Brazilian fractional-share operator and aircraft manager Avantto has seen its revenues grow 15 percent on average in each of the past two years, even though the country’s economy has remained slow throughout the period, according to the company’s CEO Rogério Andrade.
He told AIN that in each of the past two years the company’s EBITDA operating profit has grown even faster than Avantto’s strong revenue growth, as a result of the maturing company’s increasing focus on managing costs rather than purely concentrating on boosting revenues.
And the outlook for Avantto and other fractional-share operators in Brazil may be even brighter in the future, in Andrade’s view. “I believe when the economy starts to grow again, we are going to sense really strong growth in the business—[at a rate] a few times greater than in the private aviation sector” generally, he said.
Noting that, in the early years of its existence, eight-year-old Avantto’s revenues grew at an average annual rate even higher than the 15 percent it achieved in 2016 and 2017, Andrade attributed the company’s sales resilience in a soft national economy to two factors. One has been Brazil’s economic softness, which has persuaded many former outright owners—most of whom “by nature fly very few hours,” according to Andrade—to sell their aircraft through Avantto and its trading partner ACASS and to acquire fractional shares in the business jets and helicopters Avantto operates.
The second factor is what appears to be a long-term generational trend, according to Andrade. Avantto is finding that, because of the popularity of services such as Uber and Airbnb, younger adults in Brazil are influenced by the growth of the sharing economy not to regard ownership of private aircraft and other high-priced assets as an important symbol of personal success. Instead, wealthy young adults understand the benefits sharing-economy fractional ownership of business aircraft can offer them, and many are choosing that route.
Expanded service offering
For Avantto, the result over the past two years has been that, even though the net size of its core fractional-ownership fleet has remained stable at “a little over 60 aircraft,” the company has attracted new clients willing to trade ownership of their aircraft for total or partial management of their business aviation requirements. Avantto’s clients continue to be a mix of high-net-worth individuals and companies, the latter mainly using their fractional shares to fly their ‘C’-level executives on domestic and international business trips, according to Andrade.
What Brazil’s economic slowdown has meant for Avantto is that “we lost some aircraft [from the managed fleet] but we also brought in some,” said Andrade. “Net there is basically zero addition.” However, because many new clients have wanted Avantto to manage their aircraft for them, the company has expanded its service offering to become much more deeply involved in managing the maintenance of clients’ aircraft, training their pilots, and ensuring clients’ aircraft operations meet all required regulatory standards. This has expanded its revenue base.
“The client base is stable,” but has grown a little during Brazil’s economic downturn, said Andrade. “There has been a shift in the base in the sense that, right now, there are more customers for twin[-engine helicopter] and jet [fixed-wing aircraft] and less in single-engine helicopter.” There is approximately a 50-50 split in Avantto’s overall fleet, though it contains “a little more airplanes than helicopters.”
Avantto’s fleet and operations
As a result of the new clients who have come to the company, Avantto is also now managing turboprop Beechcraft King Airs and Pilatus PC-12s, according to Andrade. Having these aircraft available helps Avantto make its fractional-share offerings more flexible and attuned to clients’ specific needs each time they fly. While Avantto’s fixed-wing fractional-ownership program only includes jets, it has an exchange program that lets its customers fly in turboprops should they require, say, flights to short-runway grass airstrips at ranches in the countryside.
Avantto’s exchange program also allows clients to fly in mid-size and large business jets for longer trips, particularly intercontinental flights to Europe and North America, according to Andrade. Avantto has been helped in this regard by the fact that some of its newer clients have brought Falcon business jets to the firm to be managed.
The company’s core fractional-ownership fleet remains focused on four helicopter types and two business-jet types. Offering 5 percent minimum fractional shares in its helicopters, Avantto operates the Airbus Helicopters H125 and H130, the Robinson R44 and the Leonardo AW109. The company offers one-sixth minimum fractional shares in the business-jet types it operates, the Embraer Phenom 100 and Phenom 300.
Avantto doesn’t usually offer its clients options to finance the purchases of their fractional shares, but earlier in its history it did so in a few specific cases. At one point, Brazil’s national development bank BNDES offered “really attractive” financing for Embraer Phenom 100 and Phenom 300 business jets and in buying examples of those two types Avantto offered its clients those financing terms for their shares. Today, however, “We purchase the aircraft and our shareholders purchase shares from us. But we are taking the [financial] risk ourselves. Sometimes we finance our aircraft. It’s not the only reason, but it’s one of the reasons we don’t have larger aircraft in the fleet”—such aircraft would be highly expensive to purchase and finance.
According to Andrade, the Phenom 100 can operate to most destinations in Brazil non-stop, while the Phenom 300 can operate non-stop to anywhere in South America and on a one-stop basis to the Caribbean, a region to which some of Avantto’s clients want to fly. Avantto boasts that it is the only business aviation operator in Latin America that has achieved IS-BAO Phase 2 certification, so it operates all its flights under IFR rules and with two pilots, except for its single-engine helicopter operations.
Cultural changes offer new opportunities
In Andrade’s view, major cultural changes taking place in Brazil as a result of the growth of the sharing economy, combined with economic growth in the nation’s agricultural sector in western and northeast states, offer massive opportunities for the fractional-ownership business to blossom when Brazil emerges from its downturn.
“Fractional is just beginning in the country,” he said. While Avantto—Brazil’s fractional-share aviation pioneer and largest operator—has just over 60 aircraft, the company estimates “there could be 3,500 managed or fractional aircraft in Brazil because of the change of habits.”
Considering that Brazil has more than 5,000 large communities and mainline carriers and regional/air taxi operators serve only about 300 of them, and road infrastructure throughout much of the country remains almost non-existent, the nation’s economic growth needs business aviation to thrive, according to Andrade. A startling statistic that supports this thought is that, today, eight major airports in Brazil—two in São Paulo, two in Rio de Janeiro, and one each in Brasilia, Curitiba, Porto Alegre and Salvador—account for 60 percent of all commercial air travel in the nation, he said.
For now, most of Avantto’s business remains concentrated in the traditionally wealthy southeastern part of Brazil, the company basing all its aircraft in the three highly populated states of São Paulo, Rio de Janeiro and Santa Catarina. The company has fixed-wing aircraft based at various airports throughout the São Paulo metropolitan area (though most of its business jets are based at Congonhas Airport), but it concentrated its helicopter operations in São Paulo at HBR Aviação’s specialized helicopter base about two years ago.
However, some of the new customers Avantto has won in the past two years are involved in Brazil’s fast-growing agriculture industry and they are “flying to central states where the agricultural development is happening,” said Andrade. The company has no aircraft based in those areas yet because “they are too green-field, but there are lots of opportunities” for future growth there for Avantto and for business aviation generally, he added.