Heavy jet set
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Posted Date: 01/03/2008
Issue: Executive & VIP Aviation International March 2008
Publication: Executive & VIP Aviation International
Building a heavy jet fleet is complex and mission critical, but some level of commonality is always a plus. Kurosh Tehranchian, Chief Executive Officer of Ocean Sky, is building his owned fleet largely around Bombardier aircraft and, to date, he is delighted with the results.
“Bombardier has a great product and is very successful in the market,” Tehranchian enthuses. He adds that the Challenger 604 – of which Ocean Sky owns and operates two – is the most demanded aircraft for charter in Europe. He says the Global Express XRS – for which Tehranchian has one firm order with delivery scheduled for May – is also very popular and this one will be the first to be operated from the UK.
Tehranchian is also negotiating to buy an April delivery position for a Challenger 605 and is in talks with the owner of a Learjet 60 – which is currently under Ocean Sky’s management – to buy this aircraft too. Perhaps the icing on the cake is a BBJ ordered in 2007 for delivery in 2010. Tehranchian employed traditional asset-based financing methods to acquire the two Challengers and will pursue the same avenue for the rest of his fleet. For the first time, he says, banks are showing a willingness to set private jet finance budgets. They are decreasing their deposit requirements and they are finding comfort in very high – almost ridiculously high – residual values.
He points out that banks become nervous when operators are disposed towards paying a premium over the aircraft list price for an early delivery position – as Tehranchian is inclined to do – but, he says, the value of the asset is what the market determines it to be. “These are supply and demand economics,” he states categorically, adding that if the suppliers cannot keep up with the demand, the queue for new aircraft will simply get longer.
Tehranchian concedes that a global recession – and this is something we have not seen in a long time – will cool the heat in the private jet market and so might oil prices, but Ocean Sky has a strategy in pace for a downturn and Tehranchian remains undaunted by anything the market might throw at him. In addition to the owned fleet, Ocean Sky has under management three Learjet 45s, a Challenger 604 and a Gulfstream 550 (the first on a British Air Operator’s Certificate). But although Tehranchian is proud to have won these management contracts, he finds peace of mind in his company’s ownership of fleet; after all, in the event of a downturn, aircraft under management could be sold which would leave Ocean Sky with overheads but no assets through which to generate revenue.
He also finds comfort from the types of clients his fleet generates. Demand for heavy jets comes largely from high net worth individuals who make lifestyle decisions to fly private jets. This category of client is likely to remain whatever happens in the economy. Aspiration flyers are more inclined towards the light/medium jets – of which Ocean Sky is also an operator – but this category of client could start to dwindle if their income levels drop in a downturn. It is little wonder that Ocean Sky has plunged so much investment in the heavy jet category.
However, Tehranchian is convinced that while everyone in the charter business is making money – and this is very much the case at present – the market will correct itself without significant negative implications so there is little for him to concern himself with here.
Buying businesses
Tehranchian has not just been deftly buying aircraft over the last couple of years; he has also been sinking investment in the services business. In the Autumn of 2007, Ocean Sky bought Manchester based Northern Executive Aviation (NEA), a long established aviation services centre in the north of England. This operation is also the Air BP fuelling agent at this location.
Mike Foley is the Managing Director of Ocean Sky Jet Centre in Manchester – the former NEA operation. He explains that coming into the Ocean Sky fold has brought with it capital investment and the expansion of NEA’s capabilities for aircraft maintenance and support.
The Manchester operation is an integrated service centre which includes FBO operations, aircraft maintenance and the operation of a fleet of Learjets. “In terms of maintenance, our approvals cover the whole of the Bombardier product range as well as Cessna Citations and Falcon 900s; and we’ve been appointed the UK service centre for the Grob spn jet,” comments Foley. “We’re looking at maintaining other manufacturers’ aircraft too.”
The Ocean Sky Jet Centre in Manchester is the blueprint for further jet centres in other locations, not just around Europe but worldwide. “Within 12-24 months we plan to open one or two jet centres through either our own development or acquisition. New jet centres will be based on the Manchester model, which is integrated FBO, MRO and service support for both owners and operators.”
Ocean Sky also operates an FBO at Prestwick Airport in Scotland run by the very capable Eddie Allison, well known in the industry. It delivers pure handling without associated maintenance activities. However, there is interaction and standardisation between Prestwick and Manchester to ensure consistency of offering. The operation at Prestwick has been quadrupled in recent months and now not only handles private jets coming into the Scottish airport but has expanded to commercial jet handling for passenger and freight aircraft.
Foley comments: “2008 will be a year of major expansion for Ocean Sky Jet Centres.” This expansion may be in the guise of the acquisition of airport infrastructure, of FBOs and also of the MRO network. Military airports are of interest too, although the opportunities for this in the UK are limited; but opening up European military airports to private aircraft movements is definitely a possibility.Given Ocean Sky’s clientele, Moscow is a very important market for the group; this is the market at which the BBJ is largely aimed. Consequently, Tehranchian has permanently stationed four Ocean Sky staff at Vnukovo Airport to take control of the handling there.
Finding an identity
Ocean Sky has undergone rapid development in the last four years and is now a group of five businesses, each as important as the next, and each feeding off the other. The first of these businesses is aircraft brokerage – where Ocean Sky started out under its previous incarnation: Aircraft Zone. “Brokerage will always be very important to us,” Tehranchian states. A separate business is charter sales and then there is the sales/acquisition business which continues to grow exponentially. The fourth area of business is the FBOs and finally there is the recently acquired maintenance business. “All these businesses are profitable, integrated and separate,” states Tehranchian. “Through our businesses we align our goals with those of our clients.”
“But our number one value is safety,” he asserts. To demonstrate this, Tehranchian explains that he literally searches the globe for highly qualified and seriously skilled pilots. Of the 11 pilots he has on his pay roll, eight of them do not live in the UK. This is a very expensive strategy but Tehranchian is unfazed. As long as he is able to recruit the best, he will pay the price for importing talent.He has commissioned his own software and installed a very sophisticated management system so he knows just how many trips he is losing to his competition, how this compares with previous years and how good the next month will be so that he can choose his pricing structure carefully. “This is a balance between science and art,” he states.“Nothing we are doing is revolutionary,” he says modestly. Perhaps doing it well is where the “revolutionary” bit comes in.
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