UK Charter Firm Hangar8 Grows, as Charter Market Contracts

 - October 1, 2013, 7:47 AM
Hangar8 has built a fleet of more than 50 aircraft and is expanding its geographical footprint by pursuing opportunities in emerging markets. Founder and CEO Dustin Dryden believes that industry rationalization has been a force for good in improving the business aviation sector.

Over the half dozen years since the unwelcome intervention of the 2008/09 financial crisis, the aircraft management and charter market has not been a business for the faint-hearted. Tough trading conditions have served up challenges and opportunities in equal measure, laying the groundwork for the classic “survival of the fittest” story line in which the stronger players are able to turn their struggling competitors’ misfortune to their advantage.

One such prospering opportunist is UK-based Hangar8, which has quietly grown into one of the top-tier operators, while garnering a lot less attention than higher-profile rivals such as Jet Aviation, ExecuJet Aviation, TAG and Gama. The publicly listed company boasts a fleet of more than 50 aircraft and has an operating network that extends into Africa (including Nigeria, Congo and South Africa), India (Mumbai and Lucknow), the Commonwealth of Independent States (Krasnodar in Russia and Almaty in Kazakhstan), as well as half a dozen British airports, Malta, Switzerland, Poland, Slovenia, Austria and France.

Most aircraft management and charter firms are privately owned and give away few details on their financial performance. Hangar8 is listed on the London Stock Exchange’s AIM index and its last published interim results for the six-month period ending Dec. 31, 2012, showed revenues up by 19.4 percent at £11.1 million ($17.4 million) and profits before taxes up 39.9 percent at £649,000 ($1 million). In a July 16 trading statement ahead of year-end results anticipated in October, the company indicated that more good news on revenues and pre-tax profits can be expected based on “significant organic and acquisitive growth.”

A significant factor in this growth has been the November 2012 acquisition of the International Jet Club, another UK management firm based at the London-area Farnborough Airport. Hangar8 paid just over £5 million ($7.8 million) for IJC and, in the process, increased the large-cabin-jet segment of its fleet. The takeover was partly funded by selling new shares in the company.

Hangar 8 founder and CEO Dustin Dryden told AIN that the addition of IJC, which has continued to trade under its own name, has expanded its new parent company’s customer base in the higher echelons of the private flight market. “The strategy is to be a group with a variety of boutique companies in the marketplace,” he explained. “IJC is a high-end business, and we also have an aeromedical division and an oil and gas division. By having a boutique operation we can take smaller aircraft than our competitors and provide everything from the gold-plated, platinum service like IJC to a more cut-price service.”

Pricing isn’t the only differentiator within Hangar8’s service portfolio. For example, its clients in the oil and gas sector tend to have specific auditing requirements.

Increasingly, Hangar8’s clients need flights in and out of emerging economies where the infrastructure needed to support operations can be almost non-existent. This has engendered a high degree of resourcefulness and self-sufficiency. For example, it recently had to set up a maintenance organization in Congo within a week.

The rapid growth of the Hangar8 fleet is not something the company has sought much public attention for, partly due to its management clients’ general preference to remain low profile. At the same time, Dryden indicated that the company is always transparent with its customers, making clear to them the improved purchasing power that it has achieved through the increased scale of its operations and sharing these savings with them.

For some time Hawker Beechcraft jets dominated the Hangar8 fleet, but more than half of its aircraft are now from Bombardier’s Global Express and Challenger lines. “It’s a shame that the Hawkers are no longer available to buy new,” commented Dryden, who started his career as a pilot. “But they have several more years of service left in them because no direct competitors have yet arrived in terms of range and value-point.” He added that the operator has had no trouble getting adequate product support for the Hawkers since the U.S. manufacturer shed its jet portfolio as part of the process through which it has emerged from bankruptcy protection.

Gaining a Foothold in Emerging Markets

Hangar8’s expansion into key emerging markets has borne early fruit, but the key starting point is always finding an initial aircraft management client to justify the trouble and expense of establishing a new operating base. In many cases, the initial impetus has come from companies in the oil and gas sector needing assured lift in support of exploration and production activity.

India has been one of the company’s more recent initiatives. “It’s an interesting marketplace that is not yet developed from a commercial [air transport] perspective,” said Dryden. “It is quite easy to manage aircraft there and so owners are coming around to this approach.”

Now Hangar8 is looking to expand further eastwards into Asia and is eying prospects for establishing a base somewhere like Singapore. Acquiring an established operator in the region might prove to be the preferred approach here, according to Dryden.

“Brazil is a brilliant opportunity and we want a bigger customer base there, but issues such as the language barrier do present problems for foreign operators and few have successfully moved into that market,” said Dryden. “The aircraft management model hasn’t kicked in there yet, but we’d love to be part of it.”

As a public company, Hangar8 has an obligation to return a profit for its investors but Dryden argued that this does not get in the way of its ability to take a long-term view of developing new business. “There is plenty of opportunity these days and anybody who says that this business is in a downturn is wrong,” declared Dryden. “Our customers are largely global wealthy individuals, and if they thought the economy was tough they wouldn’t be flying around in aircraft like this. We’ve ended up trading with people who are doing very well.”

In his view, the business aviation sector is “cleaning up its act,” meaning that there has been significant rationalization resulting in the dominance of a smaller number of leading players. “The bigger [management] companies are doing better and better, and certainly our competitors are doing well; I don’t see any of them struggling,” he said. “There is still a huge client base to be served and new clients coming into the business all the time.”The management team at Hangar8 is roughly a 50:50 split between aviation people and those with a more rounded business background. Dryden sees this as a big benefit because it results in a more balanced approach with a greater emphasis on sound business processes than might otherwise come from leaders who see things only through an aviation prism. For example, one of his colleagues has experience in the automobile sector, where it is common to have to deal with numerous suppliers, and this has led to greater efficiencies in dealing with challenges such as having to operate to almost 500 different airports each year.

According to Dryden, some in aviation are inclined to think the sector has life especially hard in terms of regulatory burdens. “The fact is that loads of other industries have strict regulations and our staff simply need to deal with the rules we face or we’ll never get it right,” he told AIN.