Fractional ownership program providers hit by the financial crisis have faced a rapid change in fortunes. But today there is an opinion the market seems to be improving. We met with Mats Leander, Executive Director NetJets Europe to learn more about the current situation in the fractional jet market.

In one of the recent interviews you said that “Business will be better than expected”. What makes you think so?

If we look at it from a pure sales perspective, our card sales in the first quarter of this year were 60% up compared to the first quarter of 2009. I would say that’s a positive sign. Another indicator of the positivism is that in 2008-2009 you had people who could not continue being clients due to financial reasons. That has stopped. People are still with us and actually an interesting thing is – and it is something that has happened in Russia – we have been meeting with a number of customers who left us in 2008. The indication I have from the sales office on the ground in Moscow is that their customers are interested in joining the program again.

There was almost 10% more first meetings in Q1 2010 vs the same period in 2009 and 40% more demo-flights were flown in Q1 2010 than Q1 2009. Our flight volume also increased by 17% in Q1 2010 vs same period in 2009. These are all positive signs.

In which regions do you see a better growth?

Across all of Europe including Russia.

How is your jet card program going in Russia?

Our mid-size and large-cabin cards are doing very well. We do not really sell small cabin cards in Russia – I do not think we have sold a single one. But in the bigger category it is flowing well.

What about the shares ownership program?

I would say it’s fifty-fifty. We sell just as much of each in Russia.

There is a belief that charter, fractional ownership, jet cards are not able to meet the customers’ need. Are these schemes in your opinion right for the times?

All these solutions are relevant but it depends on what sort of service the customer is looking for.

Using charter airlines can suit some people however; customers are not guaranteed aircraft availability and pricing, aircraft quality, crew and service can also vary significantly.

NetJets Europe offers Customers a tailored travel solution depending on their needs through the fractional ownership programme and the Private Jet Card programme.
The Private Jet Card programme is an entry-level way for individuals to experience NetJets Europe, providing 25 hours of flying time and no long term commitment. For those with larger flying needs, NetJets Europe offers the fractional ownership model. This allows Owners to buy a share of an aircraft equal to the anticipated number of hours of flying they do each year.

NetJets Europe Customers can benefit from the companies’ economies of scale and flexibility. Customers have access an entire fleet of over 800 aircraft worldwide and guaranteed availability. NetJets Europe is also committed to providing Customers with the highest levels of service and safety.

What in your opinion would be the prospect of the fractional ownership program in Russia?

I think it’s a very strong proposition. There are a lot of people in Russia who have tried owning a whole aircraft but who do not need to and simply but need 150 – 200 hours flying. In the fantastic years of 2007-08 owners rented their aircraft to other people to gain income but they have had to face the last 18 months, which have been terrible and have had almost no income on the plane. It’s not a viable model in the long run to buy an asset of 30-40 million dollars and rely on an aviation company to rent an aircraft to other people when you do not need to use it. Fractional ownership with NetJets Europe is a much more intelligent choice. You pay maybe 25% of the airplane and receive 200 hours of flight time: no problems, you are not a service provider to other people and you pay for what you need. That’s it. 24 hours, 7 days a week service and we take care of everything.

Such problem as fly permits has always been an issue... Are you able to offer customers an aircraft in a short period of time?

Yes. Of course, we have to oblige the legal limitations that everybody has. But yes, we can do that. Today the Russian aviation authorities are trying to be very helpful to all operators and that permit problem that was in Russia is not there any more.

What is the minimum notice for flights to or from Russia today?

Contractually we require a minimum of 48 hours notice from customers flying to or from Russia but often we can meet their needs with less warning.

Do you manage flights inside the country?

Not cabotage flights because that’s still not allowed. But we have people who fly from international destinations into Moscow and then the same team of passengers continues their trip inside Russia and leaves. Those flights we do. That’s also legally accepted by the Russian aviation authorities. We are looking to find solutions for this in the near future but at present we do not fly what you’d call cabotage flights.

How would you describe your Russian customers? Is there any difference between the customers from various parts of the world?

No, they are exactly the same. Dynamic entrepreneurs, who fly for a mixture of business and leisure reasons and who use NetJets Europe to save time and be more efficient when working and spending time with family.

Have you ever encountered customers who were disappointed by NetJets service or such cases never happened?

In 2007 we experienced some issues with permits. But that has changed. We also had some small customer service issues. But, we have listened to our clients’ feedback and improved the areas where they were not completely satisfied.

Can a customer quit the program before the terms of the agreement end?

The commitment to the program is five years however; there can be some flexibility if a Customer would like to terminate the agreement earlier.

It is said that fractional ownership compared to the full ownership can save a customer a sensible amount of money. Could you please make an example of money-saving or explain how it can be achieved?

When a customer enters into the NetJets Europe Owner Programme, they buy a fraction of an aircraft which is much more cost efficient than purchasing a whole aircraft. The customer then benefits from a certain amount of flying hours a year, depending on the size of the fraction they have purchased. To give you an example of the money customers can save:

NetJets Europe offers 1/16th of an aircraft for around 0,000 USD, however, if you were to buy a wholly owned aircraft, this would cost around .4 million USD.

How many aircraft are today in your fleet?

About one hundred and fifty aircraft. And globally it’s over eight hundred.

Aren’t you going to expand?

Oh, we will again. We are cautiously optimistic about the future but believe we are through the worse. Overall business jet traffic is up and from our Q1 results, it seems that confidence is returning to our customer. However, it’s too early to see how the positive effects in the market will influence our future growth.

Late in 2009 there were announcements that NetJets has had to cancel orders placed with Hawker Beechcraft and Dassault aviation. Could you please give a comment on that?

We have not cancelled aircraft orders; we have deferred some aircraft. We now have the right resources in place to satisfy our Customers’ needs.

Please share the company’s plans for the nearest future?

We are going to grow again. We are improving our service. We have another team member who is actively selling in the Russian and CIS market. We are looking at potentially expanding operations in the area and making a program even more attractive to the Russian clients.

Which improvements are you going to apply to your program?

It mainly concerns service. There are some changes that are forecast. The Russian aviation authorities are looking for changing the rules for import, the permit process etc. and depending on the outcome of that we will see if we can implement other changes. But it’s too early to say. We have to see what happens in Russia and what actually comes out of the discussion that is taking place. When we know we’ll use of course the new systems and implement new procedures and make it better for our clients.