Expanding the offer in turbulent times

posted on 11th June 2018

CEO Martin Lener explains why the time was right to add an ACJ to the Tyrolean fleet, and how he is diversifying to combat current weakness in the charter market

Austrian charter operator and aircraft management company Tyrolean Jet Services (TJS) has added an Airbus ACJ318 ER to its commercial business jet fleet.

Owned by an Asian family, the ACJ was completed at Lufthansa Technik in Hamburg in 2010. The owners decided in the middle of last year they could generate better revenue under a new operator and put the aircraft in the hands of Innsbruck-based TJS.

“As a long-established business jet company, it was a natural next step for us to add an ACJ because of the new standards of comfort and space it offers,” says CEO Martin Lener.

Airbus designed the ACJ to meet client requirements at the top end of the corporate jet market, where demand is increasingly for larger equipment. The aircraft’s cabin is claimed to be twice as wide and offers triple the volume of long-range competors, giving up to 19 VVIP passengers additional room to relax or move around on board. “We are able to carry larger executive, family and government groups, allowing them to take advantage of features that other business jets cannot deliver,” says Lener.

The ACJ can fly for 9.5 hours and has a range of 4,200nm (7,780km), yet its fly-by-wire controls and carbon brakes contribute to an excellent short-field takeoff and landing performance. The new addition to the TJS fleet has a sophisticated cabin management system including in-flight entertainment. The company promises clients a “unique, magnificent dining experience” thanks to a well equipped galley manned by highly experienced cabin staff.

In addition to charter and aircraft management, TJS offers a complete range of business jet services including flight support and aircraft sales and acquisition, designed to help owners and customers to achieve their business or financial targets. Owners are offered Austrian or any preferred alternative registration.

The company’s commercial fleet comprises a Bombardier Global Express, two Dornier 328 Jets (one in Executive and one in Corporate configuration), a Cessna Citation VII and a Citation Jet 2 plus two acquisitions in 2011, a Gulfstream G200 and the new ACJ.

Available on charter for the final two months of the year, the Airbus flew to Mauritius and the Middle East as well as doing extensive business around Europe. “There is strong demand for heavy jets around the Christmas and New Year period, but before that the market had been slow, reflecting the lack of consumer confidence is lacking. Demand was weak in November and even at the beginning of December,” Lener says.

Luxury destinations such as the Maldives, Mauritius and the Caribbean have been generally in less demand during the northern winter, he notes. “There is too much capacity. Supply and demand is not in balance and rates are lower than they were in 2008.”

As a relatively small operator, TJS relies on its personal service. “We’ve been intensively involved in the charter business for a long time and we understand this fast changing market,” Lener says. The wide mix of equipment the company operates may give it flexibility, but he acknowledges it also represents a challenge in the current economic climate.

“The licensing, crewing and training needs make it difficult to run an organisation efficiently across several types. If you want to operate a Gulfstream G550 or Global Express it will cost you €30,000,” he says.

The Airbus has a dedicated team of two pilots, two co-pilots, four cabin attendants and two flight station engineers, reflecting the need for more frequent maintenance checks on a large, intensively used aircraft. But Lener points out that initial training on an A318 costs less than with less popular types, “because there are 5,000 of them out there”.

How far could this philosophy of an aircraft for every niche extend in future? “If someone came along with a Falcon 7X it would be another model in our fleet,” Lener says – though in some respects that could be a nice problem to have.

He points out that TJS has 10 aircraft under private management, resulting in greater commonality than might be obvious from the list of seven aircraft (and six types) available for commercial charter. For example, the company manages a second Global Express, although this is based in Kazakhstan and therefore requires its own crew.

It is impractical for fleet operators to advertise on the open market when they are looking to expand, but they can make it known through their existing network of contacts. TJS has been active in the Baltic Air Charter Association for five years – “a good way of meeting brokers,” Lener says – and he has sat on the BACA council for the last 18 months.

Word of mouth from existing clients is also a valuable tool, and it is perhaps significant that the Airbus had spent only a few months with another charter operator before the owner decided to switch to TJS.

However, the charter scene has not been a happy one in the last three years or so. “The gloom and doom in the economy is such a contrast with a market that was so hot in 2006-08,” Lener says. “In 2009 there were more cancellations than deliveries. There are some signs that it’s stabilising now, but only slowly. Even when enquiries are strong, as they were towards the end of last year, this does not translate automatically into business. Charter clients are shopping around, and booking at very short notice.”

Having worked for TJS since 1980, not long after its formation, Lener observes a speeding up of the business cycle. “We had severe turbulence in 2001, then again at the end of 2008, so the cycle was seven years. But now we have had the same again in Europe three years later. There are much greater fluctuations and it makes everything less predictable.”

TJS sought to diversify to protect itself during the last downturn. In attempted a move into the Middle East market in 2009 by setting up a joint venture, ClearSky Aviation (CSA), with MerchantBridge. The partners based an aircraft in Beirut, Lebanon, initially offering air charter and aircraft management. The idea was to build on this by adding maintenance and FBO services.

The venture survived only a year in a market that has become highly competitive, with many new players moving in. The number of unlicensed aircraft, and the inevitable impact on margins, concerns Lener.

“It didn’t work in the way central Europe does,” he says. “It’s very price driven and the grey market is becoming more of a problem every year.”

The company has maintained its strategy of diversification, but now through different business streams rather than geographical expansion. When Tyrolean Airways outsourced its catering, TJS co-invested with Welcome Air in the Innsbruck-based operation. The first year for the catering operation, Cloud Number Nine, under its new ownership has been “positive”, Lener reports.

The acquisition represents only a small addition to TJS’s revenues as not many of its flights originate from Innsbruck, though there will be some outbound traffic as winter sports parties complete their trips and return home. Welcome snow began falling in early December after a slow start to the ski season, and TJS further taps into this by way of a concierge service offered to people enquiring where they should ski for a weekend.

“This falls between the business jet and travel agency spheres,” Lener says. “We’re happy to serve clients from other parts of the world. We understand how to treat them. We have long experience, and it’s a different income stream.”

The company has also established its own in-house IATA travel agency for those clients wanting to fly with a scheduled carrier. “It’s a platform to maintain our link with corporate clients and give them an alternative,” Lener says.

Companies that have scaled down from booking private charters at least still have a reason to contact TJS and can rely on a personal service, albeit not such a lucrative one. Conversely, Lener hopes groups of 14 or 15 executives travelling on business class tickets will see the merit of a dedicated charter.

Meanwhile, TJS continues to develop its Part 145 maintenance facility for Cessna, Global Express and other business jets based in Austria, Germany and northern Italy, which now employs 10 technicians. When the upturn finally comes, the company intends to transact with customers in as many ways as it can.