With over 200 aircraft under management, mostly wide-body jets, the wholly owned NetJets Inc. subsidiary EJM (Executive Jet Management) has been a leader in providing jet management services to owners since it was launched back in 1977.
As EJM President and NetJets COO Global Aircraft Management, Robert Molsbergen explains, the company is now well down the track with its strategy of building out from its US operation.
“The US subsidiary is by far the largest, but we now have our European AOC for EJM Europe and we manage eight aircraft in Europe, with the aim of growing this to 12 before the end of 2014. By the end of 2015 we are looking to increase that to 20 aircraft under management, which will make us a significant player in Europe,” he comments.
The third division is NetJets China. On 23 September this year, NetJets Business Aviation announced that it had obtained its CCAR-135 operator’s certificate from the Civil Aviation Administration of China, which clears the way for NetJets to launch its fractional operation in China, when the time is right.
However, Molsbergen points out that the way NetJets Inc., is approaching the China opportunity is to look first to EJM China to build up a strong aircraft management business while also developing the charter side, this being a natural parallel activity to aircraft management as owners seek to get some use out of what would otherwise be an idle asset.
“Clearly we think we have a significant edge in approaching the charter market in China, by way of the established nature of our name and our reputation for the unsurpassed safety and service elements of our operation,” he comments. EJM already manages a Global 5000 that happens to be based in Hong Kong, plus two Hawker 800s that it uses to support charter services inside China. “There are quite a few prospects in that part of the world that are already well familiar with the NetJets fractional offering in the US or Europe, and who now want to fly in-country in China. We also have multinationals and individuals inside China that are already familiar with our North American service,” he comments.
When the announcement was made, back in September NetJets Inc. chairman and CEO Jordan Hansell said that NetJets had been working with the Chinese authorities since 2012 to secure the operating certificate. The joint venture, NetJets Business Aviation Ltd, was set up in China in partnership with Hony Jinsi Investment Management Ltd., and Fung Investments and announced at ABACE in November 2012. At the same time, at the Zhuhai Airshow, NetJets unveiled its Private Jet Travel Card, making it possible for Chinese-based travellers to access the NetJets network in the US, the EU and Switzerland. NetJets then set up its China headquarters at Zhuhai Jinwan Airport, in Zhuhai Guangdong Province. At ABACE 2014 NetJets announced that it has hired key employees for its Zhuhai operation, and had partnered with vendors. It added that it had positioned two aircraft in China in preparation for the launch.
Commenting on progress to date, NetJets China Vice Chairman Eric Wong said that the company now had in place the necessary internal structures and processes for safe flight operations and had good working relationships with key vendors.
“People in the industry tend to be very familiar with the NetJets story, but the EJM component is much less familiar territory. The way I try to characterise it is that Netjets and EJM are both the biggest in the world in their specific categories. EJM is the biggest managed aircraft company in the world, with well over 200 aircraft under management, excluding the NetJets fleet (which would take the total to over 700 aircraft),” Molsbergen explains. Another key fact he quotes is that EJM has one of its managed aircraft taking off somewhere in the world every eight seconds, on average.
“EJM has been around for over 35 years, and we have the bulk of our 1000 employees in Cincinnati, where we oversee and manage in excess of 40,000 flights across the US and to another 130 countries, on average, each year,” he adds.
The EJM managed fleet is not only the largest, but also one of the most diverse fleets in the world. Jets in the fleet average some 30 million miles and over 63,000 flight hours per year. Although the China operation will be run as NetJets Business Aviation Ltd., the model that is being rolled out is very much the EJM model. This will involve some charter, but it will not be the NetJets flexible ownership approach but conventional charter operations as run by aircraft management companies everywhere.
Molsbergen points out that the China operation has its own 145 certification, which allows the company to do whatever maintenance is required on its own fleet to keep it running. This facility is run out of Zhuhai and Hong Kong. “As of November 2014 we have close to 60 people in mainland China and eight in Hong Kong,” he notes.
So how difficult was it for NetJets to get its operator’s certificate in China? “It took about two years in all. Things change as you go along, as they always do. This is not a process for the faint hearted. But we are in China for the long game. We always knew it was going to be a longer process to get certified in China than it would be in Europe or the US, but we are prepared to build solid foundations for the business out there and to let it develop at its own pace,” he says.
There is plenty of reason to dampen down or set aside any expectations that business aviation will surge any time soon in China. As Molsbergen notes, the environment lately has become a lot more challenging as the Government’s anti corruption campaign has gathered momentum. Important as business aviation is to business in China there is a reluctance at present to be seen to be doing anything that smacks of conspicuous consumption! “Some 50% of the charter flying in China in recent years has been related directly or indirectly to government, and that market has now shrunk significantly, for obvious reasons. We see the education of politicians and government officials about the value of business aviation as being very much something that we and the industry will need to work on in the years ahead. However, we have seen a pick up in the number of charter hours being flown since we obtained our certificate,” he notes.
A lot of the current charter customers are customers of NetJets and EJM world wide and are either not Chinese nationals, but executives flying into and out of China, or are Chinese nationals who are based in Europe or the US, and are flying on NetJets programmes.
Molsbergen says that he is sensibly optimistic about the future of the China division. “This is not going to happen overnight. There are real challenges as far as infrastructure and attitudes are concerned, but our division there will grow in parallel with the development of infrastructure and a more business aviation friendly regulatory environment. Looking at this market, we bring a certain level of operational excellence, service and safety into the market,and that might help to accelerate some of the market dynamics. The CAAC, in issuing our operating certificate, were kind enough to say that NetJets is now the gold standard in China, which is a very telling comment,” he notes.