Striding through the hotel lobby for our 0630 meeting, AVIAÂ CEO Gillian Hayes brims with her usual enthusiasm for the company and its customers, despite the hour. A prosopagnostic’s dream in her signature bright blue, she’s a woman on a mission to disrupt business aviation through AVIAÂ’s global purchasing ambition and this early rendezvous is the only space we could find in her hectic meeting schedule.
AVIAÂ is fundamentally a group purchasing organisation (GPO). It brings fleet purchasing power to everyone by combing the requirements of several operators. Fuel is an obvious example, where the needs of a Citation Mustang owner-pilot might be merged into the much larger purchases of a couple of corporate flight departments, providing a considerable reduction in cost to the individual owner.
Fleet operators could be forgiven for asking what’s in it for them – and several have. But there are savings to be had even for a 100-strong fleet if AVIAÂ adds its requirements to the similar needs of several other operators. Right now it potentially creates the purchasing power of almost 500 jets and Hayes reckons it will be closer to 1,000 before the year’s out.
There’s also a benefit to suppliers, servicing clients they may never have reached in the past, and gaining access to large, lucrative sales. And while fuel is an easy example, AVIAÂ is expanding its influence across the board, already with particular focus also on data, FBOs, ground handling, insurance, maintenance and training. It’s an expansion that’s been bolstered by a recent merger with Convolus, a European smart purchasing network, that brought 150 jets into the AVIAÂ ‘fleet’.
And yet, Hayes says there’s more to the AVIAÂ advantage. “We’re building a community that’s good for the operator and supplier alike. We, the aviation community, must have healthy suppliers. When you think about a ‘buying club’ you tend to think of a group that uses its power to beat prices down, but we’re just trying to streamline the process.
“Look at a typical transaction and you might see as many as 20 intermediaries, each taking their little piece, because the market is very fragmented. It’s not transparent and no one really knows what anything costs because there are so many players. We want to bring all our members together with the vendors they want to work with, facilitating conversations so that purchasing is much more direct, while the acquisition and retention costs for suppliers are lowered, avoiding the need for them to take a bite out of their margin in order to supply a high-quality product. But it only works if we have frank, open, honest and transparent group discussions.”
AVIAÂ is therefore all about its members and suppliers, but as a business it needs to make its own money. How? “We charge a membership fee to participate in the network and we take administrative fees on the supply side, but they aren’t commission based, they’re intended just to support our work – typically they end up being between three and 5 percent of overall spend. We’ve seen that prove small enough in other industries that it doesn’t interrupt the transaction and still brings down cost, but it’s obviously big enough to keep our ball in play.”
It’s a tried and tested model elsewhere. It has worked very well in US healthcare, but also in catering and restaurant groups, and local and state government, essentially in anything that needs to perform lots of purchasing with little money and time to put into a professional purchasing process. “We provide that purchasing expertise to even the smallest business aviation operator.”
An important part of that purchasing professionalism is the ability to save customers money without pinching suppliers’ profit. AVIAÂ’s network might show that a piece of maintenance could be done with equal quality at a facility just 20 minutes flying time away, but an owner operator just wouldn’t have the exposure to the supplier base to know that. Equally, AVIAÂ is able to expose service vendors to operators they might otherwise never see.
Last August, for example, AVIAÂ signed the Patriots Jet Team as a supplier of upset prevention and recovery training, guaranteeing members discounted slots on the Team’s unique courses. “They’re very good at what they do and very busy doing it, but they weren’t necessarily looking to run around educating the market place; but we can do that for them. We can help our members know that Patriots Jet Team is there, and we consider them a very high quality vendor. And I’m certain of their quality because I visited their facility.”
Personal relationships
Further to the process of introducing vendors to customers, Hayes says AVIAÂ has plans to publish requests for proposals on its website, telling potential vendors of particular customer requirements and facilitating any resulting transactions. Regular member conferences are also on the agenda, with plans for a regular programme beginning this year, providing the opportunity for members to recognise common requirements, which in turn saves suppliers the need to visit multiple customers. Perhaps more importantly though, conferences are a nurturing ground for personal relationships.
“Our founders, Dustin Dryden and Jim Hall, say it’s all about personal relationships. As a newcomer I was a little nervous, navigating the acronyms and learning the industry, but I’ve found people so welcoming – and that’s our role as a GPO, to introduce and welcome people within the industry. Our customer success team speaks to members weekly and we often hear of an issue before the vendor does. Then, we’ll work to repair or strengthen the relationship, or even to open a new one. You could consider us the industry glue, but I prefer to think of us as elves or minions, running around and facilitating.”
At this point in the conversation another elf appears, Rick Tilghman, AVIAÂ’s Chief Operating/Chief Product Officer. Gillian Hayes had worked in a similar role to Tilghman’s prior to taking the CEO position and says: “I needed to find someone who was hopefully better than me at doing what I had been doing and that was Rick. He runs the ops and product side of the house.”
Like Hayes, his background is not in business aviation; he reckons it’s one of the few industries he hadn’t already worked in, but previous roles had required top secret clearance for government operations and seen him work a couple of years as a director at PayPal, all of which equipped him well to bring modern business analysis techniques and understanding to business aviation, an industry he describes as having ‘largely a barter economy’.
“Looking at the industry, I couldn’t see how any operator could plan beyond the next quarter with any certainty, because they couldn’t understand their future risks. I also think a lot of capital is misallocated and there are ways of optimising efficiency that will allow business aviators and suppliers to allocate capital in a way that helps them grow their business over time.
“A big focus for me is on analytics. We have lots of members using SAGE, QuickBooks and Excel to run their businesses and while these are fine from an accounting point of view, they don’t help develop a business. They don’t show you which aircraft are most efficient, where you’re losing money, where you could realise more profits. Meanwhile, suppliers have struggled with the distributed nature of the industry, having to invest heavily just to find customers, which means they have analytics questions too. Just as we have a members’ dashboard that helps them make their purchases, so we’ll have a supplier dashboard that shows them where customers are and what they need.”
Speaking to Hayes and Tilghman, it seems they’re attempting to create a local customer/supplier relationship on a global scale. “That’s what we want,” Hayes confirms. “We want expert vendors who really know how to provide the best service at the best price, regardless of where in the world our customers or their aircraft are.” “And beyond that, Tilghman says: “We’re working to help operators compare how their aircraft are performing against a baseline generated across customers operating similar jets. Ultimately, they’ll be able to make fleet and regional comparisons, because operating the same aircraft the same way out of London compared to south Florida, for example, has very different costs.”
Success story
Recently promoted Chief Business Development Officer, Matt Smith has a background in charter brokerage and fleet management, with a focus on reducing cost and optimising efficiency, an apparently ideal introduction into AVIAÂ. His team drives new members and suppliers into the AVIAÂ community. “We need members to attract suppliers, since we’re working for both. That’s unusual for the industry; we’re helping provide customers with the services and products they need and providing suppliers with a large pool of potential customers.”
Still new to the company as Vice-President Business Development when he spoke to EVA at the MEBAA show, Smith was busy meeting potential new suppliers and was keen to celebrate the news that Jetex had signed up to the AVIAÂ list. “I’ve also just taken on a Middle East representative and I have people in the US and the UK. As we grow and build our community so we’ll add to the team, but I’m keen that we should grow organically – I’m wary of repeating a common start-up mistake by overloading the sales team.
“And at the same time as my title is VP Business Development, AVIAÂ is still a start-up, so we all have to be really agile. I’ve helped fill the coffee machine, and pitched in on a recent North American FBO tender. It involved creating a mailing list, calling the list, printing it and mailing it; on thanksgiving I worked alongside Gillian and another member of staff preparing the mailing, stuffing envelopes. I love that one day I’ll be doing my ‘proper’ job and the next I’ll be doing something random.
“It means I really look forward to going to work and I’m enjoying the different perspective that comes from working with non-aviation people in an aviation community.” Nonetheless, AVIAÂ has set itself up with a team that includes non-aviation folk, including Hayes and Tilghman, as a disruptor in a highly conservative industry – do some potential members and suppliers take a little more convincing of its potential?
“We have our early adopters, members who’ve been with us since the beginning and they’re fully engaged. Then we have more hesitant customers, but we’re helping change their purchasing patterns and with time they’ll see that. We’re also super transparent and we’ll just as happily tell people they’re already doing very well as we are to tell them we could help.
“This is a partnership and as more people see us grow and becoming more established, they’ll join the community. Every contact we have with a company builds on our relationship with them. Our customer success team will help them make better purchasing decisions and go to our suppliers if they notice a customer isn’t buying from them.
“For example, we might see that a customer isn’t buying fuel from one of our suppliers at a particular location. It might be because at that one FBO the supplier is a few cents more expensive than a competitor. We can go to the supplier and say, ‘On the basis of our customer data, if you reduce your cost by a couple of cents, you can increase your fuel uplift by this much’. All the data we gather and distribute to subscribers is blind, so nothing confidential is given away but at the same time it helps everyone.”
Smith says it also works in reverse, with suppliers coming to AVIAÂ to better understand their sales. “We supply a solid source of market intelligence and even help open new markets. We had a US company with no international presence, which came to us for advice because they were opening in Europe. They wanted to identify the key locations for their product so they could be sure of a customer base. We supplied the data that enabled them to create an expansion strategy. We really do work for our suppliers just as much as our members; we treat them and their data as a community.
“I’ve even been able to personally help solve a member’s problem. A charter operator, he came to me at the NBAA show complaining that he couldn’t get credit with one of our fuel suppliers. I walked him to the supplier’s booth and started a conversation with their senior leadership team, which revealed he’d just become stuck in their computer application process. Now he’s happy because he has the credit and the better rates being an AVIAÂ member generates, and they’re happy because they’re selling millions more gallons of fuel. That’s a real AVIAÂ success story.”