Trading conditions for business aviation remain “bleak,” according to ExecuJet Aviation CEO Niall Olver, but in his view the downturn has provided the stimulus for a much-needed “reset” for the industry and its “unsustainable” business models. “The market became overheated and now we are trying to weather the downturn by resetting our cost base at ExecuJet to ensure that cash flow remains positive,” he told NBAA Convention News.
One business model in particular that Olver feels has become unsustainable is exclusive sales representation by companies such as his for business aircraft manufacturers. He believes that the more fluid and independent way in which many customers now choose and purchase aircraft has made this arrangement as outdated and redundant as many traditional travel agents and insurance agents have become in recent years.
It was this thinking that prompted ExecuJet to agree with Bombardier Aerospace to transition the long-standing agreement under which it had been exclusive sales agent for new Bombardier business aircraft in numerous territories across the Middle East, Africa, Australasia and Scandinavia, into a nonexclusive arrangement. According to Bombardier, the two companies terminated the exclusivity arrangement effective June 30, 2009, by mutual agreement, “in order to allow for more flexibility given the evolution of the respective businesses and the market.”
“The market is maturing a lot, and one of the big differences is that the notion of customers working exclusively through agents and representatives [to buy aircraft] is going [away],” explained Olver. “We see no point in perpetuating this concept and thus we now want to leverage our strong position as a solutions integrator in the aircraft sales and support process, and in so doing be more customer-centric.”
For the time being, contractual terms mean that ExecuJet cannot sell new aircraft for other manufacturers but the group also remains at liberty to sell Bombardier products and is active in all avenues of the used aircraft market. Olver emphasized that ExecuJet remains a strong supporter of Bombardier and will continue to operate authorized service centers for the OEM worldwide.
“We are looking at a slow recovery and the industry will not be going back to the hype we have seen in recent years,” commented Olver. In his view, the executive charter market remains soft in Europe, but on the other hand, ExecuJet has seen a boost in its aircraft management business– possibly because some smaller operators have gone out of business.
Olver added that aircraft sales “fell off the map” beginning around November 2008, although the company did see an increase in transactions completed during July and August with deals generally taking longer to complete. ExecuJet’s aircraft maintenance operations have started to pick up in some areas, and while its FBO business has certainly seen lower levels of traffic, the drop in throughput does seem to have stopped. “When industry does come back it will be more about efficiency and modesty,” Olver concluded.
Despite the global scope of the financial crisis, its impact on business aviation has not been geographically uniform, with ExecuJet seeing less of a downturn in South Africa, Australia and the Middle East but significantly worse trading conditions in Europe.
ExecuJet, along with its partner Lufthansa Technik, is continuing to demonstrate its close relationship and strong ties with Bombardier, but it is also supporting Aerion in marketing efforts outside the U.S. for its proposed supersonic business jet.