NBAA Convention News

Flexjet leader sets sights on expanding charter operation

 - September 30, 2008, 7:39 AM

The new president of Bombardier’s fractional ownership and jet card programs has brought a unique perspective to the Canadian manufacturer’s Flexjet and Skyjet operations. Fred Reid, who took the helm on August 25, is the former CEO of Virgin America and has spent more than 25 years working within the commercial aviation sector. He served in various management positions at Pan American World Airways and American Airlines, and later as president of Delta Airlines and president and COO of Lufthansa. In the latter position, he was the first U.S. national to lead a major international airline.

Reid told NBAA Convention News that his career to date has given him an “intimate” knowledge of the various aspects of the air transportation industry. While he learned much about aviation safety, global operations and aviation management and “brand building,” he also realized the value of customer service–a mindset that is missing from many airlines, he said. “Unfortunately, and I don’t say this with any joy, all levels of customer service and convenience have disappeared from the U.S. airline landscape,” Reid said. “But I regard that as an opportunity for us.”

He added, however, that not all airlines are “dreadful” or guilty of diminishing service standards. “It’s a sad fact that many airlines in the U.S. aren’t very good, but I would also point to Emirates, Kingfisher, Singapore Airlines and Lufthansa as airlines that still do a very good job,” he said, adding that Virgin America has won three awards for its first-class service. “In fact, many of our [Flexjet and Skyjet] members fly in the [first-class] cabins of those airplanes on long-haul international flights. So there is some quality left to the airline business–just not much.”

In addition to customer service and hospitality, Reid also learned to build an aviation company from the ground up–as he did with Virgin America–and learned to function in a global economy. While working for Pan Am and American, Reid held various positions based in Europe, the Middle East and South Asia. He then joined Lufthansa, headquartered in Germany, and was later instrumental in forming the SkyTeam global alliance while at Delta Airlines. “I definitely have a global perspective, having lived more than 30 years outside the U.S. and having worked extensively in different markets,” he said. “I would also say that the current business I’m in is starting to show signs of going global.”

Reid admits that the fractional market–as opposed to charter–has been slow to attract business in Europe, but he said the international market is “showing real life after some starts and stops.” He pointed to Lisbon, Portugal-based Jet Republic, which last month placed a $1.5 billion order for 110 Learjet 60XRs, and NetJets Europe as examples of successful fractional models.

He also recognized Flexjet’s error in attempting to launch European services before the market was ready. “We freely acknowledge that we made a premature foray into Europe in 1999. We got out pretty quickly because it wasn’t working very well,” he said. The company dismantled the last of the program in early 2002. He added, however, that “geographic diversification” is one of the primary areas that he intends to develop as president.

“The fractional industry tends to follow where business jets are being sold,” Reid said. “The big news over the last couple years, of course, has been that three quarters of all private jets sold have been outside the U.S. There is an opportunity for expansion, and Flexjet is a stronger company than it used to be.” Although he does not have an exact time frame for the company’s expansion plans, he said Flexjet will “probably” focus on Europe to start and on other markets–such as Russia, the Middle East and Asia–at a later point.

Other areas he intends to develop include “fleet diversification” and “product diversification.” To accommodate the eventual expansion of Flexjet’s business, Reid said he hopes to one day offer long-haul options for Flexjet members, such as the Global Express or the Global 5000. “I would aspire to moving up the ladder into the big jet category and long-range category,” he said. For now, however, Reid intends to continue to build the company’s base of 107 Learjets and Challengers.

The company is particularly excited that it has been selected as the launch customer for the Learjet 85s, of which it has seven on order. A cabin mockup is on display here at NBAA’08. In addition, Flexjet is also celebrating 100,000 flight hours among its Challenger 300 fleet. “We’re very proud of that,” Reid said. “It is by far the most popular airplane in its class.”

In terms of its products, Reid said he hopes Flexjet will develop more hybrids and variations–similar to the company’s Flexjet One and Versatility Plus programs–to provide owners and customers with more flexible options. “In the past few years we have developed products that interact with one another,” he said. “The products used to have lines and boundaries around them, but they’re becoming more interactive. I think that’s another opportunity for us.”

The company does not have specific goal dates for the plans, however. “We’re going to spend the next three to eight months testing some hypotheses and making some pretty significant plans,” Reid said. “I don’t know whether those plans will be in all three areas [geographic, fleet or product diversification] or none of them. We have no time frame. First and foremost I am committed to keeping this company profitable and the standards very high.”

Reid said he is also focused on addressing more immediate issues and concerns, such as the current economic downturn. “Last year was a banner year for us, but as we progressed through 2008, we noticed a softening in demand,” he said. “Year-over-year orders are down, but there still is growth. Rather than facing a vacuum, we see a dampening of growth more than anything else.” He added that the next few weeks are going to be “crucial” and admits his uncertainty about the market.

He added, however, that he is confident that a significant percentage of the company’s 960 customers will not be affected by current events. “We have a very diverse customer base, but what we don’t have is a preponderance of bankers, rock stars and fashion models. Our clients are by and large focused on business productivity and the use of business jets as a tool of efficiency. Even in these are tough times, saving time really adds up and makes it worth it. The owners have really done the math. They don’t just send big checks; they send battalions of lawyers and accountants and financial advisors.”