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  1. Wealth
October 6, 2010

Come Fly With Me?

By Spear's

Having taken off in the boom years, private jet firms crash-landed in the bust. Where now for the industry, asks Zain Alatas

Having taken off in the boom years, private jet firms crash-landed in the bust. Where now for the industry, asks Zain Alatas
FOR THIRTEEN of the past fifteen years, the UK private jet market enjoyed a boom. When NetJets came to Europe in the mid-Nineties, offering part ownership of jets at lower prices than expected, the marketplace suddenly expanded. A few years later, a raft of similar companies had appeared.

On another front, as oligarchs and sheikhs alike came to the UK more frequently, so too did their Gulfstreams and BBJs. Suddenly, little-known RAF bases, such as Northolt, Biggin Hill and Farnborough, grew into important, busy travel hubs. By the early Noughties, travelling ‘private’ had caught on in a big way, and deliveries of new aircraft grew consistently from 2003 to 2008.

Then the biz jet bubble burst. Clients in fractional-ownership schemes were put under pressure to sell their shares as markets crashed and fingers were pointed at bonus-driven bankers who flew privately. The service providers, who owned outright large fleets of aircraft, now had too many planes and not enough passengers. In an attempt to save face (and money) unused aircraft were moved to minor UK airports, where the planes stood unused for months as the recovery failed to emerge.

The charter market was also put under strain, as most of the biz jet set decided to slum it in first class. This left management companies, brokers and private owners alike with some thinking to do.

One notable failure was that of Jet Republic, a fractional-ownership model that bravely opened in September 2008, announcing Europe’s largest ever private jet order, for 110 Learjets worth a total of $1.5 billion. In view of the growing private-jet market and difficulties in the commercial aviation sector, with airlines cutting routes and flight frequency, the company sought to fill a gap for time-starved executives who required unusual itineraries. Within a year the company declared itself insolvent, blaming adverse market conditions.

Though this economic air pocket has been a disaster for some, companies that have made it through have noted a significant rise in private air travel in 2010. With major airports and commercial airlines seemingly on permanent strike, and the mysterious revelation that private jets somehow did not come under the same no-fly regulations when it came to a certain Icelandic ash cloud, the private jet has become almost a necessary back-up; a Learjet has never looked less luxurious. Moreover, the post-credit-crunch guilt is less palpable now.

Just as fractional was fashionable five years ago, now it is the traditional private ownership and charter companies that are most active. Two full-service providers in particular, one Qatari and one backed by a Russian family, are leading the way for the future of private aviation. Taking inspiration from the American executive jet business, focus is now on better all-round service.

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‘It’s about a lot more than just getting you from A to B,’ says Stephen Grimes, CEO of Ocean Sky. The company set up in 2003 as an aircraft broker and has since expanded to cover management, engineering, ground handling, charter brokerage, catering and aircraft interior design. ‘Our aim is to offer the total package.’

In their terms, total package has so far come to mean a vast investment in the UK, Europe and the Middle East. The fleet has doubled to 40 in the past year, with the aim of adding another twenty next year. They have also opened their own fixed-base operations (FBOs) in strategic destinations for leisure travellers: Mahon, Ibiza, Valencia.

Having an FBO means having a hangar and service facility as well as a VIP terminal, though Grimes, who joined from rival Harrods Aviation last year, hopes the latter is not even necessary. ‘With us, if everything goes to plan, we would hope to have you driven straight out on to the tarmac to meet your jet.’

Another firm to look out for is Rizon Jet and affiliate Oryx Jet, who have just arrived in the UK from Qatar; their VIP terminal, built by a team of Qatari designers to look like a five-star hotel in the Gulf, will soon open its doors at Biggin Hill, where Rizon have just bought a maintenance and management hangar. Their CEO, Patrick Enz, was poached from another leading firm, Jet Aviation, in 2009.

What both these firms have in spades in confidence and cash. Ocean Sky’s Russian backer used the downturn in Europe to his advantage; while smaller European operations suffered, he swooped in and bought up. Rizon’s chairman is CEO of Qatari Diar, the investment arm of the Qatari sovereign wealth fund, which bought Harrods earlier this year.

By contrast, the fractional ownership models have been quieter. Though the fractional model that NetJets pioneered represents value for money for frequent private flyers, it could well be that after the fifteen years of big business, the private-jet industry is returning to its original clients, and becoming once again a high-luxury pursuit for leisure travellers and private owners.

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