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Fractional Operations Dunnunda

Old 15th Feb 2009, 13:18
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Fractional Operations Dunnunda

Europe and the US have seen massive growth in fractional operations but as yet there seem to be virtually no companies trying to get into this lucrative market Dunnunda. While I'm aware that the CAR doesn't provide explicitly for fractional operation (a la FAR 91k) what else precludes this type of operation in Australia and New Zealand?
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Old 15th Feb 2009, 13:23
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what else precludes this type of operation in Australia and New Zealand?
Money and available work to sustain the aircraft. Its a very small market over here compared to the US.
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Old 15th Feb 2009, 13:31
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That's true but then NetJets Europe do quite well. Again Europe is a densely populated place but Australia has historically needed aviation because of the sheer size of the country. London and Australia are similar in terms of populace (ish) and there are 6 airports geared up for business operations in the M25 area. The whole point of fractional ownership is that it should reduce costs and make aircraft available to more people, which I believe is why it does so well in the good old US.
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Old 15th Feb 2009, 14:02
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Fractional operations rely on population density to provide them with the good chance of a return passenger load, once they have dropped off their first customer of the day. I.e. Pick up in London, drop off in Barcelona. Pick up in Barcelona (or some place near, like Nice) drop off in Berlin etc. That is the economy of scale which makes fractional ownership cheaper.

Australia is large, yes, but a great may of the business operations involve mining concerns - from a major city to a country town. No chance of return revenue there, so fractional ownership doesn't have the scale economics available in the US or Europe.

The overall size of the market is another factor. When you are sharing your aircraft with another, availability becomes an issue. That issue reduces proportionally with the amount of aircraft in the fractional operator's fleet. NetJets in Europe operate 160 aircraft now, so one is guaranteed to be available (within 10 hours) for any call-out. For an Australian fleet, maximum, say 10 aircraft, it would be annoyingly common for the 100 customers or so to be met with a "sorry, the fleet is busy now, we can accommodate you in two days' time.."
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Old 15th Feb 2009, 21:25
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I think that it has been tried before. GoJet at Wollongong were offering a fractional ownership program. It "COULD" work but i dont think in the short to medium term it would really work out.

Not unless you had a Bond or Packer on your side
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Old 15th Feb 2009, 21:56
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A 'syndicate' type operation may well work, especially if all the companies were known to each other. I can't see fractional working, except maybe using VLJ's...
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Old 16th Feb 2009, 06:34
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Frac's in Oz ????


You gotta be kiddin, right???

Seriously though, its been tried in many different ways. Wasn't the whole business class idea the birth of Ozjet. And haven't we done this all full circle before. Trunk routes as still more affordable to be done business or first class in someones elses airplane, ie red rat, than on one that you have to pay for, all be it fractionally. Yes the concept is working overseas, but we have the alternative, much to all our disappointment, here with the domestic's.

On the other hand, the government have their own unofficial RPT about the trunk routes in Tax payer funded corporate machines taking back benchers on holidays. We all pay our taxes, so lets all hop on board any time we like.

Be safe out there!!!!
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Old 20th Feb 2009, 03:26
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The Netjets model here in the US was built on a 50% utilization factor - ie 50/50 revenue/ferry, so a revenue out and ferry back might be feasible.

As far as the guarantee response is concerned in the US its 4 hours, but Netjets owners also understand that if we can't get a QS tail to them in that time we can send them a vendor aircraft. So a fractional operation has the option of using the existing charter fleet as necessary.

I think the big issue is demand.The Australian population last time I looked is 15 million plus. The population of California alone is over 36 million. Here in the US Netjets flys 70+ Citation X's (the plane I fly) while in Australia I believe there is 1 (VH-TEN).

Netjets was talking about starting an Asian devision (before the current economic woes) but my guess is that it will be centered around China. If they ever do start an operation in Australia I'll be the first to sign up
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Old 20th Feb 2009, 03:40
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It's not just popultion density, it's route diversity.

A company that has a head office in Pig-Knuckle Arkansaw and a plant in Mind-Numb Wisconsin would probably require a regional flight to a large city, an aircraft change at a hub, then another regional flight to connect the two, or go non-stop in their Biz-Jet.

Australia has many fewer population centres, all reasonably served by airlines, and with most businesses based in the major cities.

With fewer dots to join, the attraction of an expensive Biz aircraft falls exponentially.
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Old 20th Feb 2009, 04:02
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What WizofOz said.

RPT serves the major population hubs already, so no need for a more expensive option no matter how convienent it is.

In the US the population is all over the place (look at what is defined as LA and then tell me where the low population part is between there and San Fran for example. There's people everywhere and they all need to travel through the hub and spoke system the RPT's have. Pain in the arse if as Wiz said you want to go from regional to regional.
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Old 20th Feb 2009, 04:27
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Flog and WizofOz, you two make good points. It makes a lot of sense if your flying between city pairs that are not covered by the RPT's.

Having said that I flown a lot of people between major city pairs such as New York and LAX. Why would they go fractional when they can buy a first class ticket on a RPT for so much less?

Less stress - your limo drives you out to the airplane - we load your bags, give you a safety briefing and 10 minutes later we're departing. At the destination, your limo meets you plane side and your on your way.

Privacy - during that 5 hour flight from New York to LAX you have the plane to yourself - a very productive environment.

Service backup - as I said above - your plane breaks, we guarantee a recovery within 4 hours - very often its way less than that. A lot of fights I do have an aircraft standing by in case I break.
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Old 20th Feb 2009, 04:34
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3green, IMHO we don't have the wealth over here that are willing to spend like you're LAX to JFK pax. And the company boards of associated high rollers see tall poppys when they start spending like that on their own transport. Out come the scyths.
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Old 22nd Feb 2009, 09:49
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ThreeGreen, another aspect that makes fractional ownership attractive in the US is the general congestion, inefficiency, and shabbiness of most major airports in the US. The pain and time of domestic travel in the US makes the bizjet system seem much nicer in comparison - in Australia the RPT does a much better job.

If we just focus big city pairs like NY/Chicago or NY/LA and compare this to Sydney/Melbourne or Sydney/Perth:

Sydney - airport close to the city, large, clean and efficient.
New York - Newark and JFK are far from the city with horrible traffic in between. LaGuardia is a dump and highly congested. Cabs are dirty and unsafe. (One option for this demographic, though is connecting helicopter flights to downtown).

LA and Chicago also have highly congested, generally shappy airports - weather delays are extremely frequent in Chicago, and in LAX you may have to wait an hour for your gate if things aren't running smoothly. And LAX isn't near where you want to be most of the time - as someone else pointed out the LA metro is huge.

On the AU side, Melbourne airport is a little further and not quite as nice and new-looking as Sydney, but still quite efficient by US standards. Perth is overloaded but still friendly and the airport is close to the city.

In all US airports you must arrive 1.5 to 2 hours prior to departure to clear security. Washington-Dulles airport for example has security lines that are literally a half-mile long. Elite status helps a bit - priority lines - but not everyone who flies in bizjets is really that frequent a traveler. The US TSA is a joke. In comparison, I've never waited more than 10 minutes in security lines in Australia and that was at the Sydney international terminal - at domestic terminals the wait seems more like 60-90 seconds average. I've arrived at the airport as late as 15 minutes before departure (without bags) and been let on my flight. In the US you'd be lucky to get the next flight an hour later with that arrival time!

I once made it from my office in the Sydney CBD to the gate lounge, waiting for my flight, in 23 minutes. In New York, even for LaGuardia, you would be very happy with 1.5 hrs. Then your flight to Chicago could take 2-3 hrs despite being about the same distance as Sydney-Melbourne, due to congestion at both airports and airspaces.

By my reckoning, another interesting advantage of the Australian system is that because almost all business travel is on one carrier, there are so many flights that flexibility is easy. There are so many carriers with a piece of the NY-Chicago pie, for example, that flights are likely less than once per hour on any particular carrier, and the next one might be fully booked. That can't compare to QF's every-15-minute SYD-MEL service during peak periods.

So by my book Australia should be proud of its RPT system, but that will make it that much harder for bizjets to be so successful.

--JP (Yank, migrated to Sydney)
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Old 22nd Feb 2009, 13:54
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In response to all here, 3Green & Wiz have it.

Australia's population density and essentially centralised manufacturing and service industries, combined with high levels of RPT make the fractional program not viable.

If you have 4 customers for an aircraft and they all want to go to the footy grand final then you have an issue because it would be hard to get 3 additional equivalent sized aircraft at any time in this country.

The NJ policy of max response times in the US and Europe work well but even we have a tough time in the sandpit sometimes to satisfy everyone.

I am a current Netjets pilot and most of what here is bible, we at NJME are slightly different in the same way that NJ Asia (the next to kick off) will be.

That is we are franchise's of NJA essentially. We do the same thing to the same standard and we regularly have NJA/NJI/NJE customers on our aircraft and the service level is standardised.

Big issues are business ownership rules and in the case of China, opening of the lower airspace to "GA" without having to get military clearance to get to the out of the sweatshops.... ops manufacturing facilities.

In addition to being part 91K we are also 135 and do the odd charter for non NJ customers that are usually brokered for premium clients that want high levels of service among a thin bunch of operators.

Bring on Asia and if they ever did Oz I suppose I would be right behind ThreeGreen with my hand in the air even though I doubt it would ever happen.

As we ride out this current blip, the few owners that do have jets in Oz will barely change ops tempo where as in the rest of the world they are hurting, this is because those that have private aircraft here have budgets in the millions for their aircraft where the charter market has died in the arse in Europe and most of NA.
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Old 22nd Feb 2009, 18:52
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Melbourne airport is a little further and not quite as nice and new-looking as Sydney
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