The global aircraft charter specialist, Air Charter Service, which has some 17 offices around the world, recently appointed Azat Mulgimov, formerly Commercial Director and main board member at the Russian cargo charter airline, Aviacon Zitotrans, as General Director of its Moscow office. EVA International spoke to Mulgimov about the current state of the Russian charter market and ACS’s plans for the region.
Q: What is your view of the Russian charter market?
A: We are seeing growth in the market now. We opened our Kazakhstan office in November last year and we are moving to new offices in Moscow and hiring more brokers in order to take advantage of what we see as a growth market. We currently have a staff of almost 30 in our Moscow office, which makes us the biggest charter broker in Moscow, and if you take into account our other two Russian offices, that makes ACS the biggest charter broker in Russia as a whole. ACS has enjoyed tremendous growth since the company opened its first office in Russia in 1995, mainly to go after the cargo charter market.
At that time there were just three charter brokers in our Moscow office, by comparison with our present team of 30. There are four brokers in our Kazakhstan office. We opened that office because we were seeing a lot of demand from the oil and gas interests and mining companies in Kazakhstan and it seemed the right time to put an office in on the ground. Things are going well and we expect to expand that office over the next few years.
Q. What do you do to market ACS in Russia? How do you reach your potential client base?
A. We use sophisticated on-line marketing, and we do mass mailings to potential customers. We have one of the biggest customer databases in the world and this is constantly evolving. Every single broker in ACS worldwide works off that database and it gives us a tremendous reach and impact. Over the last year, for example, we added more than 1,500 customers to our global database. One of the brokers’ main tasks is to keep the customer relationship vigorous. Our brokers do a lot of flying on various executive jets so they have a very good feel for the interiors and the experience offered by the various aircraft and can match these to the client’s expectations. This, plus the broker’s detailed knowledge of the client, helps to speed up the process of meeting the client’s request and generating a very positive client experience.
We also make sure that we keep our relationships with aircraft operators at a very high level, and we strive to keep those relationships as good as the relationships we enjoy with our customers. The operators are our suppliers and they are part of the key to us providing an excellent service for our clients. Our operator database gives us access to more than 50,000 aircraft worldwide. Operators know that we are one of the two largest brokers in the world, so they too work hard to keep in constant contact with us, particularly on issues such as empty legs, where aircraft are being returned to their home base, so that we can offer clients great discounts if they are in a position to utilize those aircraft.
According to our estimates the business aviation market in 2013 is growing at something approaching 5% to 7% year on year, but we are growing far faster than that. Globally over the last few years we have grown market share by 15% year on year. We grew even through the recession. We have a pretty good business model and it seems to be working!
Q: Do you have a preferred set of operators that you use to source charter aircraft?
A: We are based in Moscow itself, at Vnukovo-3, the number one airport in Russia, and most of our charter flights come into and go out of there. We use all the major operators in the Russian/European market, with almost 100 flights a month spread amongst 10 or 12 operators, many of whom have their own aircraft as well as acting as the operations manager for owners. This is almost exclusively a mid to large cabin market, ranging from Citations to Hawker 700s or 850s or Challengers, for relatively small groups of under 20 passengers. For groups of over 20 passengers we have a commercial charter arm and all such requests are handled by our commercial team.
Q. Is the grey market much of a threat to ACS?
A. The grey market is a real headache for all brokers, however you define it. There are far too many private jets that are utilized by owners to generate income without an Air Operators Certificate (AOC), which means that none of the safeguards demanded by the authorities are in place. Specifically an AOC requires the operator to have a quality system which ensures that all the applicable regulations are followed, that there are acceptable systems for the training of crew, that there are key accountable staff responsible for specific safety critical functions around training, maintenance and operations, and that the operator has up to date Carriers Liability Insurance, to cover any claims arising from the death of or injury to passengers. It is very difficult to catch illegal operators and as a charter company we quite frequently get offered aircraft that are on the grey market and as soon as we see that it fails our stringent due diligence checks, which establish that it has insurance coverage and that it is a legitimate charter aircraft, we reject the offer. We have to maintain and provide full documentation on every aircraft that we charter, and these due diligence checks are a protection both to ourselves as ACS, and to our customers, and enable us to ensure that we never fall into the trap of getting involved in a grey charter accidentally. We are probably one of the only brokers in Europe with a full time compliance team and every ACS office around the world has access to this team. Every single aircraft, passenger and cargo, is checked by the compliance team.
Q: What are the main destinations for charter flights out of Moscow?
A: We see a lot of flights during the winter ski season to the big ski resorts, but also regularly to Dubai and other Middle East destinations and to the major European airports. Mostly the travel is leisure travel rather than business on these routes, with the exception of the Middle East. In summer much of the traffic is to Europe and Italy in particular. South East Asia and the Middle East are also frequent destinations. We do a lot of charter work for the big corporates, with a strong demand for group charters.
Q. Being based at Vnukovo-3, you obviously have continual competition from the major scheduled airlines. What does charter offer that commercial can’t?
A. There are a great many advantages to our service by comparison with commercial airlines. These include all the usual things, such as the ability to travel to any airport at any time of the day, including a very large number of airports that are not on commercial routes. All of our customers are assigned a personal broker that looks after them on a 24×7 basis. We can provide all the usual luxuries, including catering, limousine travel and so on, and of course we provide a much higher level of personal service than you will get from a commercial airline.
Q: One of the problems for the broker market is that there are few barriers to new companies entering the market. Unlike an aircraft operator you do not need an AOC to be a broker so anyone can set up shop. Is that an issue for you?
A. Very much so. Unfortunately, so-called “bedroom brokers”, people operating out of a spare bedroom, say, are a plague. They have the ability to do the whole charter market a great deal of harm by providing a very shoddy service. As to competition, that is not a particular concern. They can take away one or two customers by offering really cut price rates, which they can do since they have none of the overheads of a proper broking operation, but with our global experience, our compliance team and our attention to detail, there is so much more we can offer. Plus we have the financial backing of a large corporation, which is something no one man band can offer. Some 90% of charters have to be paid for by the customer up front and you are trusting the broker with your money until they pay the operator. With a one person band, there is no protection for the client if the broker goes insolvent, and that is a real difficulty for people trying to benefit from cut price charter flights through fly-by-night brokers. The other danger of course is that without a strong compliance team the client could be involved in a grey charter without knowing it.
At the same time as a top quality broker we are more likely to be able to get the client favourable rates if any are going, and with our global network of offices we can utilize empty legs between offices, and that is a very large benefit that comes from having offices around the world. When we sell a one way charter we always look to see if we can sell the aircraft back again. We have a dedicated web site for our empty legs which is updated all the time, and most of our customers will subscribe to this.