When time is money

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Perception remains that private aviation is a luxury many corporates can’t afford, yet how many of those same corporates have ever done a detailed cost analysis on this business travel option and put a price to their own time? Richard Holmes asks that question.

Time is money, and the hours in the day a commodity to be used as profitably as possible. Chances are that’s unlikely to include spending long unproductive hours on the cold metal chairs of an airport terminal, waiting for a flight delayed by hour after tedious hour. You may be fortunate to have access to a business class lounge and the creature comforts that come with it, but that is of little help when it comes to getting the job done.

That’s the attraction of private aviation, creating a scenario whereby you dictate the schedule: when to leave, when to arrive, and just how much comfort is required on board.

“For the business traveller, it’s all about saving time… with a private jet you are so much more productive than if you have to travel commercial,” says Neil Turnbull, Chief Operating Officer of Vertis Aviation. “It literally buys you time.”

While few corporate travel managers would dispute the timesaving benefits of chartered air travel, they are perpetually balanced against the often-considerable cost implications. In certain instances, and taking lost productivity of skilled workers into account, the cost of chartered air travel can be on a par with commercial alternatives, but most of the time that convenience comes at a hefty price. And, as economies slow and budgets are tightened, private air travel has come under increased pressure.

“A slower economy has a natural consequence of reduced travel budgets for many corporations who have enjoyed the benefits of private air travel,” explains Gavin Kiggen, Flight Operations Director, Africa for ExecuJet Aviation Group, which offers charter and maintenance facilities in Johannesburg, Cape Town and Lagos. “The resource extraction companies have been driving the use of aviation services. With the general decline in commodity prices, there has been a corresponding reduction of use of air charter.”

It’s not just the corporate sector that is keeping a careful eye on the cost of chartered air travel.

“Non-governmental organisations seem to be cash-strapped, and tourism is under pressure,” says Dylan Coppard, Chief Executive of the Johannesburg-based Angel Gabriel Group. “The corporates and high net worth individuals seem to be holding their ground though.”

As in so many sectors, a diverse client base is key to navigating the often-turbulent world of doing business in Africa.

“We have seen a consistent growth in our charter services,” reports Bjorn Ischner, General Manager of Fireblade Aviation at Johannesburg’s O.R. Tambo International Airport. “Our charters are not dependent on one sector, so as one may slow for a while, another may grow, and overall we see an upward trend in the charter market.”

Shrinking budgets and softening demand aren’t the only challenge the private aviation industry has had to deal with. The Ebola outbreak in West Africa put a major dent in demand in that corner of the continent, and restricted the movement of skills to and from the region. While the drop in traffic hurt charter companies, it was partly offset by the falling oil price and concomitant drop in the cost of jet fuel.

“The air charter market typically responds very promptly to variations in pricing in any aviation-related cost input, especially fuel, which typically accounts for about 25 to 35 percent of the total charter price,” explains Kiggen. “This is one of the advantages of air charter over airline flying – ad hoc air charter is priced based on current prices, and this is why it sometimes happens that the same route using the same aircraft in the same month may vary in price.”

However, “aircraft are dollar-based assets with dollar-based parts and maintenance,” reminds Coppard. “We have found that any savings made on fuel have gone directly toward increased maintenance cost due to a weaker rand.”

Along with shrinking demand, cost-conscious corporate clients are also looking to improve productivity by compressing more destinations into shorter trips. Charter companies report an increased focus on squeezing maximum return out of each ‘mission’, ensuring all seats are filled before take-off. As a result, while the so-called ‘load factor’ for charter flights remains high, “with fewer flights the passenger numbers have declined over the past 12 months,” says Kiggen.

While numbers may be under pressure as clients seek to drive value out of their charters, demand is by no means stagnant. Energy and extraction projects continue to develop across Africa, and with many of them in hard-to-reach locations, private air charter is essential for ferrying expertise to site.

Countries such as Angola, Mozambique, Sudan and Senegal are especially sought-after by charter clients needing to work around the long distances, poor road infrastructure and undeveloped commercial air access. In Mozambique, cities including Nacala, Nampula and Pemba are proving to be popular destinations thanks to the growth of the coal and natural gas industries. Last year, Air BP revamped its fuel services at Nampula airport, while a new $250-million airport opened in the northern port city of Nacala in December 2014.

While investment in aviation infrastructure is encouraging improved air access, commercial carriers are often slow to pick up on new routes – or allocate valuable aircraft – leaving the door open for air charter firms to provide the quickest, and often the only, safe route from A to B.

“For a busy executive needing to visit a number of disparate locations not served by commercial airlines, executive aviation provides a valuable tool, especially in Africa,” says Ischner. “It means that a number of business people from the same company can reach three or four meetings in one day in a number of cities. This kind of journey could take days if left to commercial airlines.”

That applies acutely in Nigeria, where the enormous distances and far-flung commercial centres lend themselves easily to air charter. And, with Nigeria overtaking South Africa as the largest economy on the continent in 2014, it’s no surprise that the West African powerhouse has a vibrant private jet industry.

“Business aviation usage is a barometer of a country’s success, and as economies strengthen we see charter on the increase,” says Achuzie Ezenagu, Chief Executive Officer of Toucan Aviation, which operates corporate charters in Nigeria and the sub-Saharan region. “Businesses are increasingly using charter in Africa, as it is a valuable business tool that helps strengthen economies, due to enabling higher business productivity.”

Bristow Helicopters, one of the largest helicopter transportation services company in Nigeria, is also seeing a demand for executive-level aviation in the region, and recently launched a premium charter service out of its private terminal in Lagos, located near the Murtala Muhammed domestic airport, to the Nigerian Air Force Base in Port Harcourt.

Aimed largely at the oil and extractive industries, although servicing all businesses that require  reliable, safe and efficient transportation between Lagos and Port Harcout, this scheduled service is an evolution of the typical private charter, but plans to provide the best of both worlds: a convenient schedule, executive-level comforts and seamless ground arrangements. 

The service will operate as a collective charter, with plans to operate up to six flights a day using an Embraer 135 with just 37 leather seats.  Clients may pre-book any number of seats each month, and then allocate these seats to individual flights.  A dedicated back-up aircraft will be on standby to ensure the flight runs to schedule.

That’s because timing is everything in this industry, particularly when it comes to private charters.

“With executive aviation the aircraft leaves when the passenger is ready. There is no need to leave an important meeting for fear of missing a flight,” reminds Ischner from Fireblade Aviation. “Alternatively, if a meeting wraps up early, passengers can head to the next destination at their own convenience.”

The time savings of an efficient journey from A to B are far and away the most important benefit of chartered air travel over commercial, but it’s certainly not the only advantage.

For executives wishing to keep their travel plans under the radar, private charter is a discreet way to visit sensitive destinations, while also allowing colleagues to engage in confidential business discussions en route.

“Groups of business people can conduct their business without the worry of who else is on the aircraft overhearing any relevant conversations,” adds Ischner. “Corporate intelligence is a valuable asset.”

Safety and security is another major driver of charter demand. That could include carrying sensitive or precious cargo on board, along with the knowledge that the aircraft is well maintained and the crew highly trained. Nervous flyers are also well looked after by private aviation companies.

“We have had clients with a fear of flying come to us, as we can ensure we re-route to try and avoid turbulence, have the clients talk directly to the crew about any fears so the pilot knows the issues and can file the appropriate flight plan,” adds Turnbull.

Chartered flights also allow for the use of smaller private airside facilities that can offer higher levels of personal security.

Fireblade Aviation recently revolutionised the opportunities available at O.R. Tambo International Airport, the largest air hub on the continent, with the opening of its new facility in the private aviation precinct of the airport.

A R165-million ($13.8m) investment by the Oppenheimer family, the “Fireblade Aviation FBO (Fixed Base Operation) will welcome customers from domestic business and leisure traffic, intra-continental executives and shuttles, global users regularly flying internationally, and heavy metal jets coming from the Middle East, Asia, Europe and America,” explains Ischner.

Crucially, the opening of the new base will allow inter-continental charter passengers to clear immigration formalities in the cool, calm confines of the Fireblade facility.

“Until Fireblade there was no FBO service available for executive aviation – all passengers had to travel through the main terminal,” says Ischner. “As the first FBO to offer full customs and immigration service, this will be a welcome addition to regular business jet travellers as it negates the need to transfer to O.R. Tambo’s main terminal for clearance.”

While it’s hard not to see private air travel as an extravagance, the reality is that in a hyper-competitive business environment on a continent with often-limited transport options, chartered flights are often the only way to get the job done.

And getting the job done is what it’s all about, with private aviation simply another way to make the process of doing business in Africa faster and more efficient.

“Corporations are changing their mindset from the belief that corporate charter is a luxury to the understanding that it is a business tool. The same applies to high net worth individuals and government officials,” says Ezenagu. “The consequence is that business travellers no longer lay so much emphasis on the bells and whistles of the aircraft, but more on the efficiency, punctuality and service end of the spectrum.”

How to charter

While chartering an aircraft is never cheap, there are ways to maximize the value from your travel budget.

“Each client’s mission is different. Some will require regular charter services, whilst others will use them just now and again,” says Bjorn Ischner, General Manager of Fireblade Aviation. “We don’t operate a contracted hours service – all our charters are individually arranged. We would treat first time clients as we do all our clients – discuss their needs, their trip requirements, and then make the best suggestion for their charter from there.”

Working with a charter operator or aircraft broker on an ad hoc basis is usually the simplest way to hire an aircraft – pick up the phone, book your flight and a jet will be ready and waiting. It’s straightforward and has no strings attached, and if you’re likely to be chartering for fewer than 40 hours per year, ad hoc arrangements make the most sense. But this can also be the most expensive route to getting in the air.

“Where there is regular frequency between projects and a major city, it makes good business sense to enter into a regular charter contract,” advises Gavin Kiggen, Flight Operations Director, Africa for ExecuJet Aviation Group.

A regular charter contract is useful for frequent journeys between the same destinations – perhaps head office and a mining location – but what if your destination changes as the project evolves? If regular air travel is required to different destinations, a number of operators allow clients to pre-purchase blocks of flying time, which can reduce the hourly rate charged.

It’s also worth scouring the internet and social media for agencies offering cut-price ‘empty leg’ flights. These are offered when a chartered aircraft has completed a mission with paying clients and will be flying back to base without passengers. In a bid to monetise the ‘empty leg’, charter companies often offer the seats at a considerable discount.

These flights obviously come with some restrictions on destination and timing, but are often available on popular business routes, particularly in more developed economies. Remember too that unless you book all of the empty seats, chances are you’ll be sharing the plane with other travellers.

Diners Club

Long favoured by corporate clients, Diners Club has tapped into the demand for private air travel with its Aviation Services Card. Aimed at pilots, aircraft owners and charter clients, the dedicated aviation card is a straightforward means of paying for fuel, maintenance, airport and charter fees.

The card negates the need for carrying large quantities of cash, and allows the cardholder –­ that can be specified per card, to manage cost-control – to pay for all aviation expenses on-site, without needing to hold a pre-authorised account with the supplier.

A detailed monthly invoice allows for easy reconciliation of expenses, while the card offers 55 days of interest-free credit to assist with managing cash flow.

What to fly

As with so many facets of doing business in Africa, chartered air travel on the continent comes with its own challenges. Notably, the long distances between popular city pairs, as well as between refueling locations, have driven increased demand for mid-size jets.

With its proximity to Europe, this is particularly noticeable in Nigeria, where fleets tend to favour mid-range business jets with a six or seven-hour non-stop range.

“We have noticed that small-sized jets are gradually losing their popularity,” says Achuzie Ezenagu, Chief Executive officer of Toucan Aviation. “As a result, we are upsizing our fleet to mid-sized aircrafts. Our favourite at the moment is the Embraer Legacy 600.”

An interesting addition to the charter aircraft available out of South Africa has been the arrival of an upgraded Boeing 727 VIP to be based at Lanseria International Airport in Johannesburg, South Africa, and operated by Fortune Air.

The luxuriously-appointed jet is aimed at VIP travellers and high net worth individuals, and can fly 43-passengers nearly 6,000 kilometres non-stop. The impressive cabin features a private en-suite master bedroom, six-seat conference room and satellite connectivity.

At the other end of the scale are the smaller turbo-pop aircraft popular throughout south and east Africa. The Pilatus PC-12 is the “most capable and cost-effective day-to-day aircraft available,” says Dylan Coppard, Chief Executive of the Angel Gabriel Group.

The PC-12 and more-robust Cessna Caravan are widely used for short flights where it is hard to justify the expense of a jet, as well as particularly inaccessible destinations with unsurfaced runways.

“The Pilatus is a very popular aircraft amongst the energy, mineral and agricultural sectors,” agrees Bjorn Ischner, General Manager of Fireblade Aviation. “The Learjet offers a convenient solution for intra-national flying, while an aircraft like the Global 6000 is perfect for international flights from say Jo’burg to London.”