For Brazilian Fractional Operator, Avantto Means Go

 - October 1, 2012, 4:30 AM
Air travel is gaining ground in Brazil, as the growing middle class embraces private car travel, exacerbating highway congestion in the major cities. Avantto expects wealthy individuals will increasingly look to air travel–such as the 24 jets and 23 helicopters in its fleet–as a way of saving time and maximizing productivity.

Riding a Brazilian economy that continues to grow, fractional ownership and aircraft management company Avantto is finding a ready market and looks forward to more of the same.

In less than two years, with the backing of Brazilian asset management and private equity firm Rio Bravo, Avantto has signed more than 350 customers and assembled a fleet of 24 jets and 23 helicopters.

According to founder and president Rogèrio Andrade, Avantto’s fractional business model fits the needs of the country’s expanding economy and growing dependence on aviation.

Andrade is not without experience in aviation. Before founding Avantto, he spent seven years as CEO of HeliSolutions, an aviation provider that bills itself as “the first shared ownership program in Brazil.”

Today, he said, “The improving economy has everything to do with our success.” He went on to explain that the current fleet of aircraft in Brazil stands at about 3,230 turboprops, jets and helicopters, and the number is growing.

Ironically, a major factor propelling that growth is the expanding middle class, which is moving from the public bus transportation system into private automobiles, adding to an already intolerable traffic snarl in major cities such as São Paulo and Rio de Janeiro, said Andrade. “People are looking for answers to those hours sitting bumper-to-bumper and cursing the traffic, and one of those answers is the helicopter. About 600 of them are in service in São Paulo and about 300 in Rio de Janeiro.”

The distance from São Paulo to Rio de Janeiro is barely 220 miles, but the winding trip can take as long as five hours by automobile, six by bus. The smallest helicopter in Avantto’s fractional fleet is the Robinson R44, with a range of 385 miles, and it can cover that distance easily in well under two hours.

He also cites the slow redistribution of wealth that Brazil’s economy is encouraging. Writing from São Paulo for The Financial Times, authors Joe Leahy and Samantha Pearson made the same point in May 2012, noting that Brazil produced 22 new millionaires a day in 2010. No small number of these, said Andrade, are finding private air travel attractive, either by helicopter or airplane.

Furthermore, faced with the influx of hundreds of thousands of fans flying to São Paulo and Rio de Janeiro for the FIFA World Cup in 2014 and the Summer Olympics in 2016, the government appears prepared to approve the creation of at least several new privately owned and operated airports.

At the Latin American Business Aviation Convention & Exhibition (LABACE) in August, Minister of Civil Aviation Wagner Bittencourt offered his audience at the opening general session some reassurance, saying that a decree to permit the private construction and commercial operation of privately owned and -operated business and general aviation airports is “in the final stages of consideration.”

All this is good news to Avantto and its 80 employees at the São Paulo main office and base for most of the aircraft fleet.

Ownership Structure

Andrade said one of the first hurdles to designing the business model for Avantto’s fractional program are the ownership laws in Brazil. “Someone must be responsible for the aircraft, so our model calls for the aircraft to belong to the cooperative, which is the legal owner of each aircraft. This absolves the shareholders of owner liability.”

Describing the pricing structure, Andrade said Avantto offers only one-third shares in the fixed-wing program. As an example, the one-time buy-in cost in a Phenom 100 is $1.38 million, entitling the shareholder to 20 flight hours a month at $1,585 an hour. A monthly fixed cost of $22,200 covers crew, insurance, hangar lease, management and maintenance.

Helicopters in the fractional program are available in one-tenth shares (single engine) and one-fifth shares (twin engines).

“We charge for the time the aircraft is flying on behalf of the share owners, regardless of whether the customer is actually in the aircraft; this is a major difference between ours and other fractional programs.”

With the exception of crew costs, there is no wait charge for helicopters and jets.

With the Phenom 100, Avantto guarantees a 48-hour overnight at no additional cost, “which is about right for a lengthy business meeting or a weekend vacation.”

At this point, the fractional fleet consists of seven Phenom 100s and 12 helicopters, and approximately half of the fractional clients have shares in both a jet and a helicopter. Avantto’s Phenom 100 fleet makes it the largest single-operator fleet in Latin America and the company is awaiting delivery of a larger Phenom 300. In addition to the Robinson R44, the fractional helicopter fleet includes the Eurocopter EC120 and AS350B3 and AgustaWestland A109E Power.

Andrade pointed out that businessmen in Brazil are traveling farther to do business, and with only about 100 of 5,000 cities in the country served by the airlines, demand is already growing for more airplanes and larger airplanes with greater range. With that in mind, Andrade is considering adding Embraer’s Legacy 650 to the fleet, and the Legacy 500 and Legacy 450 when they are certified, scheduled for late 2013 and late 2014, respectively.

As for crews, Avantto requires a minimum of 1,000 flight hours in the aircraft type and applicants for captain should have a flight instructor rating. Those not already rated for an aircraft in the Avantto fleet are hired initially at entry level and then receive in-house aircraft type training. Part of the initial training includes work in a simulator and training for emergency procedures. All pilots also go through a monthly in-house training syllabus.

For helicopters and fixed-wing aircraft, whether fractional or managed airplanes, service is through a manufacturer service center or through a manufacturer’s authorized service center.

Approximately 70 percent of the company’s revenue is from the fractional operation compared with 30 percent from aircraft management.

At this point, most of the clients are located either in Rio de Janeiro or São Paulo, but Avantto is betting that in coming years private air travel in the north/northeast region of Brazil will grow quickly.

News from LABACE suggests that, in this respect, Avantto is playing with house money. Tam Aviação Executiva, one of the country’s largest aviation services providers, announced a new maintenance center to be built at Aracati in the northeast not far from the major resort city of Fortaleza. And the airport at which the center will be located opened on August 8 this year, with a promise of eventual international status.

Charter/broker Global Aviation is building a base at Deputado Luis Eduardo Magalhães International Airport in Salvador, a major international entry point on Brazil’s northeast coast.

Only about 200 of the more than 1,500 business aircraft in Brazil are under an aircraft management contract, a fact that Andrade views as encouraging. “It makes sense that this part of our business will grow faster than the fractional program,” he said.

While Andrade is looking forward to growth propelled by the expanding Brazilian economy, which he said represents about 60 percent of the Latin American economy, he also sees a “natural progression” to markets outside Brazil. He said his company recently hosted a group from the Philippines, and discussions included the possibility of a partnership to launch an air transportation service in that country similar to Avantto. “The basic terms have been agreed to and we are now creating a business plan and discussing the legal structure.” He added that operations might begin as early as next year’s second quarter.

Meanwhile, most of Avantto’s focus continues to be on the Brazilian market, where Andrade reaffirmed, “As long as the economy grows, business aviation is going to grow.”