Europe’s Executive Charter Industry Consolidates
The recent takeover of France’s Unijet by Belgium’s Luxaviation is just one example of the ongoing consolidation in Europe’s executive charter operator industry. Meanwhile, in France, the Ségur group has gathered some well-known operators and is creating a partnership in Croatia. At the same time, AirClub, the global corporate jet alliance has begun reaping the benefits of joining forces from several companies all over the continent. Consolidation such as this is the way to go, according to EBAA CEO Fabio Gamba, who sees the industry as still too fragmented.
Luxembourg-based Luxaviation announced the acquisition of Paris Le Bourget-based Unijet in January. The company sees access to the continent’s first business aviation airport and fleet growth ranking first among the expected benefits. “We chose Unijet because it has good reputation, has gathered a lot of experience–notably through CEO Dannys Famin–and it is located at Le Bourget,” Luxaviation CEO Patrick Hansen told AIN. He added it is difficult to find good acquisition targets–operators that are financially sound and have a not-too-small fleet. Luxaviation now counts on increased revenues and other favorable outcomes, such as complementarity between the Belgian and French markets.
In fact, Luxaviation took over Unijet through Brussels-based Abelag (Stand 6017), which it bought in 2013. In addition it had taken over Germany’s Fairjets in 2011, and consequently, Hansen said, it now holds four air operator certificates (AOCs). “Each company is retaining its identity,” he said, which means that ancillary activities such as FBO services and maintenance shops will be retained. Hansen predicted no job cuts among the 350 employees, as “we need all these experienced people,” he said. Nevertheless, he hopes the consolidation will help negotiations with suppliers.
Luxaviation also bets on the flexibility of an expanded and diversified fleet. It is now comprised of approximately 60 aircraft–15 of which are owned by the group. One third are long-haul business jets. Unijet brought in half a dozen aircraft ranging from a Cessna Citation CJ3 to a Falcon 7X.
“We are going to quickly grow to 80 aircraft,” Hansen said. This will be via other company acquisitions, aircraft purchases and signing of more management contracts. “We are focusing on midsize and large-cabin jets; everything bigger than a Citation Excel,” he added.
Hansen described Luxaviation’s shareholding structure: it comprises himself, an investment fund, associates and employees. “As banks are reluctant to fund such acquisitions, we used our cash to buy Unijet,” he explained. He expressed confidence that the growth of business aviation in Europe will be “interesting, albeit not dazzling.”
In France, the Ségur private equity group has consolidated several established players in business aviation. Since 2009, it has taken over FBO Aero Services Handling (now Advanced Air Support), operators Aerovision and Darta and maintenance specialist BCA. Darta has been merged with Aerovision but two additional AOCs can be found in the group: the first is under the Star Services brand, at Le Bourget airport; the second one is Zagreb, Croatia-based Sky Vision.
Under a somewhat tangled structure, some–but not all–of these France-based firms are owned by a holding company called Jet Services. The Croatian offshoot was created because some French owners of business jets wanted Ségur to have their aircraft under management contracts but feared unstable regulation in France, according to Marie-Antoinette Dain, Ségur’s CEO. She also hinted that business jet owners are not well regarded in the country.
With all these companies under one umbrella, “we can offer our customers a full range of high-quality services in aircraft management, carrying passengers, jet and turboprop maintenance, continuing airworthiness management and FBOs,” Dain said. The result is some synergies such as coordination of maintenance schedules.
“When we took over these companies, they were ailing,” Dain said. Nevertheless, each member of the Ségur group has retained its identity. The group is in a “stabilization” phase but economic conditions make it difficult to thrive, the CEO explained. Indeed, AIN understands the total number of aircraft in the group has stagnated, as Dain mentioned “approximately 12.” They range from a Beechcraft King Air 200 to a Falcon 900EX. Asked about workforce, she said there are 50 employees at Aerovision, 50 at Advanced Air Support and 110 at BCA (spread over three sites–Lyon, Toulouse and Paris). The holding company employs another 10.
Could Ségur enter an alliance? “We are open to discussion on alliances and partnerships in Europe; this would make sense. But what we have been offered so far fits neither our culture nor our plans,” Dain said.
AirClub is the only executive charter operator alliance in Europe (and possibly in the world) and it will soon unveil a ninth member. AirClub was in its infancy until the beginning of this year but then, in January, its online booking system went live. Now, grouped negotiations with suppliers have begun, in the hope of securing bulk discounts.
The eight founding members–ACM Air Charter, Air Alsie (Stand 6342), Air Hamburg (Stand 5041), FlyingGroup (Stand 5839), GlobeAir, London Executive Aviation, Masterjet and PrivatAir (Stand 1725)–are already benefiting from commercial synergies. In other words, if a member cannot respond to a request favorably, the customer is directed to another member. This has proved effective thanks to significant combined firepower.
Since October 2012, AirClub member companies boast a fleet of more than 140 aircraft. Their bases are spread over Denmark, Germany, Belgium, Austria, the UK, France, Switzerland, Netherlands, Spain, Italy and even West Africa and Saudi Arabia. Types range from King Airs and Citation Mustangs to ACJs and BBJs. Virtually all sizes can be found in between–Embraer Phenoms, Cessna Citations, Dassault Falcons, Bombardier Challengers and Global family aircraft, and so on.
With such a fleet, joint procurement can translate into major savings. AirClub’s spokesman mentioned fuel, insurance and catering among other things. Talks with suppliers started in April.
The new online booking system is supposed to give users the same experience as airline ticket booking. Pricing and availability are clearly stated, the spokesman said, and payment can be done with a credit card. The system factors in the aircraft’s schedule, which is constantly updated. “The customer sees the particular aircraft he is hiring, with its registration,” he pointed out.
The first year or so of AirClub was spent structuring. “We received unsolicited applications but we wanted to put our house in order first,” the spokesman said. The alliance wants to add new members in a progressive way, without creating head-to-head competition inside the organization and with a consistent level of service.
“Each member operator keeps its culture but a customer should not perceive any difference in the level of service,” the spokesman explained. Separately, a candidate should have a minimum of four or five aircraft. The AOC should be in accordance with EASA or FAA Part 135 regulation, he added. Each application will be vetted by an AirClub team, and an independent audit.
Standards in service quality, technical proficiency and green practices are defined in AirClub’s charter. Each member company has a representative on the board of the alliance. Decisions are made by votes, either simple majority or two-thirds majority. “About three quarters of our votes result in unanimity,” the spokesman said.
EBAA’s Fabio Gamba is happy to see such consolidation. He believes a small size is a very negative factor for an operator in today’s environment. One of the critical points is the ability to cope with the ever-heavier burden of regulation. But Gamba emphasized that the industry is badly fragmented. He said that in 2009, there were 800 operators in Europe, 85 percent having three aircraft or fewer. And the situation has hardly changed, according to Luxaviation’s estimate for 2013.
To become resilient, some companies have realized they need to grow, considering it is better “to have some fat to survive” in weak traffic periods, Gamba said. The 2008 downturn hit hard those companies that were too small and not mature enough to be aware of it, he explained–hence the trend for consolidation.
Comparing the merits of a single company constituted by mergers and acquisitions and an alliance, Gamba noted that an alliance is more flexible but less integrated.
The near future, he predicted, is a gradual extinction of those that operate just a couple of aircraft. Meanwhile, the proportion of operators with 20 aircraft or more will increase, said Gamba.