The economic downturn brought a much needed reality check to parts of the business aviation industry that were becoming seriously unsustainable, according to ExecuJet Aviation CEO Niall Olver. In a characteristically candid interview with AIN ahead of this week’s EBACE event, Olver argued that the silver lining behind the slowly clearing clouds of recession has been that the financial crisis “cleared out the lunatic fringe” that had been pursuing “business models with no basis in reality.”
Last year saw ExecuJet making adjustments to the scale of its aircraft charter, management, sales and handling activities to weather the downturn. Olver sees a gradual recovery continuing this year but he still feels that the market remains “corrupted” by unhealthy competition and the fact that a lasting recovery in demand is still being seriously impeded by a lack of financial liquidity. “The mooted recovery in financial markets has not brought aviation back as readily as expected but we do see the market growing slowly and steadily,” he said.
Referring in particular to the explosive growth plans outlined by new market entrants seeking to harness the new generation very light jets, Olver said they had been grossly unrealistic and harmful to the industry’s reputation. “Too many people got caught up in the view that you can darken the skies with VLJs, but, while we all want business aviation to become more commoditized and for there to be ease of access to it, this just breeds false expectations and can drive investment away from the industry,” he maintained. “This is still a boutique industry and that constrains the growth in demand.”
By contrast, ExecuJet maintains its 150-strong fleet of managed aircraft has held up well during the downturn. “We had feared a bigger fallout [in terms of aircraft being withdrawn from operation by cash- strapped owners] but in some cases insolvencies among other management companies have led to us picking up more aircraft,” Olver explained. He added that charter flight-hour rates are firming up and aircraft utilization is picking up too, with younger, larger aircraft generally being in greater demand and equipment more than 10 years old being very much out of favor.
But a sustained recovery in aircraft sales is still being constrained by the continuing lack of liquidity in the finance market. Olver indicated that this market is a long way from the full recovery he believes will be needed before financing for aircraft purchases is readily available. Nonetheless, ExecuJet, which now handles aircraft sales for a wide range of types, is conducting a growing number of transactions and has seen signs that the large backlog of unsold pre-owned aircraft is beginning to clear.
Just before to the financial crisis, ExecuJet launched a concept called SimplyFly, which offers a range of options for business aircraft use including some innovative lease terms. Essentially, the offering remains on hold until market conditions improve. “The principle is still very sound, but the issue is pricing it competitively, and for this we need to have greater certainty on costs and risk,” explained Olver. “We are focusing on raising funds to do non-recourse funding and then we want to be more visible, hopefully some time during the second quarter of this year.”
Olver sees the growing impetus from emerging markets–such as Brazil, Russia, India and China–to tap business aviation as a trend that will lessen the industry’s dependence on Western stock markets as the key drivers of its fortunes. He indicated that after a year or more of slowed growth plans and restructuring, ExecuJet hopes to announce new initiatives in terms of products and geographical presence by the end of June.
ExecuJet (Booth No. 242) offers a comprehensive array of business aviation services including aircraft management, charter, sales and maintenance, as well as ground handling. The group’s headquarters is in Zurich, Switzerland, but
it also has operations in Germany, Denmark, Russia, Dubai, China, Malaysia, Mexico, Singapore, South Africa and Australia.