NetJets Europe is poised to shake up the regional business jet scene with a move into aircraft management, and its plans to quickly expand this new operation to cover a sizable number of aircraft may well startle some of Europe’s existing management operations.
“We already have an executive jet management scheme in the United States,” said Eric Connor, chairman and CEO, NetJets Europe “and now we are starting one in Europe because there’s a demand for it.
“For the first 12 months, we will use the NetJets Europe AOC [air operator certificate] and then transition to a new operation, probably based in the U.K. with an expanded range of aircraft. We already manage more aircraft than anyone else, and so the new business complements what we are doing and provides us with supplemental lift, and more income,” added NetJets Europe’s top executive during the 12th annual European Business Aviation Convention and Exhibition this week in Geneva.
“We are not looking to take on smaller aircraft,” he continued, “unless they were part of a portfolio. So for example we would be interested in a Hawker 800 but not a Hawker 400.”
The fleet numbers that Connor is talking about are ambitious. “There are European management operators with between 40 and 80 aircraft,” he said, “and we would expect to get to that sort of size relatively quickly. We are already talking to several people for the startup.”
The new managed aircraft are not a way to expand the overall fleet, said Connor. “That is not the intent. We are still buying aircraft on the basis that 50% of new orders are for replacement and 50% are for growth. We have announced deals withand , and those orders are proceeding on that basis. We don’t need managed aircraft to expand the fleet nor is it about plugging any geographical holes; our aircraft are already everywhere there is demand.”
“The contribution we are looking for,” he continued, “is a positive net margin, increased economies of scale with third-party suppliers and an added benefit for our fractional owners.”
Connor says that NetJets Europe’s figures for last year showed a strong first six months, followed by a softening of demand from July and August onward. He expects 2012 to show a similar pattern. “Demand for large aircraft is strong and growing. Medium cabins are stable and the light jet sector is soft. Add it all together and the net result is zero. Our owners are flying more, but card holders are flying less. So business use continues, while leisure flying is down. The market is flat.”
“The recovery was two years away in 2009 and it’s still two years away in 2012,” noted Connor. “The economic factors in Europe mitigate against much growth, but in Turkey, in the Middle East things are very positive; we are seeing increasing demand from Africa. Also, although it’s growing from a low base, demand in Eastern Europe is now outstripping Western Europe.”