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Aviation History
2002
2002 - 1027.PDF
ULL LIST OF READER SERVICES ADVERTISER CONTACT" EDITORIAL +44 (20) 8652 3842 Quadrant House, The Quadrant, Sutton, Surrey SM2 5AS, UK Fax +44 (20) 8652 3840 email flight.international9rbi.co.uk Editor Murdo Morrison •44 (20) 8652 4395 murdo.morrison9rbi.co.uk Editor's PA Debra War burton •44 (20) 8652 3835 debra.warburton9rbi.co.uk News Editor Emma Kelly •44 (20) 8652 3096 emma.kellY9rbi.co.uk Commercial Aviation Editor Max Kingsley-Jones •44 (20) 8652 3825 max.kingsley.jones9rbi.co.uk Defence Aviation Editor Stewart Penney +44 (20) 8652 3834 stevtart.penney9rbi.co.uk Operations/Safety Editor David Learmount +44 (20) 8652 3845 david.learmount9rbi.co.uk Business Editor Alexander Campbell +44 (20) 8652 3990 alexander.campbell9rbi.co.uk Business & General Aviation Editor Kate Sarsfield +44 (20) 8652 3885 (maternity leave) Business & General Aviation Reporter Justin Wastnage +44 (20) 8652 s86sjustin.wastnage9rbi.co.uk Spaceflight Correspondent Tim Furniss +44 (1237) 471960 tim9spaceport.co.uk EUROPE/MIDDLE EAST European Editor Christina Mackenzie +33 (1) 64 23 68 89 christina.mackenzie9rbi.co.uk Israel Correspondent Arie Egozi +972 (3) 9413132 Middle East Correspondent Gerald Butt +357 2 771967 gbutt9spidernet.com.cy AMERICAS Washington DC Office Fax +1 (703) 836 8344 Americas Editor Graham Warwick +1 (703) 8363448 graham.wantick9rbi.co.uk East Coast Editor Paul Lewis +1 (703) 836 3084 jpaul.lewis9rbi.co.uk West Coast Editor Guy Morris •1(949)2528971 Fax+1 (949) 252 8972 guy.norris9rbi.co.uk Brazil Correspondent Jackson Flores Jr +55 212439-6062 Fax 00 55 212349-6090 fubar9uol.com.br Canada Correspondent Brian Dunn •1 (514) 937-1855 Fax (514) 937-3352 brian9derniermot.com ASIA/PACIFIC Singapore Office Fax +65 338 6171 Regional Managing Editor Nicholas lonides •6564343311 Fax+65 338 6171 nicholas.ionides9rbi.co.uk Deputy Asia Editor Andrew Doyle +6564343309 andrew.doyle9rbi.co.uk Regional Reporter David Fullbrook +6564343314 david.fullbrook9rbi.co.uk Australia Civil Aviation Correspondent Paul Phelan •61(7)40532791 Fax+61 (7)40533003 pdphelan9optusnet.com.au Australia Military Aviation Correspondent Peter La Franchi +61 (0) 419 246 620 Fax +61 (2) 62312795 nulka9ozemail.com.au EDITORIAL PRODUCTION Group Production Editor Graeme Osborn +44 (20) 8652 3828 Group Art Editor James Mason +44 (20) 8652 4994 Chief Sub-Editor Chris Thornton +44 (20) 8652 3850 Deputy Production Editor Jackie Thompson +44 (20) 8652 4997 Photographer Mark Wagner +44 (20) 8944 5225 TECHNICAL ARTISTS Senior Technical Artist Giuseppe Picarella +44 (20) 8652 8054 joe.picarella9rbi.co.uk Editorial Artist Tim Brown +44 (20) 8652 8043 tim.brown9rbi.co.uk WWW.FLIGHTINTERNATIONAL.COM WEBMASTER Sheena Buchanan +44(20)86524432 SUBSCRIPTIONS +44 (1444) 445454 rbl.subscriptions@rbi.co.uk THE FLIGHT COLLECTION kim.hearn@rbi.co.uk Flight International^ is a registered trademark of Reed Business Information Ltd. ©2000 Reed Business Information Ltd PcFl -\J J online service at www.rati.com, contains the full text of Flight "• 111 • — • International'and Airline Business since 1996. Full text of the magazines can also be found online with Lexis-Nexis. Dialogue, FT Profile. IAC and Reuters. Editor Kieran Daly +44 (20) 8652 3837 Reed Business Information COMMENT No staying power Don't read too much into Avolar's collapse when assessing prospects for fractional ownership programmes. UAL simply lacked commitment The decision last week by United Airlines to pull the plug on its embryonic fractional owner ship division Avolar has been taken by some to be an indicator of tough times ahead for the booming fractional sector. Not so. Avolar's demise is due more to a lack of business courage on the part of United parent UAL than a lack of demand from the market. Rather than suggesting that a burgeoning business is set for a slowdown in the post-11 September climate, key indicators all point towards significant increases in demand for leading fractional programmes in the USA. If anything, the added safety that fractional own ership provides has become an additional selling point for the schemes, which were already proving their business worth before September's terrorist attacks. Aviation Research Group/US, for example, which provides consultancy on the merits of business aircraft ownership, fractional Avolar's demise is due more to a lack of business courage on the part of UAL » ownership and chartering, has seen its busi ness quadruple since last year. Many potential fractional users are merely waiting for a firm signal from Wall Street that the economic recovery is under way before committing to buying business aircraft shares. Yet United blames market conditions for the fall of Avolar. This is disingenuous. After 11 September, UAL did not have the funds or the commitment to make its ambitious Avolar plans work. The investment needed and the time required to see a return in fractional ownership are not for the faint hearted. The way to succeed in fractional ownership is to go large. The biggest operators in the sector are only just starting to achieve critical mass and move into profit. NetJets, by far the largest fractional programme, produced a small operating loss last year following a small operating profit in 2000. Bombardier's Flexjet, despite suffering low take-up in Europe, has also proved its business case ahead of expec tations. Both operations are expected to record significant profits this year, as the pro grammes mature and break-even levels are reached. The merger of Flight Options with Raytheon Travel Air in January is designed to bring that scheme to the same position. United climbed on board a bandwagon that was travelling faster and in a different direction to its airline operations. That the airline thought it should be making money out of a new form of aircraft operation is not surprising, but the scale of attack it planned on the market looked ambitious and needed real conviction. To join the market late and build a fleet of comparable size in one-sixth of the time it took market leader NetJet would require complete dedication from board management - a dedi cation United's board lacked, understandably preoccupied with its struggling airline opera tions. United planned to trade on its reputation in a way that other major carriers had avoided. United made a major mistake in trying to move in on the fractional market, believing its sheer size and brand recognition would mar ginalise operators who created the market. No other airline followed suit, although others have considered entering the market and some have dipped their toes in charter waters. Delta Air Lines has adopted the sensible approach with its Delta AirElite charter management scheme, which offers the top most stratum of the airline's huge customer base an alternative way to travel - in a way that negligibly impacts its core business but potentially generates huge returns for Delta. Dassault and Gulfstream have both played down the significance of the loss of orders the fall of Avolar brings, not least since they recog nise that the billion dollar orders were largely theoretical - fractionally owned aircraft need buyers before they are actually delivered. Prudent manufacturers are careful how they factor fractional orders into their backlogs and production plans. In reality, only a handful of Avolar's aircraft had been committed to pro duction from both manufacturers. Airbus was even more cautious, negotiating a "joint ownership" marketing programme for its Airbus Corporate Jetliners in North America whereby Avolar would have acted as dealer and, in many cases, charter operator. The European manufacturer insisted on non- exclusivity and ring-fenced the operations to limit its exposure to risk. For Bombardier and Raytheon, which had signed even flimsier letters of intent with Avolar, production should not be affected. Avolar's demise does not signal the start of bad times for fractionals. Rather, its collapse illustrates the behaviour of a large corporation jealous of a burgeoning market. Fractionals are set to boom, with or without Avolar. SEE BUSINESS & GENERAL AVIATION P29 www.flightinternational.com FLIGHT INTERNATIONAL 2-8 APRIL 2002 3
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