Patrick Margetson-Rushmore describes Luxaviation UK’s aircraft management service, revealing how it takes care of everything, from MRO to Smarties
Patrick Margetson-Rushmore was a founding member of London Executive Aviation in 1996. The company subsequently established a mixed fleet on its way to becoming the first executive air charter operator to gain European Joint Aviation Authority certification. Another significant milestone was its introduction of the Citation Mustang light jet into charter service, followed in May 2014 by its becoming part of the Luxaviation Group.
In 2016, London Executive Aviation began trading as Luxaviation UK, while its customers discovered the benefits of access to Luxaviation’s combined fleet of more than 250 jets, including Luxaviation UK’s aircraft, among them examples of the Challenger 300; Citation Mustang, II and Excel; Falcon 2000LX/EX; and Legacy 600 and 650.
Now Margetson-Rushmore is Chief Executive at Luxaviation UK, working from its Stapleford Aerodrome headquarters in Essex. From here he oversees a variety of activity, including charter and aircraft management operations, a subject he discussed with EVA early in April.
What’s the story behind Luxaviation UK?
We did our first flight on 1 April 1996, starting with piston aircraft and growing over the years so that we no longer have pistons; we actually retired our last turboprop in March this year as well. We combine aircraft that we manage with our own fleet of small jets that are available to hire.
Prior to the merger with Luxaviation Group we had about 26 aircraft, mainly in the UK, but we also had them with owners in Moscow, Paris and the South of France. Now we’re part of the group there are 250 aircraft globally, other than in the Americas, making us the second largest business jet operator after NetJets. The fleet’s been acquired by Luxaviation’s parent company by mergers with around seven other companies and it’s made for very exciting times over the last three years or so.
And although we’re now part of a large group, George Galanopoulos, my co-founder, and myself are still very much hands-on with the charters, brokers and owners.
Why do jet owners bring their aircraft to companies like Luxaviation UK for management?
People buying an aircraft, either personally or for company use, never really want to give the keys away, but they don’t want the hassle of managing it. Owning an aircraft creates myriad issues from dealing with crewing and crew employment, through aircraft maintenance, to cross-border work. Aircraft fly into different countries with different languages and although the international aviation language is English, there are still the nuances of different cultures. On the financial side, collating bills, summarising them and answering questions can become comparatively complicated. Lots of balls are juggled to make flying possible.
In a trip from A to B to C and back to A, there are constant changes behind the scenes. A five-minute conversation with the client calling to arrange the trip results in a four- or five-hour job organising it. And if something happens with the flight, it has a knock-on effect at all the other airports and airways that you’re using. It can end up keeping our operations department busy for ten or 12 hours.
And the business is very highly regulated of course. We have a weekly external audit examining different aspects of our procedures, which means audits five or six days every month, and the Civil Aviation Authority comes in twice a year. Then there are one or two US companies that also come in and do their own audit annually or every two years.
Why do owners offer their managed aircraft for charter?
Typically owners fly between 100 and 200 hours per year. To offset some of their flying costs they allow charter to third parties. All our managed aircraft have a crew allocation and a location, and we also assign a dedicated operations manager, or key account manager, to coordinate every aspect of the aircraft.
We have a maintenance department that alerts the manager when work is due, the owner is informed and the work scheduled, but the owner doesn’t have to be proactive to any extent, other than saying ‘I want to fly on this day to this place’. But it’s important for them to realise that by offering their jet for charter they aren’t going to make money, they’re only going to be able to offset some of their fixed costs.
Is maintenance on managed aircraft performed in-house?
We own limited maintenance facilities in Europe, although we have MROs in Africa and Australasia. But often the owner doesn’t want the maintenance provider to be the same as the operator. As the operator I have responsibility to ensure bills are kept to a minimum and the work is done properly, and the owner wants to avoid the potential for a conflict of interests; in reality there isn’t, because maintenance is so highly regulated.
Where we have aircraft of the same type, we’ll negotiate volume discounts, using our buying power to reduce costs, and any benefits are passed on to the owner. Insurance is a good example of that too. It’s not a big figure, but an insurance company might charge $25,000 for an aircraft through us, while an owner going to the market to insure the same aircraft on their own might pay $40,000.
We also get fuel at bulk discounts and that’s another saving we pass on to the owner.
Luxaviation makes it easy for owners to see every aspect of their aircraft’s financial management. How does the process work?
Within five weeks of the end of the month, an owner receives a financial summary showing gross charter income with a copy of every invoice issued; every item of expenditure, including crew, fuel, airport fees, de-icing costs, maintenance and so on, with a copy of the bills. The process is very open – we have a couple of owners who come in and audit us, checking all the books, and we’re very happy for them to do that.
In terms of flying requirements, owners can log in at any time to see what their aircraft’s doing, whether it’s booked in for maintenance, whether it’s flying, where it’s flying to or where from. It’s important for them to be able to see if it’s free on a particular date.
How does Luxaviation collate and maintain the operational, maintenance and airworthiness records for each of the aircraft it operates?
The owner keeps the ownership document, but we typically have a copy of it. There’s the CAA 88 document that allows an aircraft to be used within Europe VAT free if VAT has been paid and dealt with, and the original of that remains in the aircraft while we retain copies in the office. And then we also hold the radio licences, certificates of release and all the other documents relating to a managed aircraft. Some of the maintenance records remain with the MRO, but we oversee them and have copies of all the key documents.
A new owner can see all the documentation at the MRO and here, checking work orders and certificates to be sure everything’s been done correctly. It’s really important, because we advise owners not to buy an aircraft unless they’ve checked its entire history since it left the factory.
Are your owners typically individuals or organisations?
In the UK it’s around 60% private to 40% business organisations, although most private owners also use their aircraft for business. Out of the 250-aircraft Luxaviation Group fleet, I suspect the majority is corporate.
A small percentage of owners place more than one aircraft with us and a few place one with us and one with someone else, but most owners have only a single jet.
How does Luxaviation UK support owners’ and charterers’ trip requirements?
Although most people have their own cars, we’ll arrange cars to collect people from home or office and bring them to the aircraft if required, and we arrange car parking at the airports they visit. We satisfy their specific catering and drink requirements, and keep a profile of their preferences.
We deal with all crew costs, including down-route hotels, we arrange the entire process of flying. We can, but rarely do arrange hotel accommodation for the customer, because they usually know where they want to stay, but we often arrange cars for their arrival.
We build the profile on all our clients, including basic information like passport details, remote clearance form requirements, visas, but also more personal needs.
If the customer’s a regular flyer we might get to know that their children like Smarties for example, and we’ll make sure there are Smarties on the jet. Then there are some customers who don’t want food on board, or they want kosher food, or have some other requirement – we even provide their favourite newspapers.
What has changed in aircraft management? What’s next?
Within Europe most people use jets now. There’s a shrinking market for unpressurised piston aircraft, while turboprops, although they’re highly versatile, are less likely to come to us. This is in part because we no longer have our own, but also because a turboprop owner is likely to have their own pilot and they don’t want to pay the level of fees applicable to have the aircraft managed. The charter market for turboprops is also smaller than it used to be.
Having said all that, single-engined aircraft are now permitted to operate commercially for charter in the UK and I think we may see a resurgence of single-engined turboprops and turbofans on the market. They’re cheaper to buy and operate since they use less fuel, and therefore cost less to charter.
One of our customers places his jet with us, but also has a share in a PC-12, which he takes to places the jet can’t go. And single-engined turboprops are as reliable as twin-engined turboprops, but there will be issues with customer perception of single-engine safety.
In terms of other changes, before the recession, lots of people felt they’d own an aircraft because they believed it would go up in value, and several bought new aircraft to sell at a profit of a few million pounds. Now the opposite happens. New aircraft typically depreciate by 10% per annum and that’s changed the nature of who’s buying aircraft.
People are still buying new and they’re buying pre-owned, but they’re considering the point at which they want to buy far more carefully. There’s an over-supply of aircraft for charter and charter rates haven’t increased over the last eight years, so chartering effectively costs a little less now than it did eight years ago.
We see some customers looking for more for the same money, or coming to us saying that someone else is offering the same aircraft for a few hundred pounds less. There comes a point where we’re happy to send them to the competitor – there’s no point chasing turnover when the margins for an operator are very small. There’s a perception that operators earn a lot of money from a flight, but the gross margin is actually around 10% before overhead cost.
How do you anticipate Brexit affecting Luxaviation UK’s business?
It could be very difficult for us. There are myriad issues that need to be looked at and renegotiated: cabotage and the nine freedoms of the air, EASA requirements, pilot licence requirements, security clearances, customs control, taxes, VAT – if we’re no longer part of Europe, do we need a VAT exemption certificate for countries into which we fly as well as for the UK?
But it’s not a one-way ticket. If you look at arrivals and departures within Europe, Southeast England is typically the major arrival and departure point from and to Europe. So it’s in the UK’s interest to ensure a status quo and I’d suggest it’s also in the interests of the remaining 27 EU countries to maintain it too.
We need to make the correct representations to the UK government to make sure the status quo remains and UK operators need to contact the European business aircraft associations to ensure they’re thinking the same. It’s the rational solution, but it might be politically difficult