From thesis to reality
|
Posted Date: 19/05/2008
Issue: Executive & VIP Aviation International June 2008
Publication: Executive & VIP Aviation International
The timing could not have been more inopportune. Given the aviation industry down-cycle, the events of September 11, 2001, the delay of new business aircraft types to the market and the dot-com crash, Avinode could not have picked a worse time to launch a B2B platform through which air charter operations could be bought and sold. What could possibly have been going through Avinode’s founding members’ minds when they decided to set up an internet based marketplace for the aviation sector in 2001?
“We were students in 2001, studying for an MSc in engineering,” says Niclas Wennerholm, Co-Founder of Avinode and Chief Executive Officer of Avinode’s European operations. “Avinode was our student project which we launched as a company.”
Explaining further how university students came up with the private jet charter marketplace, Wennerholm says: “We heard about the coming of the very light jets (VLJs) and we realised that there was a need for a system to coordinate all these aircraft when they arrive on the market. Originally the VLJs were scheduled to be launched in 2003 but we soon realised that we needed to address the existing market situation to see if there was an opportunity to build an online marketplace.”
Of course the market for private jet charter has evolved magnificently over the last seven years and the world’s fleet of private aircraft available for charter has flourished. The VLJs have also arrived on the market – albeit a little late.
Wennerholm and his team are still interested in the VLJ market but he predicts that the future for VLJs will be diverse. He does not believe that VLJs will simply be concentrated in the hands of air taxi operators but that VLJs, over time, will be dotted throughout air charter fleets. “I see the very light jet as an extension of the current fleets – as entry level jets – that will open up business aviation to a broader audience,” comments Wennerholm.
Product development
Much has occurred – in terms of product development – at Avinode since 2001. “Originally, Avinode was a simple marketplace where operators listed aircraft availability on our system and brokers of aircraft charter could discover aircraft availability using a simple search function. The system is becoming much more complex and we have been required to create quoting and scheduling tools for the operators as there is a lack of affordable systems on the market,” comments Wennerholm.
“In the past, we had a problem with getting smaller operators’ aircraft availability on the site. Typically, they may have used a white board to schedule their operations and so we developed a sort of electronic white board – a very simple scheduling tool – where they can keep track of their flights and we can receive updates on availability,” he explains. “After all, we need real-time availability and correct pricing information in our system and so it has been necessary to develop the appropriate tools ourselves. These tools are then connected directly to the marketplace,” he says.
Wennerholm explains that larger charter operators, who have their own internal scheduling system, simply turn on the integration software to be able to send aircraft charter availability information to Avinode. “The larger charter operators do not have to log in and update their availability; that is done automatically every 15 minutes,” he says.
Avinode’s marketplace is strictly B2B but the company has also developed B2C plug-in booking tools for both broker and operator customers in order to attract clients online from their own websites. Website visitors are able to receive aircraft availability information and instant price estimates on any route at any time. “Avinode has no intention of approaching the end client; instead we provide booking tools for all our customers to attract their clients online. We believe it is better to have hundreds of websites providing online booking instead of one single website,” says Wennerholm.
The empty leg debate
Private jet charter is very much about achieving travel by air at a time and from a location required by the buyer for a price the buyer is prepared to pay. What happens next in terms of the location of the aircraft is rarely the buyer’s concern. However, there has been much talk about responsible air travel and this includes the offer for sale of empty legs to improve efficiencies, cut costs and cast a kind eye on the environment.
If ever there was a tool that would enhance empty leg sales, one would have thought it would be a marketplace like Avinode. “One of our sales pitches to operators includes reasons why charter operators should reach out to the masses with the empty legs that they have available,” says Wennerholm. “We regularly hear about success stories. There is a lot of money to be earned on these flights if you can sell them. Also, these flights can be a great deal for a broker.”
If asked, Avinode recommends that operators check with the originator if he or she can commit to the flight in order to sell the empty leg. After all, if circumstances change and the outgoing flight is cancelled, the empty leg no longer exists and there is nothing to sell. “In the end, it’s up to the operator and whether he is willing to risk this scenario,” remarks Wennerholm.
Building a client base
Avinode may be a success today but building a marketplace from scratch is easier said than done. “Today we have over 800 clients,” says Wennerholm. “In the beginning it was a catch-22 situation: if you did not get buyers you did not get sellers, and vice versa. But steadily and slowly we have been able to attract both sides and we feel we have passed a critical point where we now have content that attracts almost any air charter broker worldwide. Today we have over 2,000 charter aircraft listed with pricing and availability.”
For Avinode, the marketplace is the core business and the bolt-on tools are only there at a very low price to facilitate customers’ relationship with the marketplace; they are not part of the strategy itself. “The aircraft scheduling and quoting tools are complements in order to provide a turn-key solution for smaller air charter operations that are not ready to invest in more advanced fleet management systems,” confirms Wennerholm.
When asked about market growth and the effect on Avinode of the prevailing strength of the market for private jet charter and acquisition, Wennerholm comments: “Of course this strong market is positive for us,” but he is mindful of the effect of a downturn in the global economy and the potential for excess capacity.
Additionally, he points out that some markets still labour under a dearth of availability. In Russia and some parts of eastern Europe, for example, passengers choosing private charter operations are keeping German and Swiss operators busy and will continue to do so until the Russian and east European fleets have swollen sufficiently to accommodate market demand at home. He is realistic about market capacity – be it a potential oversupply or continuing dearth – and is equally realistic about fluctuations in the market’s fortunes.
Charting a path forward
The Avinode B2B marketplace generates a plethora of data that gives Wennerholm and his colleagues clear insights into the trends taking place in the market. “We generate a standard report to our clients every month but we also create custom analysis based on the data that we gather,” comments Wennerholm. “We regularly receive requests for data from operators who are looking to add new aircraft.”
He adds that Avinode has seen a shift in the way in which charter companies are operating their businesses since Avinode was set up. He says the charter business has migrated from a reactive business to a properly managed sector in which venture capitalists are investing and charter operators are driven towards much higher levels of professionalism. Additionally, new company formations, mergers and acquisitions are adding a much more grown up flavour to a sector that traditionally has been more associated with prestige than business imperatives.
Avinode may have carved a comfortable niche for itself in the 2008 market for private jet business travel but, back in 2001, this was a very brave step to have taken. Despite the harsh environment prevailing at the time of the launch and the difficult early years, with hindsight, Avinode’s founders’ courage has paid off. After all, Avinode may have been operating in an austere market but it was acting alone in Europe and this market has become the one to watch.
Related Headlines
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
Issue Advertisers
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
| > |
