SIMPLYFLY a whole aircraft
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Posted Date: 19/05/2008
Issue: Executive & VIP Aviation International June 2008
Publication: Executive & VIP Aviation International
Cast your mind back, if you will, perhaps 20 years when holiday charter airlines acquired fleet on a wet operating lease basis for perhaps a short to medium term without the headache of infrastructure to support the aircraft. As holiday charter airlines grew up and put fleet on their own balance sheets or were knocked off the radar by low cost airlines, these arrangements lost favour in the commercial passenger market; albeit that they are still regularly marketed for cargo operations.
In the business jet market we have seen other instruments to enhance the affordability of aircraft acquisition and support – largely centred around fractional ownership – but the tax-based wet operating lease had plenty to recommend it for commercial operations and so why not employ it in the business jet market?
Enter ExecuJet to take up the baton and a new offering to the business aviation community has been born. Termed SIMPLYFLY by the Swiss based company, the idea is to offer the market whole aircraft availability at predictable cost, with a dedicated crew, the option to earn charter revenue and the ability to take title at the end of the term.
“Why have a share, when you can have it all?” asks Gerrit Basson, ExecuJet Group Managing Director, emphasising the thrust of ExecuJet’s new ownership programme. “It was born out of recognition of a gap in the market,” he says. “Over the last 18 months, we have seen that regular fractional owners are starting to look to the next level. They want an interim step – the ability to call on their own aircraft – but they do not want the responsibility of full jet ownership. We are addressing this with our new jet ownership programme.”
The ExecuJet offering revolves around a five year term and 600 flight hours per annum. There are two options.
The first option is the traditional wet operating lease under which the asset remains on the lessor’s (ExecuJet’s) balance sheet and there is no residual, meaning that, at the end of the lease term, the asset returns to the lessor and there is no further payment. During the course of the operating lease, the lessee pays fixed monthly and hourly charges which can be accounted for as expenses for tax purposes.
The second route is a finance lease under which the lessee pays a higher deposit at the beginning of the five year term and a residual balloon payment (in the order of 25-50% of the aircraft value) at the end; at which point the asset is transferred from the lessor’s balance sheet to that of the lessee and the lessee assumes all the amortisation obligations of an owner.
ExecuJet is focusing the programme on widebodied business jets and has identified the emerging markets as the target for the company’s new offering. ExecuJet will acquire the aircraft, insure them, provide crew, manage them and operate the aircraft under its eight Air Operating Certificates (AOCs). Maintenance, technical support, fixed base operations services and ground handling will all be provided for a set monthly fee. Flying is charged at a fixed hourly rate and aircraft charter to third party customers can be provided.
ExecuJet Chief Executive Officer, Niall Olver, explains that the plan is designed to accommodate aircraft upgrades as well as early termination. The aircraft can be located wherever the lessee chooses; but first ExecuJet has to acquire the aircraft itself.
We all know about the harsh OEM delivery schedules; and we also know ExecuJet is a Bombardier strategic partner. Nevertheless, ExecuJet is likely to look to the pre-owned market for initial aircraft acquisitions. Aircraft types will be market driven but Olver expects his leased fleet to comprise Global Expresses XRS, Challenger 604 and Challenger 605 aircraft.
Olver is convinced that, in five years’ time, the US market will no longer be driving the business aviation market – hence his desire to see this programme in place in developing markets. He is also aware that, as soon as the markets turn downwards, corporations will seek to remove assets from their balance sheets. With this in mind, SIMPLYFLY could not have come at a better time.
ExecuJet harnesses UK boom and opens new office in London
London City Airport will provide a new London base for ExecuJet. A UK Air Operator’s Certificate has also been awarded by the UK Civil Aviation Authority and ExecuJet is taking on the management of a Falcon 900 business jet, as the first aircraft on its new AOC, and further contracts will follow.
A new management and sales office in the adjacent Canary Wharf area of London is also taking shape. ExecuJet (UK) Ltd will initially be home for 10 employees, increasing to 20 within the next six months.
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