How will the Biz Jet Co's fair?
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How will the Biz Jet Co's fair?
Given the demise of SilverJet, EOS and Maxjet with fuel costs cited as a major contributor to their respective downfall, I wondered what the thoughts were about the the strength of companies like TAG, Gama and other UK based Biz jet companies given the predicted downturn within the economy?
Will their business continue to thrive given their niche market and grow given the shambles of UK's main gateway airports? OR will some go the way of these airlines? Just how strong are the Biz Jet Companies?
Any thoughts?
Will their business continue to thrive given their niche market and grow given the shambles of UK's main gateway airports? OR will some go the way of these airlines? Just how strong are the Biz Jet Companies?
Any thoughts?
Last edited by OnTheLocaliser; 4th Jun 2008 at 16:01.
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Let me see,
10,000 confirmed deliveries over the next 12 years, coupled with the fact that in Europe 100,000 city pairs are not serviced by the airlines.
The industry will feel the effect but only at the bottom end of the market, the CJ's 550's, TP's; the business end that services the entry level client that has a bit of disposeable income and wants to fly a jet to NCE, PMI and the like.
In the top end of the market, CL's G's DA's. there has historically never been a downturn, they service the clientele that will always have money, that will never fly the airlines and that have schedules that are impossible to meet with the airlines.
Even if the downturn in the economy last long term, and I mean years and some owners need to sell their assets to free up the cash; they will not return to the airlines but will continue to charter.
Also the top end of the market services destinations such as India, China, CIS, ME that no matter what happens to the economy will always need to be serviced.
And keep in mind that here in the UK we live on an island there is no other means of travelling.
I am confident about the future, even doubling or trebling of the cost of fuel will not have a significant effect on us as fuel is only 5-7% of the total cost of operating, unlike the airlines.
Try me out, call around and book a CL or G for 7 to the States or ME; you cannot find availability in Europe.
The majority of the heavy metal is and always will be privately owned, can you imagine a wealthy owner of a G going back to checking in at LHR after having had his machine for 20 years?
In 25 years of flying worlwide I have never had an owner ask about the price of fuel, if you have to ask you can't afford it.
10,000 confirmed deliveries over the next 12 years, coupled with the fact that in Europe 100,000 city pairs are not serviced by the airlines.
The industry will feel the effect but only at the bottom end of the market, the CJ's 550's, TP's; the business end that services the entry level client that has a bit of disposeable income and wants to fly a jet to NCE, PMI and the like.
In the top end of the market, CL's G's DA's. there has historically never been a downturn, they service the clientele that will always have money, that will never fly the airlines and that have schedules that are impossible to meet with the airlines.
Even if the downturn in the economy last long term, and I mean years and some owners need to sell their assets to free up the cash; they will not return to the airlines but will continue to charter.
Also the top end of the market services destinations such as India, China, CIS, ME that no matter what happens to the economy will always need to be serviced.
And keep in mind that here in the UK we live on an island there is no other means of travelling.
I am confident about the future, even doubling or trebling of the cost of fuel will not have a significant effect on us as fuel is only 5-7% of the total cost of operating, unlike the airlines.
Try me out, call around and book a CL or G for 7 to the States or ME; you cannot find availability in Europe.
The majority of the heavy metal is and always will be privately owned, can you imagine a wealthy owner of a G going back to checking in at LHR after having had his machine for 20 years?
In 25 years of flying worlwide I have never had an owner ask about the price of fuel, if you have to ask you can't afford it.
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"How will the Biz Jet Companies fair?"
I think charter companies will be hit as hard as the airlines. The fractional outfits will also take a hit.
The super rich who own their aircraft will not notice the fuel price increase, as mentioned above. For some of them, it is just "loose change."
I think charter companies will be hit as hard as the airlines. The fractional outfits will also take a hit.
The super rich who own their aircraft will not notice the fuel price increase, as mentioned above. For some of them, it is just "loose change."
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cldrvr wrote:
...the cost of fuel will not have a significant effect on us as fuel is only 5-7% of the total cost of operating, unlike the airlines...
...the cost of fuel will not have a significant effect on us as fuel is only 5-7% of the total cost of operating, unlike the airlines...
Your aircraft must be sitting on the ramp almost all year (contrary what you indicate) to get a rate of fuel cost anywhere near 10%!
Disclaimer: I fly in the (expensive) NE of the US and our price of 1 gallon of Jet-A varies from $5 to $6.5 and I calculated 488 gal/hr (1854 l/hr) for the GII and 116 gal/hr (441 l/hr) for the CJ1.
I am no beancounter or math professor but the more you fly, the HIGHER is the percentage of variable cost per hour (say: fuel cost plus maintenance) versus fixed costs, right? In order to reach your 5-10% you could only fly about 3 hours a month on a CJ1 (incl. lease payments!) or 1.5 hours on a GII (financing not included).
Fly an average of 30 hours a month (I guess not unrealistic on your side of the pond either, hu?) then your ratio for fuel goes up to 35% in a CJ1 or 54% on the GII!
Let me at last agree with your last statement: "If you have to ask about the price of fuel, you can't afford it".
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Fuel price increases have caused our CJ's to have an increase in price to the punter of £90 per flying hour in the last 3 months, thats nearly a 10% increase (78hrs a month per airframe on average, 1:40 average sector length).
As long as you monitor your fuel price it's not a great problem, it goes onto the bottom line and the top line (apart from bookings taken a while in advance). As long as all operators respond to the price with a rate hike it's a level playing field and shouldn't affect business levels too much, if at all. The problems start when (as we have done in the past) you focus on sales instead of cost accounting and look back and wonder why your margin was so crap last quarter.
Do the fractionals have a method of increasing cost if fuel goes up, like a fuel surcharge?
Phil
As long as you monitor your fuel price it's not a great problem, it goes onto the bottom line and the top line (apart from bookings taken a while in advance). As long as all operators respond to the price with a rate hike it's a level playing field and shouldn't affect business levels too much, if at all. The problems start when (as we have done in the past) you focus on sales instead of cost accounting and look back and wonder why your margin was so crap last quarter.
Do the fractionals have a method of increasing cost if fuel goes up, like a fuel surcharge?
Phil
