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Must try harder
European business aviation is doing a bad job of supporting business. Quite a bold statement, right? If that’s the truth, then the obvious question we need to ask ourselves is, why? Let’s take a moment to establish some context.
Business aviation should be a tool that drives economic growth by enabling business performance and driving efficiency. A recent report from the EBAA and Booz Allen Hamilton outlines this by telling us that, “Business aviation allows for increased productivity in transit and increased productivity from reduced transit times.”
At the same time, there is virtually no real growth in terms of business aviation passengers across Europe, and the aircraft manufacturers are reducing their delivery forecasts and complaining loudly about the weakness in the market squeezing the margins on new aircraft. This is important, because without sufficient margin, manufacturers are unable to effectively invest in new technology and aircraft programs that should benefit business aviation by offering more efficient aircraft, and therefore reduced operating costs.
Now look at Europe in a geographic context – it is approximately 10,100,000km² in size, which sounds big, but the reality is that all of Europe’s principle cities and industrial regions are within a couple of hours of each other, give or take. Again, this is important because it means you don’t need a Global or a G650 to achieve the sorts of benefits that the EBAA report describes. That is massive, because it means you don’t have to invest in a US$60m aircraft as the same world of increased business efficiency and growth is available by using smaller and much cheaper aircraft that still fly at roughly the same height and speed as their Global big brothers, and which are almost definitely (for the most part?) quicker than commercial airliners.
How do we take advantage? Well, firstly we need an office in Mayfair in London, a glossy website, and lots of shiny images of beautiful people. Chuck in some champagne and canapés and the odd picture of an aircraft, and let’s sell all these business advantages with images of luxury and opulence, because that is always going to convince hard-pressed businesses throughout Europe about how useful we really could be to them.
Next, we need a big glossy launch party, maybe in Geneva or Cannes. And let’s pack it out with beautiful people and lots of free booze (more champagne?). Again, that is going to help us relate to our prospective audience of businesses who are looking to understand the benefits that business aviation could offer them.
What about routes? Well, looking at the latest data, it seems that most users of business aviation only want to travel between London, Paris, Geneva and the French Riviera. Sorted, so we concentrate everything on those hubs (almost like a mini airline) and get really close to all of our competitors and try to take their customers. This can be done by undercutting their prices. Perfect – the passengers are flooding in.
Wait a moment, now they’ve gone. It seems that our competitors have cut their prices! Right, so now we’ll cut our prices too. Competitors respond by cutting theirs again, and then so do we. But wait – the finance department is screaming at us that we are losing cash and we can’t cut any further...
Okay, so now we’ll start selling all our empty legs through an app – that’s like money for nothing, right? Of course, everybody else is doing that, so we’ll have to make ours really cheap. The finance department is really screaming now – the cash is almost gone.
Call the marketing team. We need another really big party – in Monaco this time. Let’s use a yacht and get some new customers. Does any of this sound familiar?
Surely we have to change the model and get away from the ever-decreasing circle that is London-Paris-Geneva-French Riviera. Yes, there is some traffic there, but if our only hope is to cannibalize that traffic with constantly-reduced prices and eroded margins, it rapidly becomes unsustainable.
Let’s get back to business. In Europe, the industrial or business heartlands tend to congregate around Central Europe – think the UK, the Republic of Ireland, Benelux, Germany, Northern France, Scandinavia and the Baltics. That’s where we need to be focusing. The right product at the right price – selling the real benefits of business aviation to actual businesses that might benefit from those services. Who knows, it might just work.
About the author
Andrew Hughes is an internationally experienced executive in the business aviation sector. As a partner in Mango Aviation, he leads its business aviation services and works on a variety of engagements around the world, specializing in commercial and operational strategy in addition to providing aviation asset management advisory services.
August 16, 2016
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