Luxaviation - Consolidating Europe

[Charter JAROPS 1]

Hi All,

Luxaviation is quite active in acquiring shares in Europe`s leading Operators.
I wonder how they manage all that "growth". Any idea how they are doing right now? Do the acquired operators benefit?

[Global_Global]

Agree, what is their strategy? :confused::confused::confused::confused::confused:

They buy a bunch of companies and if I understand it correctly pay over the top for them. The management stays there and they put new management on top of that... So you get an expensive company with too much management..

Is the idea just like the Vista jet dream to build this up quickly and sell it on before it blows up? :suspect:

[CEQforever]

Luxaviation Group acquires Masterjet (http://www.businessairportinternational.com/news.php?NewsID=65223)

Masterjet is the latest to join the fold. Where's the cross-selling benefit between 8-9 AOC's in different EU countries??

[Booglebox]

This is an interesting concept. Gives potential clients the choice of various AOCs without the headache associated with setting up an AOC.
Also, they can save costs by consolidating shared functions.

[Global_Global]

Isnt this a contradiction? Gives potential clients the choice of various AOCs vs save costs by consolidating shared functions.

And with EASA allowing tailswapping the emotional reason to have a local tail is also fading away...:cool:

[Global_Global]

without the headache associated with setting up an AOC.

Why setting up an AOC in the first place? :confused::confused::confused::confused::confused::confused:

[Ghengis Cant]

No doubt Lux are paying way over the odds to get control of target companies.
Very hard to fathom the reasoning. Yes economies of scale etc. but still leaving autonomous management and operation of each company in place. No centralisation of ops etc. which might have been an obvious saving.

In the process are issuing bonds right left and centre to raise huge amounts of debt.....thereby burdening not just themselves but everyone they have bought.

An IPO on the cards in less than a year ( floatation) which is unbelievable in the sense that their strategy will not have had a chance to mature and prove its effectiveness.

The guys behind this are money men creaming massive commissions on each aquisition and bond issue doubtless who are looking to put together a package of companies then sell as quickly as they can with the promise of riches to come.

I guess they will be long gone before the effectiveness or otherwise of their strategy is discovered.

with the chill winds blowing in europe this is a strategy involving massive risk to all who work in the target companies. They are the ones who will have to pay the debt that has been raised to buy them....and will do so with their jobs if it goes wrong.

Its one monumental gamble and with each purchase the stakes get higher IMHO.

Time alone will tell.

[FLEXJET]

Luxaviation, assisted by Edison Structured Services SA, raised 10M EUR in May 2014 and 20M in December at the Luxembourg stock exchange:

https://www.bourse.lu/instrument/bond/summary?cdVal=210333&cdTypeVal=OBL

https://www.bourse.lu/instrument/bond/summary?cdTypeVal=OBL&cdVal=217707

Interesting reading the two prospectus. They appear to be buying sound, established companies and have a business plan.

But why not mentioning Mr Hansen as the CEO of Luxaviation?
Edison Capital Partners - Biographies (http://www.edison.lu/en/biographies.html)

Is Mr Bogachev still involved with Luxaviation?

[Ghengis Cant]

"Why not mentioning Mr Hansen as CEO of Luxaviation"?

Why indeed not?......might some people see a bit of a conflict of interest going on perhaps?

Could it be the uncomfortable truth that for Mr H its " heads I win" or "tails I dont loose"?

As partner or director of Edison Capital .....that company will have bagged a massive fee ...probably amounting to millions as commission for raising 30 million for Luxaviations purchase kitty and in accordance with sound banking principles there would be some massive bonuses paid to the introducing partner......
That will be a recurrent theme every time Lux goes to the market to raise some more dosh...These fees will pale into insignificance compared with the fees to be earned out of a stock market listing!

So from where I am standing it looks like Mr H is on a win, win, win....personaly......irrespective of whether the result of these purchases is success or failure for Luxaviation.

Its all about mega fees on raising mega bucks and where better than in an industry like ours where the numbers are eye watering before you even turn a wheel.

For sure there may be a sound business case to be made......maybe...( does not convince me but WTF do I know?!)....but if I am not very much mistaken someone is doing very nicely out of this already!

[Sheikh Zabik]

Interesting thread.

Theres definitely a bit of an aroma surrounding all this rush-to- buy. The big payouts to the lucky owners and the resultant new Range Rovers, Porsches and holiday homes appearing as a result have all got to be paid for.......and guess by whom? :eek:

The business justification seems to be "the story" to be told to potential clients about a worldwide operation,economies of scale plus bigger buying power to drive discounts on fuel, handling charges etc. That is all well and good but to retain all existing management and operational structures underneath a Luxembourg based bureaucracy ......all of which will have to be paid for doubtless by "management" charges levied on each individual company will be a massive burden....far outweighing any savings to be made out of discounts from bigger buying power.

Historicaly GA operations have good years and bad years. They are notoriously susceptible to economic downturns which appear like clockwork and during those downturns they loose money heavily. The established players some of whom have now been purchased have ridden these storms by shrinking down and controlling their debt in hard times. This debt burden is now out of their control.

These bonds representing this debt have relatively short dated maturities and they will have to be repaid with interest in full if the company is not to default. The combined business does not stand a cats chance in hell of generating profits to repay the tens if not hundreds of millions borrowed on such time scales...so Mr H is presumably hoping to have sold out or refinanced by the time the piper calls to be paid.....

Unfortunately pilots are not very business savvy when it comes to things like this but if I worked for a company that had been taken over by Lux I would be concerned to put it mildly and demanding some answers.......There is far far more to the story than is being officialy told......

I will be interested to revive this thread in three or four years and see who was right. I have a nasty feeling Ghengis might be correct.

[Global_Global]

On a previous thread it was said to be Ocean Sky all over again. Not sure it is the same as I dont recall that they used things like the bonds mentioned above... VERY interesting.. Boom to bust comes to my mind... :eek:

Is Mr Bogachev still involved with Luxaviation? The story I recall (from Pprune so it must be true! ;)) is that his name was disappeared as an owner when the shares he had were sold to a trust in the Bahama's or similar..

[Sheikh Zabik]

Luxaviation have raised 30 million eu last year and bought three companies Unijet, LEA and Masterjet. So it looks suspiciously like 10m per company.

The issued bonds carry a floating rate but appears to start at over six percent. Not cheap money!

So thats two million in interest a year just to buy the companies from their existing owners and before any value is added!!!! Plus of course there is all the overhead of Luxembourg to now carry.

That is two million in profit .....not turnover each year that they will be expecting at the very least to get back from those companies to service the cost of what has been borrowed to buy them!!!!!

Absolutely no way is this possible....none of those companies have ever made anything like that sort of net revenue.

So far as making any capital repayments...let alone by bond maturity dates..not a chance.

(Well I suppose they could always issue some more bonds to buy some more companies and use a bit of that to cover it........but all that is happening is an ever increasing debt mountain....)

So what on earth is going on?

Wake up guys!!!!

[His dudeness]

Someone in business aviation for 40+ years has once told me:

what grows very, very fast collapses after a while with the same speed.

For now, after 25 years in the same field I got to say, this saying has proven correct time after time.

Maybe Luxaviation proves it wrong, after all corporate taxes seems to be very low in LUX (Amazon, Skype anyone ?) and with that 'likeable' chap Junker at the helm of the EU, maybe they will succeed ?

We`ll see....

[Tinytim]

Not a Ponzi scheme which of course is illegal but sounds like a near relative.

This will go bang!....the only question is when.

[Ghengis Cant]

Interesting to observe that since Luxaviation took over LEA their fleet has shrunk and some of their most experienced crew ( flight deck and cabin) have voluntarily left.
How does that reflect on any Lux plan to take over the GA world?

[Deep and fast]

http://www.flightglobal.com/news/articles/luxaviation-plans-five-fold-fleet-growth-through-company-408628/

[Booglebox]

Here's a working link (http://www.flightglobal.com/news/articles/luxaviation-plans-five-fold-fleet-growth-through-company-408628/) to deepandfast's article

[Global_Global]

Wow 500 aircraft by simply buying companies that most likely make no money. :rolleyes:

Is a bit like the 100 aircraft craze that all these new start up air taxi companies were shouting about 10 years ago.:eek:

I am getting to old for this stuff... Congratulations to the shareholders selling their companies to LUX: finally some people making money in Business Aviation :D:D:D:D:D:D:D:D:D:D:D:D:D

[Ghengis Cant]

Nicely put Global.
Reading the hot air blooo hah about rivaling net jets is palpable bollux£s. Net jets are a cohesive world wide operation with centralised administration, marketing, training,crewing and ops.
Every time Lux buys another company it is doubling up again on overheads.....as it leaves all existing management structures, training, crewing and operations exactly as they were.
from anecdotal and direct comment from the guys and gals in LEA Lux head office is not remotely interested in getting involved at a local level, preferring to leave it to the existing organisation. You even have the ludicrous situation where lux companies are competing with each other for business!!!
For sure the lucky shareholders who sold out are laughing all the way to their bank..........but there is a dark side to all this as alluded to earlier.

[Delta12]

All this only to be...........#2 :D:D:D:D:D:D:D:D

Wouldn't bet a dime on them :8

[Harburn]

The crap that I read in this pages are rather amusing, especially from Global_Global!

Luxaviation is a financially sound company with a great plan. They are acquiring well established and profitable companies. Their consolidation plans are in line with the industry trend and they will succeed, despite what some idiots in this pages are saying.

Probably better for some people if they stick to flying aircraft and leave the business part to someone else

[Delta12]

Bit concerned ? :}

[Global_Global]

You are welcome Haburn and thank you for your constructive remarks! :8

As we have no clue about this industry we leave "the business part to someone else" while we at the pointy end end up in the sh!t when great ideas and plans go bust and f@ck up my and other their careerplans let alone out of money..... So excuse us on this forum trying to figure out where things will go wrong next time as well as where things are (or at least seem!) to be working...:rolleyes:

Having seen too many of your type coming in with your Merc's with great powerpoints about win win's that end up loosing too many people money. I have a slightly different view on the world. Call it experience :ouch:

[Tinytim]

Ah Mr "Harburn" .........;).....How you must be enjoying your new Range Rover and bulging wallet.

Now reference all these pesky posts about your benefactors........I guess if something looks like an elephant, smells like an elephant and sounds like an elephant then most people ( certainly those who inhabit the PPrune shark- infested waters) would conclude it probably is an elephant...but of course we are only idiot pilots.

You get my drift fellah?:O

[H.Finn]

"Well established and profitable companies"...are there any in this business, especially profitable ones?

I'm afraid there will be a huge corpse in the end of this path.

[Global_Global]

mmm now this becoming interesting... I am starting to bring the popcorn out! :D

Any hints on who the operator is by giving us the homebase or main aircraft types? :ok:

[Coolmore M.]

Luxaviation is a financially sound company with a great plan. They are acquiring well established and profitable companies. Their consolidation plans are in line with the industry trend and they will succeed, despite what some idiots in this pages are saying.

sounds as the "HUNTER" strategy

[Booglebox]

Global_Global, if you take this post (http://www.pprune.org/biz-jets-ag-flying-ga-etc/274553-looking-management-company.html#post3276523) and place it in the context of the third paragraph of this article (http://www.flightglobal.com/news/articles/luxaviation-plans-five-fold-fleet-growth-through-company-408628/), a possible deduction can be made. :8

[CL300]

It is amusing on how short the memory is for some people. This scheme will collapse like all the others, just because it cannot stand a slow growth.
Not being a crystal ball reader, but barely looking backward to contemplate the various disasters of great plans of 100+ planes in Europe.
The guys whom poured money in the pot like there was no tomorrow is Netjets, dreaming of a fleet of 200 planes, scattering ( overcasting) the skies, with the infamous "Skyshare", then " Fraction", is now utterly proud to manage to land a Phenom 300 in LCY, two years after operating them. They are barely having what ? 70 planes planes flying ? Got rid of hundreds of pilots, and virtually disappeared from the market. ( european that is)
At the same time there was the Flexjet scheme, that collapsed soundly as well.
Examples are so many, that a full forum will not be enough.

It is not by pairing donkeys that you make a yearling, especially, when neither of them are required in this economy.

I do therefore agree with the more than certain collapse of this new entity, with hundreds of millions in debts, and another layer of pilots looking for jobs. It is just a matter of time. :ugh:

[Delta12]

2 years NetJets operates the P300 ?

Get your facts straight before talking rubbish :rolleyes:
The downturn hit all the companies, many not existing any more. Compared to this I'd say NJ rather good weathered the storm.

Haters will hate :hmm:

[CL300]

very sorry my lord, the P300 appeared on the Snapshot on October 9th, 2013...

But was flying a bit before...so 16 months operational... very sorry for this approximation. :ugh::ugh:


Netjets will have to adjust the wings one more time, this is it... NJE not USA..

[Delta12]

NetJets will have to adjust their Wings many more times, Europe as well as US !

Thats called economy, if you know anything about an adjustment I am not aware of, PM me ;)

[westhawk]

This scheme being referred to in this thread is reminiscent of something that happened in the USA a few years back. With some differences in financial arrangement, the basic theme of trying to corner the lions share of the bizjet charter and aircraft management market is eerily similar. Potential monopolies ALWAYS promise "economy of scale" cost benefits and rarely if ever deliver them to the consumer!

In this business case, there are two primary 'consumers": The aircraft owner and the charter customer, who between them provide almost all of the income to the business. Conventional wisdom would dictate that the profit for the management/charter company is the margin between money paid out versus money paid in. Business 101 you say? Not quite so simple?

You bet it's not! A highly competent charter/management company owner can build up a healthy net worth over a period of 20 years managing a small outfit of just a few aircraft. And only by operating in that thin grey margin between honest provider of services and slippery con-man. Allot of hard work and a significant risk of failure. It only takes a very few bad judgments or an unforeseen business hazard to define the difference between profit and financial ruin for themselves and everyone who relies upon their existence. Not a business for the incompetent, the undedicated or the uninformed. These qualities, along with a "quick buck" mentality usually define the less than successful business. But that does not preclude the potential to make big bucks fast by getting "investors" into the game!


A company which did business under the name "JetDefect Aviation" and funded by an (not named here) "Equity Investment Group" followed a pattern very much like the scheme described up thread. During a period of less than two years, they proceeded to buy TAG USA, The Air Group and at least 7 other privately owned management/charter outfits. I worked for one of those companies acquired. At it's peak JD managed over 200 business aircraft across the USA from King Airs and Lears to long range large cabin jets. All the same hype abounded about how "economies of scale", "market growth" and (wait for it..) "synergy" would assure great success! Yeah, we were all gonna be making bigger bucks real soon and the charter customers and jet owners would be flocking to our doors to access our "superior product"! (all this while their lack of understanding of the "personal relationships" nature of the business was already showing)

Then reality started to rear it's ugly head. Income was down, costs were rising as charter customers and planes started leaving. The management business owners who had sold out to JD and stayed on as managers were collecting their salaries and spouting the company line even as they scrambled to establish new certificates and woo the airplane owners away. Things continued to decline as layoffs and then payroll shortages began. They even got a number of pilots with an afinity for Korporate Kool-Aide to float trip expenses on their personal credit when the corporate cards stopped working and FBOs refused to fuel without full payment on the spot. The number of pilots at my base had gone a high of from more than eighty to fewer than ten. I was one of those last few. We knew what was coming but there wasn't many places to go. Then one day the music stopped. The company declared bankruptcy and got out of paying almost all moneys owed to employees for expenses, salary and benefits. I was more fortunate than many but still lost my job and a couple of months worth of accrued salary and vacation pay. Better than the pilots and cabin crew who had covered expenses though. In fact my last Europe trip wouldn't have happened had not the airplane owner advanced us 150% of the projected trip expenses. Honest fool that I am, I actually refunded him the unused funds even as JD pocketed my money... (having a clear conscience hurts sometimes)

Well sorry for the long story. I just wanted some of you to see what might be on the horizon. It's something you should be prepared for as a corporate or charter pilot. It can happen to you too. And the kicker? The guys who set the whole JetDirect Expansion/buyout scheme up in the first place remained rich, got richer and will continue to do so as long as people are attracted to the concept of "easy money". It WAS a pretty good run while it lasted though. I try to remember that whenever I feel a bout of bitterness coming on.

For those in a position that requires you to believe otherwise that's your business. Feel free to disregard. No sense in responding to this post though. Just keep believing. And preparing...

There's a sucker born every minute. (and aviation is rife with 'em!)

westhawk

[Ops Watcher]

On a smaller scale did not a company devastate the UK helicopter market in recent years by buying a lot a good operators and then going into liquidation?

[Propellerpilot]

Thanks for sharing that story, westhawk. Quite couterptoductiv to keep people “highly motivated“ and asleep... why continue to work extremly hard and always go the extra mile, if doom lurks around the corner and the gain is pocketed by those bull$hitt talkers and promisers ? Oh, but always stay positive....

[Above The Clouds]

OceanSky rings a bell :eek:

[Harburn]

It seems that everyone is an Industry Guru on this site! Some people are so brave, hiding behind pseudo names and firing unfounded accusations and “funny” comments! As you have my contact details, why don’t you contact me and tell me what you think???

The facts speak for themselves, we have been in the business for 20 years, offered employment to hundreds of pilots over the years and continue to do so for many. Some of them continue to be personal friends. We built the Company with the help of everyone and we are really proud of this and what we have achieved. The fact that we are flooded with applications from pilots also speaks for itself.

At the same time, we were pleased to see the back of many…the selfish, lazy whingers that did not fit in our Company. “Tinytim” – your style reminds me of one of them that we eventually managed to get rid-off some time ago. “Do you get my drift fella”???

I fully sympathise with some people’s concerns and Yes, this industry has been full of failures. However the good ones always find jobs and sometimes even better ones!

I was a pilot for many years and I do know what it is like to have to get up at 2am to go flying, in bad weather, with demanding passengers. I never let that faze me and more importantly I never criticised the hand that fed me, always supported my employer, even when I did not agree with their decisions. My advice to you guys – stop been part of the “Doom and Gloom” brigade, be positive and support your company…whoever you work for. If the company succeeds, hopefully you will get the benefit yourselves. Positive attitude guys in every part of your life…it works!

No need to “get the popcorn out” Global-Global…some of us have business to run, so I will not be reading further. As I said, you can contact me direct anytime, if you have anything constructive to say! :)

Good luck to all with your careers!

[BuzzB]

Well Harburn you certainly took the pprune bait! And in doing so not only revealed beyond doubt who you are but also what you are.
Your arrogance and attitude to your work force sucks ....
You have already called most on this forum idiots and now transparently use it to threaten your employees not "to bite the hand that feeds" them....as there are plenty out there waiting to take their jobs.
The very reason people use Pprune ( you hypocrite as you are using it yourself!) is to give them a voice against people like you who pretend to listen but in reality manipulate the next round of redundancies to get rid of anyone who dares question you. Instead of which you surround yourself with compliant ( and in one case severely incompetent and damaged) yessmen to who, in any other circumstance, your loyalty might be seen as endearing.
Reference those "unfounded" rumours. you know the truth as do we all.......
And yes I do work for you.....but rest assured my hand is on the red ejector handle...as i see no future here for the above and all of the other reasons Which others far more clever than me have given.

[Propellerpilot]

I can confirm - to question or to task management with any issue, even mentioning flight safety concerns can be a very serious offence in this business and automatically labels that person a troublemaker that "does not fit" even if they are actually being professional and are just minding to do their job. To live and practice what you have learnt in CRM and all those courses that they (or indirectly their clients) pay a lot of money for in order to produce a clean company training record on paper to the authority, has serious potential to end in conflict when challenged. It is such a contradiction.

That is probably also why so many spineless wonders make it climbing the corporate ladders with their elbows in this business.

"You better turn another "blind eye" to that paragraph in in the OM because we expect it from you - otherwise you are no longer a part of this family...".

No offense, I am not implying any company or any particular persona in particular here - it is just a part of the reality that I have experienced, not only once. It is no wonder that many collegues are feeling burnt out after serving this business for many years.

For people like Harburn - it just reads to be the normal wear and tear of the business he rules.

[Sheikh Zabik]

If there is one scrap of genuineness in Luxaviation's stated intention to try to build an industry leading and industry defining operation they should jump on this skanky low- budget flying club behaviour from a great height.
The management style of Harburn belongs to that of a seventeenth century mill owner.
Strange concept for Harburn to grasp I know but your employees are your greatest asset. Treat them with fairness, honesty and respect and not lap dogs to come wagging their tails when you call.......and you might be surprised at the pay back.

Mr Hansen........Are you listening???????

You certainly talked the talk what with all your forums and employee surveys about their perception of management ( whatever happened to that.....?)

Time to walk the walk Mr Hansen .....if any of us are to begin take you and your great plans seriously.

[Stupidbutsaveable]

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.

[CL300]

Stupidbutsaveable
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

No worries, just a bare look at numbers and propaganda. I was right EVERY TIME since 2003 ( some biases in the process, like i did not see that they would chop from the top of seniority list, but the numbers were right)

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. :suspect::suspect:

[CL300]

Industry Blogs : Aircraft Interiors International (http://www.businessairportinternational.com/industry-blogs.php?BlogID=1291)

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.

[Delta12]

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 :yuk:

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.

[His dudeness]

Everyone agreed that in today’s market, there is a direct relationship between aircraft numbers and business success.

Which is true as "our" regulators have set out to destroy small business (not only in aviation, that goes across almost all business fields)

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.

[flynowpaylater]

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.

[Propellerpilot]

Didn't Richard Quest have this advert running continuously on CNN, that there are more billionaires around these days... better get your slice of the pie... ?
Strange.

[flynowpaylater]

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

[CL300]

I would be interested to hear others opinions on the rationale of the finances involved with private jets.

This will cost you a lot of money :-) Your reasoning has at least two major flaws in it; but this is normal from your side of things.

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..

[Booglebox]

There are now less of them

I agree more-or-less with everything you said, except for this.
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! :cool:

[flynowpaylater]

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.

[suitcaseman]

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.:ugh: All that duplication of multiple AOC's - I just don't get it! But I'm just a driver.

[flynowpaylater]

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.

[Global_Global]

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 (http://en.wikipedia.org/wiki/Nikolay_Bogachyov) :confused:

[BuzzB]

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?

[Global_Global]

Haha did a search on Mr H and yes he must be reading this as it is even on his CV :D:D:D:D:D:D:D
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.

[Ghengis Cant]

Since 2006, he runs EDISON, an M&A boutique which he founded.

For those not familiar " M&A" means "Mergers and Aquisitions"

..................All about the business of building a business in other words....and all the commissions that go with it.

[Encorebaby]

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.

[flynowpaylater]

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.

[BuzzB]

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.

[Booglebox]

Why are they not consolidating everything under a shared, central office? They can keep their various AOCs and save a huge amount of money, and produce a more consistent service too. :confused:
I don't understand their plan - but I'm not in charge of an AOC (or a group of them) :}

[BuzzB]

Why are they not consolidating everything under a shared, central office?
That is the biggest question and so long as we are dismissed as idiots for asking it or told to refrain from engaging in social media exchanges about this.....this thread is going to run and run.
The evidence from those of us at the coal face is that Lux are just not interested in getting involved on a local level by consolodating everything and have done nothing tangible to show they are interested in dealing with management issues that are well known....despite the fact they are directly damaging the company.
Nothing has come of all the surveys where they paid lip service to engaging with workforce concerns ....so it is back to flying-club type management business as usual. In the meantime we are loosing aircraft and staff who are voting with their feet.

[CL300]

In the meantime we are loosing aircraft and staff who are voting with their feet.


Well, this is it , you have the plan, and pocket the depreciation asset on the consolidation buy-out...

[Sheikh Zabik]

Came across this quote from Warren Buffet....pretty much the most successful and wealthiest investor in history.

"In the grand scheme of things, most financial and dealmaking activity is essentially a waste of money, serving largely to enrich advisers and executives without benefiting investors or those who work in the companies "

[LGW Vulture]

Rumours are that this little alliance might take the form of something more substantial:

NasJet | Homepage (http://www.nasjet.com.sa/News3.aspx)

Good luck LUX if you think that this entity could be turned around - notwithstanding the ownership issues involved. :uhoh:

[mutt]

Good luck LUX if you think that this entity could be turned around Why do you think that they need to be turned around?

[LGW Vulture]

Due to the fact they've never made money and continue to lose it hand over fist. Crises of late payments of which many don't ever get paid owing to grace and favour flying.

[mutt]

Interesting answer, thanks... I always love it when "consultants" think that they can "turn around" Saudi companies, but at least in this case they appear to be putting their money where their mouths are.....

[Booglebox]

Is NASjet one of those companies that is owned by a rich bloke so it can never go bust?
Also, how much "turning around", if any, have Luxaviation done with their other acquisitions already?

[LGW Vulture]

Read carefully:

NAS Saudi Arabia | Kingdom Holding Company (http://www.kingdom.com.sa/investments/aviation/nas)

The profitable / potential profitable bit is FlyNAS - the low cost subsidiary!

[Knell]

Then ....
I have heard that NasJet shut down ? Truth or rumours ?

[Sheikh Zabik]

As this topic has been dusted off have a look at this.

China Minsheng Investment Seeks to Buy U.S. Private-Jet Company - Bloomberg Business (http://www.bloomberg.com/news/articles/2015-10-30/china-minsheng-investment-seeks-to-buy-u-s-private-jet-company)

With Russia, China, oil and markets in freefall.....seems Lux owners have cashed in a tidy profit already by selling one third to China Minsheng and, interestingly.... half of Execujet.......

Hedging their bets.... whilst chill economic winds must be absolutely clobbering their recently acquired companies.

[Delta12]

Does that mean LUX is now run by the Chinese ? :sad:

[Sheikh Zabik]

Just heard the chief pilot of LEA has flipped his canopy and bailed out......seemingly with great haste.
Shame ...as he takes with him integrity, experience,decency, the respect of his pilots and Good judgement.

Qualities that will be sorely missed by those he has left behind.

Wonder where all this fits in with the grand scheme of the Alchemists from Luxembourg?

[Sepp]

Great shame, that. Top bloke - enjoyed flying with him when he was a co-jo in the C550 and later working for him after his elevation.

[Sheikh Zabik]

There appears to be a stampede for the exits in LEA ( at a senior level).........what IS going on?????!!!!!!

[sellbydate]

Everything being merged with Execujet UK HQ perhaps and so duplication of capacity/roles being eliminated?