth shares in a four-seat R44 sell for $48,000 (based on a purchase price of $480,000), which is half the cost of a new Jeep Cherokee in Brazil because of the 100-percent import tax on automobiles. The monthly management fee on the same helicopter is about $5,850 and the hourly rate is about $140.

“Business aviation in South America has a long history of being considered a ‘toy for the rich,’” Paiotti said, “and fractional is the key to change this reality. This is a burden for pioneers in any market or segment, and we have taken that responsibility. It takes time, especially when you have an unstable market, as in Brazil, that is highly influenced by local and international events. Our new government has been extremely conservative in its monetary policy and this behavior has brought our economy to a halt. Sales of whole aircraft–helicopters and jets–have literally dropped close to zero over the last few months, but we are still able to deliver sales.”

Despite continued sales of fractional helicopter shares, the company’s plans to introduce a fractional jet operation, called JetSolutions, have been delayed. Said Paiotti, “Considering the big picture, we have decided to keep our focus on HeliSolutions. For JetSolutions, we are taking a longer path of having committed customers in the program before bringing in new aircraft. We are good at developing special finance deals for the ‘early comers,’ so we predict good news out in the market in the near future.” The company’s operating partners in JetSolutions include TAM (the distributor for Cessna in Brazil), Embraer and Swift Aviation Group in the U.S., the launch customer for Embraer’s Legacy.