AirX, the UK-based charter specialist, is adding two further Embraer Lineage 1000s to its fleet, making it the largest operator of that type in the world.
John Matthews, AirX CEO says that the charm of the Lineage is that it’s the poor man’s Boeing BBJ, but the rich man’s Bombardier Global family aircraft.
“With 13 seats, I can beat any Global Express price, with double the cabin, literally 100% more or so in cabin size” he says.
Mathews also says that when competing against a BBJ for business, he can offer 30% to 40% lower prices than the BBJ, although he concedes that his Lineage fleet is currently not ETOPS (Extended Range Twin Operations) certificated so can’t yet cross the Atlantic Ocean in one hop, although the company says that it hopes this will come in the next few months.
“The Lineage is a great aircraft for us,” says Matthews. “Because it’s been a failure in the charter market, it was a failure to sell because no one wants them. And its best (for us) to buy aircraft with airliner reliability that nobody wants.”
Matthews says that it doesn’t matter to a charter customer if the aircraft has been successful or not, as once they step inside the aircraft, having paid the equivalent rate of a Global Express charter, and see that is has 100% more space, they are immediately won over.
Couple that extra space with the low acquisition costs and it is easy to see why Air X wants to acquire as many of the aircraft as possible.
“I’m picking them up at less than 20% of their initial sale price, when the aircraft are only a couple of thousand hours old,” says Matthews.
“So, they have two decades of life left, but they have lost 80% of their value. They have no business jet hourly rates on the engines, they have no complicated engine maintenance programs, and we can buy any spares we want from any airline (that operates the E190 family)”.
As the company has become more established, it now has access to much cheaper finance than even just a year ago.
Matthews was quoted as saying back in November 2018, “that the real rate of interest that the company was paying on loans for aircraft was just nearly 20%.”
“We were paying on paper 7 to 12%, but in reality, it was nearly 20% as I know what the aircraft was bought for. If I bought an aircraft for £9 million, and the lease says £12 million with interest on top, then its not really 7% its closer in reality to 20%.”
The company can, in its own words, be “massively” competitive in the market, saying that it can often drop its Lineage rate to below old Global Express charter rates. Mathews says that that works because it’s able to sell its empty positioning flights.
It can do this through Avinode, the online charter marketplace, with the company saying that 95%+ of its income is sold purely through Avinode.
According to Matthews, AirX is now the only brokers-only airline, saying that the company will never again have a direct client. “We closed down the direct client division. And since then, the business and the loyalty from the brokers has shot up.” He says. “We are the only people that are solely broker income only.”
“We talk three time a day,” says Matthews about Avinode, “I talk to them more than I talk to my wife.”
As well as the two Lineage aircraft joining the fleet, the company is also adding another Airbus A340 airliner to its fleet.
That aircraft, unlike the other AirX A340, will be outfitted in a high-density configuration, with the company saying that it will be ideal for the ACMI (Aircraft, Crew, Maintenance, Insurance) market, as well as high density sports charters.
“It will be there to fill a gap,” says Matthews. “Because obviously some airlines have gone bankrupt, and a lot more will go bankrupt.”
Matthews says that one of the reasons he sees airlines going bankrupt is that they have been acquiring brand-new aircraft, noting that whilst demand has not been falling, the yield that airlines get from operating flights has been falling drastically.
He cites the example of football fans wanting to travel abroad to watch their team play, saying that whilst a lot of fans might be willing to pay £150 for the trip, no airline with new aircraft will be able to operate the flight as the yield it gets will not cover its operating costs.
The ACMI market is one that Matthews says will be a major growth area for the company in coming years. “I want to do what Titan Airways is doing, but with used aircraft. I want to do what Hi-Fly is doing, but with used aircraft.” He says. “I don’t need a brand-new Airbus A380, I’m going to look instead at a retired 1998build Boeing 747-400.”
Whilst the fuel costs on an older generation aircraft are higher than those of new-generation aircraft, the lower acquisition costs allow Air X to compete with the more-established players in that market.
Understanding that difference and understanding that it doesn’t matter to the average flyer if an aircraft is brand new or 15-years old, as long as it’s safe and clean, has been one of the keys to the AirX’s success.
“I learnt that most of what I thought about the market was wrong, most of what I thought about the company was wrong, and I’ve learnt, in my eighth year in business, what the general aviation market actually is, value wise, strength wise, and productivity wise. “says Matthews.
“My success has come from living and breathing AirX really, and not worrying about other things that I don’t really understand.”