Interview with Niklas Berg, founder and CEO, and Oliver King, managing director
Looking at the iconic, huge, white-with-a-splash-of-green Avinode stand at EBACE 2013, it is something of a stretch to believe that this global business started as a university project by three Swedish university students, Niclas Wennerholm, Per Marthinsson and Niklas Berg. But then Avinode is quintessentially a technology company, with a technology that, in the words of managing director Oliver King brings together buyers, suppliers and sellers of business jet charter services globally, and as Silicon Valley has proved again and again, IT companies have the capacity to expand mightily from very modest beginnings.
Avinode now claims to be the leading global charter market, with over 3000 aircraft accessible via its online marketplace. Thousands of aviation professionals log in every day to buy and sell charter flights all round the world. The company’s CEO, Niklas Berg and Oliver King, who joined Avinode three years ago, spoke to Executive & VIP Aviation about the original rationale for the company and its progress to date.
“The three of us, the founders, were all college students at Chalmers, a technology university, which is well known for the Chalmers School of Entrepreneurship. The kernel of the idea came from a friend of ours, Max Lieberman, back in 2001,” Berg explains. At that time Eclipse had announced that it was going to change business aviation by producing thousands of light jets. We thought great, let’s start an IT service that simplifies this emerging air taxi service market. But it was just after September 11 and the attack on the Twin Towers, plus the dot.com collapse was still very fresh in people’s minds,” he recalls. There was not a lot of money around to back anything that combined IT with aviation. Nevertheless, the three started to look at the way operators market themselves to brokers. “We quickly saw that the entire market was based on static information,” Berg says. They were convinced that in the era of the Internet, there had to be a better way for the charter industry to match buyers and sellers.
Previously Avinode brokers found flights for customers by looking at paper lists and getting on the phone to operators. The fax and the phone book were the prime tools of the trade. The number of options and permutations that they could trawl through to find the best fit for their clients was hugely limited, even with their best efforts. The client generally needed answers on price, aircraft availability and suitability in pretty short order and the broker had a tough job finding answers fast enough to clinch the sale before the client got impatient and called a rival broker.
The three students found a flight time DOS-based system run by Per Johannson that was used across Europe. “We built a quoting system on top of this. The broker input routes and times into the system and it returned quotes. We took it from a client server DOS platform and put it on the Internet and added some Danish brokers. What we found when we looked into it was that there were numerous sources of supply dotted around Europe, all the aircraft management companies that looked to charter unused hours on the owner’s aircraft, and there were numerous buyers. The silver bullet, that no one had got right yet, was to bring the two sides together by creating an online marketplace with near instant quoting,” he comments.
From the outset, Avinode’s founders took the decision to use as much proven, off-the-shelf technology as possible. They built their database of available aircraft and operators in Microsoft Sequel Server, which had proven scalability. Scalability and speed are crucial to the system, since the number of permutations that could be involved in satisfying a client’s requirements can multiply exponentially. Each additional requirement, such as route, time, seating capability, preferred aircraft type, interior options, catering, crew, price, airworthiness checks, adds yet another dimension to the matrix of options that have to be searched. “It is not at all unusual to find that the system is doing upwards of 1.3 million calculation points in order to produce the quote,” King says.
That figure alone shows that the system is doing a lot more than merely taking a load of work off the broker’s shoulders. It is giving the broker a powerful tool to provide the client with a much more exact fit to their specific requirements, thus increasing client satisfaction and helping to build and strengthen the relationship between the client and the broker. It also makes it extremely easy for the operator to reach out to virtually the entire community of brokers and to keep them informed as to the moment-by-moment availability of their portfolio of aircraft.
Looked at like this, all the early fears from brokers and operators, namely that an online system would somehow cut them out of the loop, vanish. The real problem Berg and his colleagues had when they tried to get Avinode off the ground was in convincing brokers that their system would be comprehensive enough, that it really would include all the information that the broker would otherwise be garnering through the telephone. To win that battle they needed to bring a large percentage of the operators on-board as fast as possible, and to get the operators disciplined in keeping their aircraft information bang up to date.
What they brought to the table, from the broker’s perspective, was an enormous increase in the speed with which the broker could give the client a firm quote. “Before Avinode, it could take a broker 24 hours or more to develop a firm price, and even then there was no certainty that it really was the best price available. It was merely the best price the broker could obtain from the calls that he or she managed to make,” King explains. With Avinode, the broker can reach a firm price in five seconds or less. That leaves plenty of time for the broker to add further value by attending to some or all of the plethora of ‘concierge services’ which the client might want, from hotel bookings to limousine travel arrangements.
Before Avinode, it could take a broker 24 hours or more to develop a firm price, and even then there was no certainty that it really was the best price available
“Brokers knew the operators they worked with regularly but they would have no visibility of which aircraft just flew into which business airports, or that a particular operator has an aircraft with two days’ availability while it waits for an empty-leg flight. We stepped in with empty-leg information and empty transient availability. It was a classic application of technology to a problem that is too complex to solve with pen and paper,” King notes.
Avinode’s major rival was the US-based CharterX, headquartered in New Jersey. In 2006 Niklas Berg went out to Miami to open up Avinode’s assault on the US market and that brought Avinode into direct competition with CharterX. “The US market was very different from the European market, but we had a great deal to offer. For a start, we brought buyers in Europe that were looking for trips to the US, so US operators and brokers had something to love us for!” Berg says. In a shrewd marketing move Avinode also teamed up with Netjets in the US, who were looking for a convenient way of sourcing jets outside their own fleet.
“We competed hard against CharterX in the US and grew to be about the same size as them by 2010, at which point, after six months of discussions, we acquired all the outstanding shares of CharterX and merged their platform with ours,” Berg says. That acquisition gave Avinode a dominant position in the US market to complement its dominance in Europe. “We have work to do still in Latin America, and the US still has a lot of potential,” Berg informs.
The CharterX acquisition brought two additional companies into the Avinode fold, namely the safety auditing and safety data management company Wyvern (wyvernltd.com) and the web-based aircraft and crew scheduling system, SchedAero (www.schedaero.com). “Wyvern is still largely a US company so we have some great opportunities over the next few years to expand Wyvern’s global capabilities,” Berg comments.
The future for Avinode looks busy. The group now consists of three companies, Avinode, Wyvern and Schedaero. The management team will be working to expand the footprint of all three companies in Latin America and Asia while looking to add additional functionality wherever that seems appropriate. It has just launched a complete sales management system for brokers, complete with CRM and fully integrated with the Avinode marketplace. It has added helicopters to SchedAero’s existing fixed-wing jet content and is looking at adding a luxury limousine side to provide brokers with a ready made address-to-address service for their clients. “As we grow there are plenty of opportunities for combining information on the system to deliver services. The regional jet operators, for example, have spare capacity that they could charter and to date there has not been a good way of connecting the regional jet operators and the business and leisure charter markets, so there is plenty to do,” King concludes.