Luxaviation - Consolidating Europe
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Broken Record
CL300
Let it go chap. It's not good for your health to stay so bitter and take every opportunity to stick the knife into NJE. No need to tell us how much better off you are now.........really, don't bother.
Let it go chap. It's not good for your health to stay so bitter and take every opportunity to stick the knife into NJE. No need to tell us how much better off you are now.........really, don't bother.
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Stupidbutsaveable
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CL300
Let it go chap. It's not good for your health to stay so bitter and take every opportunity to stick the knife into NJE. No need to tell us how much better off you are now.........really, don't bother
Broken Record
CL300
Let it go chap. It's not good for your health to stay so bitter and take every opportunity to stick the knife into NJE. No need to tell us how much better off you are now.........really, don't bother
NJE was a good company for a while, but lost its soul. The scheme like Lux is not made for success, not in Europe. I would love to, but it does not work at a scale that makes it sustainable in the long term.
I cannot care less about NJE, I care about me ( this is the best way to deliver the product). I still know some people in there, and if they are not UK citizen, they shall start to look for other pastures, but apples to apples, it is complicated when pension funds management are in the house.
But if you want to know my situation, just ask, you can not imagine how far the company can go, until you live the experience.
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Industry Blogs : Aircraft Interiors International
The charter operator sector is on the edge of an M&A frenzy. The past few months have seen several mergers including the high profile reverse takeover of Gama Aviation, by UK operator Hangar8 in December 2014. This follows Luxaviation Group’s acquisition of London Executive Aviation (LEA), earlier in the year.
The newly formed Gama Aviation PLC will now be a top five global operator, offering a 144-strong fleet, across all major geographical markets. And the consolidation of LEA and Luxaviation has also created a major player, offering one of Europe’s biggest fleets of 90 aircraft.
A still-challenging trading environment and government regulations are forcing scale – both in terms of aircraft numbers and geographical coverage – to be the only route to profitability for aircraft operators.
The benefits can be significant in the form of better buying power for fuel, landing fees, insurance and crew, as well as client retention – being able to offer clients a broader range of aircraft and geographical reach. Empty legs can also be better utilised in a larger business or group.
A direct relationship between fleet size and business success
Last month PrivateFly hosted an industry round table, inviting representatives from several of the operators in our network – including Gama Aviation, LEA, GlobeAir and Blink. We looked at the commercial challenges for private jet operators and the subject of fleet size and scale was a prevailing theme. Everyone agreed that in today’s market, there is a direct relationship between aircraft numbers and business success.
Richard Koe, managing director of industry intelligence provider WINGX-Advance presented some statistics, showing the size of fleet required for operators to move into profit. The magic number depends on the business model of the aircraft operator ie:
1) Charter dedicated: The operator owns their aircraft outright and offers them for commercial charter.
2) Charter managed: The operator manages an aircraft and arranges charter on behalf of the aircraft’s private owner – when they are not using it.
3) Private managed: The operator manages aircraft for private owners who don’t offer their aircraft for commercial charter.
Each operator type has different operational challenges and rewards. Charter dedicated companies work on the basis of a ‘higher risk, higher reward’ model, whereas the others have a lower risk and lower reward.
For charter dedicated operators there is a bigger share of the charter revenue to be had, but at a much higher cost of business. There is also the pressure to maintain business levels in the European low season (November – February), as they are dependent on charter revenue. Depreciation is also a bigger factor, due to the aircrafts’ greater utilisation compared to those belonging to private owners.
On average, across all business models, the figures indicate that operators with more than seven aircraft in their fleet are more commercially viable in today’s challenging business environment. A charter dedicated operation needed 10 or more aircraft to break even, whereas the other business models could become profitable with four or five.
The average operator offers two or three aircraft
Europe is still very much a fragmented market with a total of 1,600 operators holding an AOC (Aircraft Operator’s Certificate), but the vast majority (95%) offer a fleet size of fewer than 10 aircraft. Almost half have just one aircraft and the average operator offers two or three.
This is why from a customer perspective; it has been difficult to compare the market. Technology such as PrivateFly is now making it easier, by linking the customer to available charter aircraft through an online marketplace.
So what further mergers and acquisitions will follow in 2015? Our industry is a fast-changing and fragmented one, and with operators under increasing commercial pressure, I don’t doubt there will be many.
The charter operator sector is on the edge of an M&A frenzy. The past few months have seen several mergers including the high profile reverse takeover of Gama Aviation, by UK operator Hangar8 in December 2014. This follows Luxaviation Group’s acquisition of London Executive Aviation (LEA), earlier in the year.
The newly formed Gama Aviation PLC will now be a top five global operator, offering a 144-strong fleet, across all major geographical markets. And the consolidation of LEA and Luxaviation has also created a major player, offering one of Europe’s biggest fleets of 90 aircraft.
A still-challenging trading environment and government regulations are forcing scale – both in terms of aircraft numbers and geographical coverage – to be the only route to profitability for aircraft operators.
The benefits can be significant in the form of better buying power for fuel, landing fees, insurance and crew, as well as client retention – being able to offer clients a broader range of aircraft and geographical reach. Empty legs can also be better utilised in a larger business or group.
A direct relationship between fleet size and business success
Last month PrivateFly hosted an industry round table, inviting representatives from several of the operators in our network – including Gama Aviation, LEA, GlobeAir and Blink. We looked at the commercial challenges for private jet operators and the subject of fleet size and scale was a prevailing theme. Everyone agreed that in today’s market, there is a direct relationship between aircraft numbers and business success.
Richard Koe, managing director of industry intelligence provider WINGX-Advance presented some statistics, showing the size of fleet required for operators to move into profit. The magic number depends on the business model of the aircraft operator ie:
1) Charter dedicated: The operator owns their aircraft outright and offers them for commercial charter.
2) Charter managed: The operator manages an aircraft and arranges charter on behalf of the aircraft’s private owner – when they are not using it.
3) Private managed: The operator manages aircraft for private owners who don’t offer their aircraft for commercial charter.
Each operator type has different operational challenges and rewards. Charter dedicated companies work on the basis of a ‘higher risk, higher reward’ model, whereas the others have a lower risk and lower reward.
For charter dedicated operators there is a bigger share of the charter revenue to be had, but at a much higher cost of business. There is also the pressure to maintain business levels in the European low season (November – February), as they are dependent on charter revenue. Depreciation is also a bigger factor, due to the aircrafts’ greater utilisation compared to those belonging to private owners.
On average, across all business models, the figures indicate that operators with more than seven aircraft in their fleet are more commercially viable in today’s challenging business environment. A charter dedicated operation needed 10 or more aircraft to break even, whereas the other business models could become profitable with four or five.
The average operator offers two or three aircraft
Europe is still very much a fragmented market with a total of 1,600 operators holding an AOC (Aircraft Operator’s Certificate), but the vast majority (95%) offer a fleet size of fewer than 10 aircraft. Almost half have just one aircraft and the average operator offers two or three.
This is why from a customer perspective; it has been difficult to compare the market. Technology such as PrivateFly is now making it easier, by linking the customer to available charter aircraft through an online marketplace.
So what further mergers and acquisitions will follow in 2015? Our industry is a fast-changing and fragmented one, and with operators under increasing commercial pressure, I don’t doubt there will be many.
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Price & Competition & Price....
One wonders how much budget is left for training or unplanned tech issues down the road. But no problem, its already good practice to 'postpone' the tech issues until back home
To me:
Chartering an Aircraft directly or via a Broker is like Russian Roulette !
Not saying there are no good Brokers on the Market, but it is just to appealing to take the cheapest offer and make the biggest profit.
One wonders how much budget is left for training or unplanned tech issues down the road. But no problem, its already good practice to 'postpone' the tech issues until back home
To me:
Chartering an Aircraft directly or via a Broker is like Russian Roulette !
Not saying there are no good Brokers on the Market, but it is just to appealing to take the cheapest offer and make the biggest profit.
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Everyone agreed that in today’s market, there is a direct relationship between aircraft numbers and business success.
Its a byproduct of the lobbies being allowed of doing the paperworks for regulations. Which parliaments all too often put into law unchecked. (National and EU)
I was at helm of an air taxi company with 2 airplanes until 2004 and I tried hard to get the operators at my home base to get together and pool resources and things like purchases (fuel, training etc.).
Was impossible to achieve. Everyone was in a catfight with each other and the one big player we had laughed hard - they were attached to an airline and got fuel price discounts we only could dream of.
Today, 3 of the 5 operators are history, the remaining are just bigger than they were.
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Some interesting posts from all sides. We all love to analyse the market place and hazard a guess at the best route to take. For sure there are economies of scale, and there are diseconomies of scale. When the market is healthy, scaling up makes sense. When the market is down scaling up can be disastrous. The big oil tanker analogy.
But, the bottom line is, whether you like it or not, the bottom line. The biz jet market is basically about losing money. Someone somewhere loses a lot of money. There is no ROI on a new or even 10 year old biz jet. You can't even cover the asset depreciation, let alone achieve a return. So all operators of this genre of biz jet are reliant on wealthy owners taking a big hit financially on their asset and hoping they can squeeze enough margin from management fees and chartering to cover the overheads and hopefully make a small profit. In the meantime, the owners of the aircraft have taken a massive loss. Some owners are fine with that. The flip side is the owner who was told that his beloved aircraft wouldn't lose money if he gives to operator X and charters is out. That formed the basis for many owners over the last ten years or so making the decision to buy. It is no coincidence then that the amount of "newer" aircraft is subsiding by quite a bit. Is it because the financial forecast they were given by operator X was hopelessly optimistic and inaccurate, and on analysis of the numbers the owner has decided not to repeat the exercise? Not that many less than 5 year old aircraft available now on the charter market, certainly compared to the amount purchased pre 2008.
A 2009 XLS was $12m to buy. Having done 400 hours a year for 5 years is now worth $7m. So a hit of $1m pa. (£660k) So, to just cover depreciation you need £1650 per hour. Now add on the maintenance, engine overhaul fund, Nav fees and fuel and you have about £2700 per hour. Crew, about £300 an hour. So we are at £3000 an hour, but no management fee in there yet, and no operator margin on the charter. Add in those, and we would be at maybe £3'700 an hour.....cost. No ROI (Which a charter dedicated operator would need). The charter market commands rates of around £2300 an hour. So a loss of £1400 an hour. Over the 5 year period a loss of £2.8m for someone - probably the owner. It works out that the owners hourly rate, based on 100 hour a year personal use is £5600. The guy he rented it to paid £2300 an hour for the same aircraft. A 4 hour return trip would work out £13'200 more expensive than chartering. Why would anyone do that??
A lot of you biz jet drivers don't know when you're up. You get to fly these wonderful machines and get paid well for doing so. The operator has managed to pursued someone to spend all this money and in reality the pilots are the biggest benefactors. Operators make very small margins if they are lucky and owners make massive losses.
There has been a lot of criticism of Harburn as if somehow they control the market, but the reality is that this a decreasing industry because the model, what ever way you look at it is broken. Being reliant on an ever increasing supply of wealthy people coming through to door and willing to lose lots of money is simply not sustainable. There are now less of them, and those that are left are unlikely to make the same mistake again. Sure, there are owners who don't really care, but in general these are the same owners who don't want it chartered out. It will settle to a level that is sustainable which is well below where it is now. All Harburn has done, from what I read is to cash in the chips now as he/she can see the writing on the wall. I call that good business.
I would be interested to hear others opinions on the rationale of the finances involved with private jets.
But, the bottom line is, whether you like it or not, the bottom line. The biz jet market is basically about losing money. Someone somewhere loses a lot of money. There is no ROI on a new or even 10 year old biz jet. You can't even cover the asset depreciation, let alone achieve a return. So all operators of this genre of biz jet are reliant on wealthy owners taking a big hit financially on their asset and hoping they can squeeze enough margin from management fees and chartering to cover the overheads and hopefully make a small profit. In the meantime, the owners of the aircraft have taken a massive loss. Some owners are fine with that. The flip side is the owner who was told that his beloved aircraft wouldn't lose money if he gives to operator X and charters is out. That formed the basis for many owners over the last ten years or so making the decision to buy. It is no coincidence then that the amount of "newer" aircraft is subsiding by quite a bit. Is it because the financial forecast they were given by operator X was hopelessly optimistic and inaccurate, and on analysis of the numbers the owner has decided not to repeat the exercise? Not that many less than 5 year old aircraft available now on the charter market, certainly compared to the amount purchased pre 2008.
A 2009 XLS was $12m to buy. Having done 400 hours a year for 5 years is now worth $7m. So a hit of $1m pa. (£660k) So, to just cover depreciation you need £1650 per hour. Now add on the maintenance, engine overhaul fund, Nav fees and fuel and you have about £2700 per hour. Crew, about £300 an hour. So we are at £3000 an hour, but no management fee in there yet, and no operator margin on the charter. Add in those, and we would be at maybe £3'700 an hour.....cost. No ROI (Which a charter dedicated operator would need). The charter market commands rates of around £2300 an hour. So a loss of £1400 an hour. Over the 5 year period a loss of £2.8m for someone - probably the owner. It works out that the owners hourly rate, based on 100 hour a year personal use is £5600. The guy he rented it to paid £2300 an hour for the same aircraft. A 4 hour return trip would work out £13'200 more expensive than chartering. Why would anyone do that??
A lot of you biz jet drivers don't know when you're up. You get to fly these wonderful machines and get paid well for doing so. The operator has managed to pursued someone to spend all this money and in reality the pilots are the biggest benefactors. Operators make very small margins if they are lucky and owners make massive losses.
There has been a lot of criticism of Harburn as if somehow they control the market, but the reality is that this a decreasing industry because the model, what ever way you look at it is broken. Being reliant on an ever increasing supply of wealthy people coming through to door and willing to lose lots of money is simply not sustainable. There are now less of them, and those that are left are unlikely to make the same mistake again. Sure, there are owners who don't really care, but in general these are the same owners who don't want it chartered out. It will settle to a level that is sustainable which is well below where it is now. All Harburn has done, from what I read is to cash in the chips now as he/she can see the writing on the wall. I call that good business.
I would be interested to hear others opinions on the rationale of the finances involved with private jets.
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that there are more billionaires around these days...
They don't seem to be buying Biz jets though.
Does anyone think that the escalation in the Ukraine crisis and the increasing sanctions on Russia will have a big impact on the Biz Jet industry in Europe?
There seems to be a lot of Russian owned aircraft being operated in EU. Am I right in saying that a lot of the LEA fleet, and the larger Luxaviation fleet is Russian owned?
FNPL
They don't seem to be buying Biz jets though.
Does anyone think that the escalation in the Ukraine crisis and the increasing sanctions on Russia will have a big impact on the Biz Jet industry in Europe?
There seems to be a lot of Russian owned aircraft being operated in EU. Am I right in saying that a lot of the LEA fleet, and the larger Luxaviation fleet is Russian owned?
FNPL
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I would be interested to hear others opinions on the rationale of the finances involved with private jets.
This does not change a iota on the fact that this specific scheme will not work except with major loss.
Because like you wrote : Someone has to pay somehow..
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Originally Posted by FNPL
There are now less of them
There is an ever-increasing supply of rich people, in line with the world's Gini index. They are also increasingly less clever, as you no longer have to be a captain of industry or an innovative world-changer to be a billionaire.
So I also disagree with your outlook: On a global scale (not just looking at the developed world), the future is bright!
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Booglebox - you're probably right. The calibre of Billionaires these days is not what it was. The culture of being famous for being famous.
I should adjust my outlook to read :
Being reliant on an ever increasing supply of wealthy (STUPID) people coming through to door and willing to lose lots of money is simply not sustainable.
Still though, where's all the new biz jets then? Not in Europe.
I should adjust my outlook to read :
Being reliant on an ever increasing supply of wealthy (STUPID) people coming through to door and willing to lose lots of money is simply not sustainable.
Still though, where's all the new biz jets then? Not in Europe.
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Slight thread drift - Flynowpaylater, you have left out one very important factor in your calculations - "tax deductible". And that includes depreciation. I'm sure all these STUPID people have clever tax consultants. They may even bank with HSBC Switzerland.
As someone said earlier in the thread, spend a fortune to be second best.
All that duplication of multiple AOC's - I just don't get it! But I'm just a driver.
As someone said earlier in the thread, spend a fortune to be second best.
All that duplication of multiple AOC's - I just don't get it! But I'm just a driver.
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Suitcase - Agree both points. However, any savvy businessman would sooner make a profit and pay some tax, than make a whacking loss and get a tax rebate on those losses. The tax deductibles are merely the silver lining around the black cloud.
Sort of a thread drift, but in reality this company (Luxaviation) is right in the middle of this market and the business plan seems to be wholly reliant on growth. There is no real growth in this market anymore, so it simply buys up competitors to achieve this growth.
The AOCs thing is fascinating and maybe telling too. Lots of layers of expensive management. Normally mergers / takeovers result in streamlining to get efficiency. This seems more like a franchise but with the subordinate companies keeping their own identity. All very odd.
Sort of a thread drift, but in reality this company (Luxaviation) is right in the middle of this market and the business plan seems to be wholly reliant on growth. There is no real growth in this market anymore, so it simply buys up competitors to achieve this growth.
The AOCs thing is fascinating and maybe telling too. Lots of layers of expensive management. Normally mergers / takeovers result in streamlining to get efficiency. This seems more like a franchise but with the subordinate companies keeping their own identity. All very odd.
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There is no rational to pay over the top, with borrowed money, for a number of probably loss making companies.... Maybe we are seeing history being made and do we end up with a great company in our industry but the road is full of failures.. I think the example mentioned of JetDirect in the US is the best comparison 
Haburn as you are in the know is this the owner of Luxaviation?: Nikolay Bogachyov - Wikipedia, the free encyclopedia
Haburn as you are in the know is this the owner of Luxaviation?: Nikolay Bogachyov - Wikipedia, the free encyclopedia
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I dont think Harburn wants to play anymore Global....
None the least reason is the grumpy e mail our new " boss of bosses" sent us last week telling us not to discuss anything on social meeja.....Getting a bit too close to the truth Mr H?????
Mr H told us all in his roadshow that there was no big money man behind all this and any investment was "Institutional".... Whatever that means.
What's the big deal with this Russian guy.....Has he got form in the industry that would spell more bad news if he is there hiding behind some offshore trust?
None the least reason is the grumpy e mail our new " boss of bosses" sent us last week telling us not to discuss anything on social meeja.....Getting a bit too close to the truth Mr H?????
Mr H told us all in his roadshow that there was no big money man behind all this and any investment was "Institutional".... Whatever that means.
What's the big deal with this Russian guy.....Has he got form in the industry that would spell more bad news if he is there hiding behind some offshore trust?
Last edited by BuzzB; 25th Feb 2015 at 07:31.
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Haha did a search on Mr H and yes he must be reading this as it is even on his CV 
Since 2006, he runs EDISON, an M&A boutique which he founded. He has done numerous deals across Europe, Russia and Asia - primarily in the oil & gas, aviation and real estate industries. He also keeps himself busy with a private jet firm and a social network site. He is married and father of two girls.
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Since 2006, he runs EDISON, an M&A boutique which he founded.
..................All about the business of building a business in other words....and all the commissions that go with it.
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Flynowpaylater
A business that is wholly reliant upon growth falls loosely into the definition of a ponzi scheme?
Ponzi scheme - Wikipedia, the free encyclopedia
en.m.wikipedia.org/wiki/Ponzi_scheme
A*Ponzi scheme*is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.
Obviously I'm not suggesting in any way that the thread subject or any other operator is actually operating in this way.
A business that is wholly reliant upon growth falls loosely into the definition of a ponzi scheme?
Ponzi scheme - Wikipedia, the free encyclopedia
en.m.wikipedia.org/wiki/Ponzi_scheme
A*Ponzi scheme*is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.
Obviously I'm not suggesting in any way that the thread subject or any other operator is actually operating in this way.
Last edited by Encorebaby; 25th Feb 2015 at 12:16.
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probably a bit wide of the mark there with the Ponzi scheme. Ironically a Ponzi scheme is effectively guaranteeing a good return on investment every month. Eventually they just forget to keep paying and forget to give the original investment back!
Perhaps the growth is there but I reckon they have already missed the boat.
Perhaps the growth is there but I reckon they have already missed the boat.
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Will someone please tell me the significance of reference to Mr Bogachev in our industry?
Two minutes on the internet and the strong association between him and Edison capital is clear.
Two minutes on the internet and the strong association between him and Edison capital is clear.