LABACE Convention News

Avantto Benefiting From Improving Bizav Market

 - August 12, 2019, 11:00 AM
By far Brazil’s largest fractional-ownership operator, Avantto uses a sophisticated operations control center to schedule and monitor its fleet of more than 60 owned or managed business jets, turboprops, and helicopters.

Despite there having only been what CEO Rogério Andrade describes as a slow improvement in business confidence in Brazil over the past 18 months, Avantto has seen its revenues and EBITDA operating profit grow strongly throughout the period.

Even more encouragingly for Avantto, Andrade told AIN that this year the company’s financial performance is shaping up to be even better than it was in 2016, 2017, and 2018—all of which proved to be very good years for the fractional-ownership and aircraft-management company.

Avantto saw its revenues jump by an average of 15 percent annually in 2016 and 2017, and its EBITDA in each year outperformed even the strong revenue bump. The company’s 2018 revenues grew “at plan” by 16 percent, EBITDA performing in line with sales growth, Andrade said.

However, Avantto’s revenue and operating-profit performance in the first half of this year outdid even the previous three years’ strong results. The company had budgeted for 15 percent revenue growth in 2019 but in the first six months saw revenues climb “a little above what we planned”—and the company thinks its 2019 second-half performance will be even better. Andrade reckons revenues will grow 20 percent for the second half, and its EBITDA about 30 percent, on a year-over-year comparative basis.

As many Brazilian bizav-industry insiders forecast last year, growth in the sector basically remained flat as business confidence and investment wavered in advance of the Brazilian presidential election. Many wealthy foreigners living in Brazil—some of them aircraft or helicopter owners—migrated to Florida or Portugal, uncertain of Brazil’s economic and political future, according to Andrade.

However, in 2018 the migration process “almost stopped”—only those who had previously fully committed to leaving the country doing so—and the business climate gradually began improving, said Andrade. “This year, we have felt confidence ripen again.” Once Jair Bolsonaro was sworn in as Brazil’s new president in January, “everybody renewed their expectations of a brighter future and started spending more money immediately after” Bolsonaro took office.

While the improvement in business confidence and investment “is not happening smoothly,” with several “ups and downs” from month to month in the spring, Andrade thinks Brazil’s bizav sector “has been better this year—charter companies are doing better and flying hours have increased a little.” Meanwhile, Brazil continues to move slowly, “step by step, to a better economy.”

Fleet Investment

Last year’s strong financial performance and the even better prospects Avantto is facing in 2019 as Brazil’s dominant fractional-ownership operator has allowed the company to continue investing in its core fleet of aircraft and helicopters. At the end of 2018, Avantto inducted another Embraer Phenom 300, and it added a further Phenom 300 in the first half of this year. Avantto plans to add yet another Phenom 300 and an additional Leonardo AW109 in the second half, according to Andrade.

In 2018 Avantto sold an AW109 and a Pilatus PC-12 it was managing for the owners, as the company continued to see owners of managed aircraft decide to switch to its fractional-ownership programs instead. This trend is continuing, and Avantto is now in the process of selling an Embraer Phenom 100 and an Airbus H120, Andrade said.

Avantto began seeing a wave of new customers in 2013, most of whom were aircraft owners who wanted the company to manage their aircraft. Over the past six years, many of those customers decided to sell their aircraft and become fractional owners in Avantto programs instead—as Avantto had forecast would happen, according to Andrade. However, in the first half of this year, the company started seeing some new bizav users entering the market, those people being willing to buy and fly business jets and helicopters.

Along with that new wave of owners, Avantto is also seeing bizav owners become increasingly willing to invest in twin-engine helicopters such as the AW109 and larger light business jets such as the Phenom 300. While those aircraft cost more to acquire than single-engine helicopters and small light jets such as the Phenom 100, their operating costs “are not materially higher” than those for the smaller aircraft, Andrade said—hence owners’ liking for them. Most buyers of Phenom 300s and AW109s in Brazil are moving from owning larger aircraft with even higher acquisition and fixed costs, he added. “They are saving money but are moving to the top” of the smaller aircraft types available.

Because of that trend, “We are seeing a brighter future for the Phenom 300 and the Agusta” AW109, said Andrade. Since twin-engine helicopters are now popular in Brazil, “we are willing to decrease the number of helicopter types in our fleet—we’re not planning on bringing in any more Robinsons [R44s] and we are thinking of unifying our Airbus [Helicopters] fleet to the H130.”

Looking ahead, Andrade thinks the Brazilian business-aviation sector will grow “at a similar rate” to the nation’s overall economy. “This year [national] growth will be about one percent and in the coming year it will be two to three percent,” he said. For now, Avantto is continuing to focus on near-term business growth opportunities it sees in its core markets in Brazil’s highly populated southeastern states.

But analyses of private-aircraft distribution throughout Brazil show unequivocally that private and business aviation is growing in Brazil’s central region, said Andrade, “mainly because of the agricultural business” there. “We’ve not gone there yet…[but] it won’t be long before we have to do so.” Using Google AdWords—which lets Avantto gauge the response rates for its targeted advertisements in different geographical areas—“we’ve been releasing some ads there [in central Brazil] and the results have been good. At a certain point, there will have to be some real [Avantto] initiatives in the central part of Brazil.”