Vantage point
Posted Date: 11/05/2009
Issue: Executive & VIP Aviation International June 2009
Publication: Executive & VIP Aviation International
Having a clear view across the landscape for charter operations as a consequence of long experience is a major advantage in the poor operating conditions the charter industry is now facing. For Dagmar Grossmann, Chief Executive Officer of Grossmann Jet Service, her 25 years’ experience in aviation enables her to read this very difficult market with the advantage of hindsight. Jo Murray reports
Presiding over Grossmann Jet Services is the pinnacle of Dagmar Grossmann’s career to date. This is a career that includes aviation consultation, recruitment, marketing, communication, operations management and sales. She has had the good fortune to build her business in Prague, the Czech Republic, during the boom years from 2004, but her experience prior to these good times will be what stands her in good stead to marshal her charter business through the tricky years of 2009 and 2010.
Grossmann Jet Service is a charter operator of managed aircraft which appear on the operator’s own AOC. “My core business is, on the one hand, to be on the international charter market; and, on the other, to help owners earn from their aircraft,” says Grossmann. The challenge is to find synergies between the managed aircraft clients and the charter operation clients.
“Each management contract is individual,” comments Grossmann. “I have been in this business a little more than 25 years and have found that, on some points, aircraft owners’ wishes follow the same pattern.” She adds that her company’s role is then to enable the aircraft owner’s expectations of his or her aircraft to be met while assisting with the offsetting of some of the operating costs.
This too is a challenge because of the chameleon-like nature of the charter market. “The business aviation market – and the aviation market in general – is constantly changing. There is a two year cycle,” she maintains, adding that it therefore becomes very difficult to predict which aircraft types will fit the future demands of the market.
“When you operate a bigger aircraft, planning ahead is easier but you have to provide a lot of special services. When you operate smaller aircraft, you have a lot more competition,” she explains. At present, Grossmann Jet Service operates an Embraer Legacy which belongs to the company. Managed aircraft include a Mustang and a Hawker 900XP. There is also a special contract in place to operate a Dornier aircraft but not on Grossmann’s own AOC. It is fair to say that there are plenty of different missions that can be met from such a diverse fleet.
She is glad of the broad scope but concedes there are challenges in dealing with engines from three different engine manufacturers. The ideal is to reach a greater level of commonality across the fleet. “In fact we are now negotiating for a second Embraer Legacy which would give us a little more opportunity to share pilots and save owners costs,” she remarks.
Of course, to some extent, operators of managed aircraft are at the mercy of the aircraft owners for the fleet they can employ in the field, but there is nothing to say charter operators cannot turn away aircraft owners and Grossmann has not been afraid to do this. “Over the last year I have refused two aircraft because I saw that the owners would not fit into my structure and strategies. You always have to take into account what the owner wants,” she says. At Grossmann Jet Service the ground rules are set in stone up front and, if they are not workable for both parties from the beginning, experience tells her that the relationship will not work in the long run.
Nevertheless, Grossmann is emphatic that the maximum returns an aircraft owner will ever achieve on the charter market is to cover his or her costs. And now we have the global recession to deal with, that is putting even greater strain on those expectations.
“When I came to the Czech Republic in 2004 I came to a very under developed market. On the one hand it was a business paradise but on the other it was very risky. It took a lot of my time and energy to explain to the potential market in this region what these private charter services are about. Many people saw it as a luxury tool aimed just at rich people. We therefore undertook many workshops with travel agencies to explain our services,” Grossmann states.
She is emphatic that her fleet is ideal for the market she is serving, even though the market in eastern Europe is showing significant recessionary strain. “Personally, I believe the market will improve a little by the middle of the year,” Grossmann comments. “On the other hand, the threat of market conditions on the operators is not great as those conditions on the aircraft owners who now cannot sell their aircraft. So we are stuck!” she laughs.
Grossmann Jet Service is very much a player on the world market. “In business aviation it is very common that you take a ferry flight to London in order to take a flight to somewhere else. So I serve the world market and, after that, I serve the local market. Our third area of business is alongside the travel agencies. Personally I believe that the travel agency market is really important,” she says.
Given the glut of new operators in the east European market in the last couple of years, Grossmann has seen a more scattered market and she even began to fear a decline in service levels. “Business conditions are really not very good at present but business ethics are much better. The operators that are really serious will survive,” she states categorically. Pilot remuneration levels have also started to decline in the region and customer loyalty is increasing. For an operator, this is good news.
Grossmann is not just a private jet operator and aircraft manager by profession; she also has many years’ experience in aircraft trading. Building on 12 years’ experience with Grossmann Air Service in Austria, in 2001 she launched Dagmar Grossmann Jet Consult in Vienna where she undertook worldwide aviation consulting as well as aircraft selling and purchasing. In this role she worked with one of the largest private jet operators in Europe at the time, with 15 aircraft on its AOC.
Obviously the consulting side of the business leads nicely into the operating side of the business but it is not always the case that consulting and financing advice lead to aircraft management. Today, at a time of credit crisis, the opportunity to advise on acquisitions has shrunk rapidly despite the low prices in the pre-owned market.
So are all these issues going to be limiting factors to Grossmann Jet Service’s growth over the coming two or three years? Grossmann responds with a shrug given the lack of clarity in the market at present. “Now we not only have a big threat hanging over the industry but also lots of changes. We live with a constant cycle of changes. But September 11, 2001 was a much greater threat to the industry than what we are seeing at present,” she comments.
“We had such an upswing in the last two years that things in the industry were really going crazy. Even the light jets market was over heated and medium sized companies – not just large companies with flight departments – were seriously considering investing in a $2 million aircraft,” she says. Grossmann adds that the support costs associated with operating and maintaining aircraft were often dismissed in the rush to partake in this new market for owning executive aircraft.
This situation made Grossmann far more fearful than the down market we are facing at present. Obviously, the prevailing picture is muddied by the banking crisis but the life and death threat associated with the situation that resulted from September 11 was far more worrying for the industry, she maintains, than any misadventure in a bank’s boardroom.
Grossmann is emphatic when she concludes: “The serious survivors will find the right channels for our businesses.”
