EBACE Convention News

Avinode Sees Strong Charter Market in Europe

 - May 23, 2018, 2:00 AM

Charter information specialist Avinode (Booth D69) says it has “continued to see an ongoing improvement in the European market” having finally turned the corner last year, and that it’s “absolutely business as usual” despite uncertainties such as Brexit.

Oliver King, Avinode managing director, told AIN, “A year ago it felt like we had come through an uncertain period. But there is no mistaking now that we’re in a great period for growth in Europe, which we’ve not seen for a number of years. The core markets continue to grow. Even Sweden saw 8 percent growth last year, although it’s a small market and not material on the wider European stage.”

King said among those using Avinode there had been growth of 13 percent year-on-year from 2016 to 2017. “There’s not many times we’ve talked about double-digit growth. It’s been a great year.” He added that previous years had seen a drop in activity in Spain and Italy, but now “We’ve seen it come back, especially at the lighter [aircraft] end."

The size of chartered aircraft has remained “very stable” after the shift toward lighter aircraft a few years ago (from midsize), while the heavy end “remained almost untouched,” he said, adding that the light end is “the most price-elastic and also it’s the end that’s attracting the new customers."

Looking globally there is a trend toward charter being more popular under the shared economy, he suggested. “We’ve had a look at the data to see if we can spot any trends with the data, for example with millennials all trends are pointing upwards so we’re seeing people with disposable wealth participating more in charter. Online brokerages are raising awareness, too. People can quickly discover what a private jet costs.”

King believes the upward trend in charter activity is here to stay. “I think it can only continue, especially once you’ve pulled the genie out [of the bottle] on transparency.” Meanwhile, platforms such as FlyVictor and Surf Air are raising awareness through heavy promotion of their offerings.

“I think awareness is out there now” in Europe, he said, noting that “the U.S. has been on a growth trajectory for four solid years now.”

King said pricing is indicative of trends in the market. “Activity and demand are up, but prices generally haven’t followed,” he noted. “So this shows increasing competition too.” Avinode looked at three key trunk routes for business aviation, such as Teterboro-West Palm Beach and Luton-Nice. “These are bellwether routes but we’ve seen prices extremely stable.”

Big Picture

Everything in the business aviation space is interlinked, King explained, so the company keeps a close eye on developments in areas such as used aircraft inventory versus sales of new aircraft. “Charter is our specialty but it doesn’t take place in isolation.” Recently, he observed, “the used aircraft market has caught up,” so the OEMs can start to have more confidence they can sell new aircraft. However, he recalled that many owners had been burned on plunging values 10 years ago, which may drive some to membership schemes or to stick with charter. From the sell side, he said once people are members of a scheme “it’s easier to offer brokerage services alongside too” as you have a captive audience, “and it’s a wealthy group.”

King said another aspect is the way aircraft are managed and chartered out by third parties for the aircraft owners, which is still a popular business model. “We’ve still got a fundamental problem in the industry as it’s structured so that aircraft are partly used for personal use and chartered the rest of the time. This is still a challenge for the larger players competing with owner-managed fleets. It’s an ongoing challenge.” Furthermore, he said, “rates are now more transparent for management of aircraft so there has been pressure on what those fees can be.”

On the charter broker side of the business, King said, “the demise of the broker has often been predicted, but as a whole, the business has been strong and we have seen an increase in the number of brokers, at least on the Avinode system.” Its Trip Manager software has proved popular, he said, with one in three brokers on Avinode now using the platform. “We’ve seen that expand, particularly in the U.S.” Many small brokerages are now using Trip Manager instead of word processing and spreadsheet software. “It was an opportunity we saw, as they all had a very similar need,” he said.

Avinode takes a neutral stand on whether there is a need for regulation of brokers, though it welcomes initiatives such as that between BACA and Argus International to provide an accreditation scheme and better guide customers on service quality. Reputation is important in such a small industry, King said, and this is something that keeps most brokers providing the best service they can.

Overall King professed to be “very positive as to where we stand at the moment. It’s a really strong industry.” With the European charter market being just one-third the size of the U.S. market, he believes there is great growth potential, especially with Europe’s strong geographic position between the U.S. and the Middle East and Asia, along with Africa.

Avinode itself is growing, having doubled the size of its main office in Gothenburg and grown 40 percent in personnel during the past two years. The company has invested in areas such as data mining and added more IT expertise at its office in Portland, Oregon, which also leads the development of its SchedAero product. King said the nine-hour time difference between Portland and Gothenburg works well for serving its global customer base.

Last year Avinode saw 550,000 broker requests pass through its system, and it is up 25 percent already this year on the comparable period last year. “This reflects growth in the U.S and the ongoing strength of Europe,” said King. He noted Avinode can’t say the percentage of charters that come through its system “as there is no IATA-type [data gathering] system” as there is for airlines.

Finally, King told AIN that Avinode is just about to add a chat feature for operators and brokers, “to allow them to operate more efficiently in servicing the passenger,” while here at EBACE it expects to announce the next stage in the development of its PayNode online payment system.