Skies now are bluer for Europe’s light jet survivors

EBACE Convention News » 2011
May 17, 2011, 8:30 PM

Europe’s still-fledgling entry-level charter jet market is showing some positive signs of growth, according to leading operators and analysts. But turning a profit with the aircraft–to date, largely Cessna Citation Mustangs and Embraer Phenom 100s–will not be an easy task according to Michael Ricks, COO of UK-based Oriens Advisors, an aviation consultancy that specializes in the entry-level jet market.

Ricks said that firms already in and entering this market must have financial staying power. “If additional investment is needed it is best to do it sooner when you can evaluate several market alternatives as opposed to having to hustle later when potential investors sense mismanagement or creditors are getting ready to pull the plug,” he told AIN. In his view, there is a potential for turboprop clients to move to the light jets for charter, but developing a true air-taxi model for Europe with light jets is a long way off as there are not enough aircraft in the area to “achieve critical mass.”

Nevertheless, Ricks sees European traffic congestion and the limited number of hub airports, about 200, as well as several economic factors driving the light jet market there. “In Europe, a number of conditions speak to the acquisition of new aircraft now. Interest rates are very low, but beginning to increase. Financing is now available. Manufacturers have unsold white-tail inventories and there are [delivery] positions available for new jets significantly below the list price,” he commented. “New jets from Honda, Piper and Pilatus will be coming onto the market in the next few years, and that is animating Cessna and Embraer to offer favorable conditions now to solidify their market positions.”

Ricks also said the charter and air taxi operators flying these aircraft confronting a dynamic and rapidly changing marketplace that will mandate new marketing and operating tools. “Tomorrow’s winners are not just jet jockeys, but also nerds. It is all about market analytics, search engine optimization, dynamic scheduling and algorithm evolution,” he explained. “If you are still working with a white board, something is not going to work in your organization.”

Light Jets=Light Profits

For those flying light jets in revenue operations now, “profitability is at the bottom of the curve,” admits Patrick Margetson-Rushmore, whose firm, London Executive Aviation (LEA), operates seven Cessna Citation Mustangs as part of a larger fleet that also includes Citation Excels and Embraer Legacys. LEA owns five of the aircraft and manages the other two for owners.

The serial numbers range from 52 to 157 and the highest time aircraft has accumulated 1,156 hours. Most of the Mustangs fly at least once a week and the average stage length is just under one hour; however, the firm does book longer flights with the aircraft during the summer months to the south of France and Geneva. Those flights average approximately 2.5 hours. Margetson-Rushmore thinks LEA’s fleet will average 300 hours per aircraft this year, a somewhat low figure but, according to him, “higher than anyone else in Europe.”

“Our potential customers for this aircraft are more price sensitive,” he told AIN. LEA operates seven different aircraft types, including Dassault Falcons and King Airs, and Margetson-Rushmore said the market last year was far more “buoyant” for the larger aircraft. LEA has not seen customers of mid-size aircraft moving down market in the Mustang in the recession. Rather, those customers stopped flying altogether. However, what LEA did see was an influx of Mustang customers who had been flying on Hawker Beechcraft Premiers and Cessna Citation CJs and Bravos at the firm’s competitors.

Margetson-Rushmore said that, overall, passengers found the Mustang’s interior “quite spacious once they are inside,” adding that maintenance squawks to date had been relatively minor. These included spurious crew alerting system (CAS) messages, a transponder problem with the G1000 avionics (since fixed) and an overtemping issue with one of the Pratt & Whitney Canada 615 engines. Overall, the firm lost an estimated 12 flights due to these problems, but Margetson-Rushmore classified the aircraft’s reliability as “good” and Cessna’s support of it as “very good.”

Cabin Size a Factor

David Fletcher, CEO of FlairJet based at Oxford in the UK, is equally enthusiastic about his firm’s trio of managed Embraer Phenom 100s that began revenue operations in January 2010. He said the 100s are averaging about 400 hours per year each, and that number could conceivably increase to 600 to 700 hours. Currently customers are equally split between business and leisure travel and the average flight is approximately one hour.  The company also operates a pair of the larger Phenom 300 light jets.

Customers are attracted to the Phenom 100 because of its cabin size as well as its modern design, Fletcher said. He also noted that the aircraft’s faster speed (compared to the Mustang) is not much of a factor in customer chartering decisions. “On the average trip you only save five to ten minutes [with the Phenom],” he said, adding that the decision is more a function of cabin size. The Phenom has a 50-knot faster max cruise speed than the Mustang–390 knots versus 340 knots.

The Phenom weighs 1,000 pounds more than the Mustang and has five cubic feet of additional luggage space. The Phenom’s cabin is slightly more flexible that the Mustang’s in that it can be configured to seat four to six passengers, while the Mustang can seat only four. In the four-seat configuration the Phenom also offers a true aft lavatory, while the Mustang offers a flip-up padded lid over a chemical bowl aft of the pilot’s seats. 

Fletcher said his customers are a mix of those who used to fly on Cessna Citation CJs and turboprops, those who moved down from larger jets during the recession and first-time business fliers. For new customers, he also said the Phenom 100 is a good vehicle for eventually convincing them to transition into the firm’s two larger Phenom 300s. “You create trust with the customer. They enjoy traveling on the 100 and it is easy for them to see what the 300 can do for them in terms of increased speed and range,” he explained.

Overall, Fletcher said business is on the upswing, the best it has been in four or five years. “We’ve been very, very busy and we expect that will continue through the summer,” he said.

The FlairJet founder characterized Embraer’s support of the Phenom 100 as very good. “There were some teething problems with the aircraft when we first got them, but they were pretty minor and the product support from Embraer was pretty good and we are seeing none of those problems now,” he said. That included factory-provided adjustments to the aircraft’s brake-by-wire system.

Steady Growth Envisioned

Fletcher thinks entry-level jet growth in Europe will be “steady” in the coming years. “There won’t be any mass-purchases,” he said, doubtless with failed ventures such as JetBird in mind. Nonetheless, he expects demand to grow by 8 to 10 percent this year and FlairJet itself is currently negotiating to bring on two more managed 100s.

Oriens’ Ricks predicted that it would be a while before entry-level jets attain their potential in the European market. “There are certainly those who have found a way to operate and generate additional profits [with these airplanes],” he reflected. “That said, the greatest opportunity lies with achieving a critical mass that the industry has yet to achieve. There just aren’t a lot of airplanes out there and part of the value proposition around the concept of jet air taxis is having a critical mass of aircraft under way to offer point-to-point transportation to a wide audience.” Ricks argued that achieving that critical mass “is not going to take forever. I see a huge opportunity in Central Europe that will build over time.”

For now Ricks sees continued growth of entry-level jets in Europe over highly traveled city pairs such as London to Paris or London to Geneva. “These cities have overburdened hub airports combined with high-net-worth individuals and a high probability of business travel. For these people, sitting for a long time on the tarmac is very expensive,” he concluded.

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