TAG Aviation has become central to business aviation over the last 40 years and yet, with its finger in a whole host of pies, it is sometimes difficult to define exactly what is core to this Swiss-based business. Jo Murray speaks to Graham Williamson, President, Aircraft Management & Charter Services, TAG Aviation Europe, and finds out that TAG Aviation has been enjoying massive aircraft management success
“Aircraft management has been an outstanding success in recent years,” says Williamson. “We saw significant growth, particularly of larger cabin aircraft such as Globals, Gulfstreams and Falcons. In January 2006 we managed 20 aircraft; today we have 100 in Europe and nearly 30 in Asia.” He says, if anything, the recession has helped aircraft management because clients have sought dependable, reliable and secure operators.
Aircraft management – and charter – of course are core to TAG Aviation’s cluster of business units, all of which feed off each other. It is easy to forget an aircraft group’s origins but it is worth remembering that TAG Aviation grew out of the acquisition of an aircraft charter business – Aero Leasing – which owned its own fleet. The aircraft management segment was developed when the company elected to gradually divest of its owned fleet starting in 2003
But diversity and complementary revenue streams are also key components of TAG Aviation’s success. “In the past, TAG generated most of its revenue through charter and this was supported by a core fleet of aircraft directly owned by TAG,” says Williamson. “In recent years, we have reduced our dependence on charter and the associated risk during economic downturns. In the last few years, and more importantly during the recent recession, our aircraft management business has grown enormously.” This large managed fleet now provides virtually all of the company’s charter capacity.
While both management and charter are core businesses, Williamson is keen to point out that all of TAG Aviation’s businesses operate independently of each other. “The maintenance businesses in Geneva and Farnborough have been constant source of revenue growth and we have invested heavily to expand our capacity and range of services,” he says. “Having managed aircraft complements our maintenance business but 80% of our maintenance customers are not TAG aircraft. The very successful FBO in Geneva is also complemented by our managed fleet but like TAG Geneva Engineering, most customers are third-party.”What is more, many of TAG’s managed aircraft are based in non TAG locations and currently TAG aircraft are based in more than 20 locations in 16 countries.
Given the impressive managed aircraft numbers, what does this mean for the collection of AOCs? “We do not collect AOCs for their own sake,” Williamson responds emphatically. “Our customers expect us to deliver whatever they require and we have a wide range of locations and client profiles.” The Swiss AOC, he explains, is only attractive to certain clients and sits outside the EU which is why a decision was taken to acquire an AOC in the UK 10 years ago. “Then about six years ago we were approached by a number of Spanish clients who wanted to come to TAG but insisted that they remained under Spanish regulation and registration; hence the Spanish AOC and an operation in Madrid.”
Now there is a sister company in Hong Kong with its own AOC and another AOC in Bahrain. “Of course, once we have served the wishes of a client, it does allow us to grow these AOCs for similar customers,” says Williamson. “We have 45 UK registered aircraft, 20 Swiss, 22 Spanish, more than 20 in Asia and, of course, multiple Cayman, Bermudan, Isle of Man and US registered aircraft as well.”
Business units within a group often feed off each other and TAG Aviation is no different. Firstly there is a fabulous shop window in the shape of TAG-owned and operated Farnborough Airport. This is where maintenance customers learn about aircraft management at TAG, for example. “Our clients expect a seamless product from a menu of services: flight operations, dispatch, airworthiness, client services, maintenance, FBOs, etc,” says Williamson. “We built our own Ground Training School three years ago to ensure we could control quality and content. This school now has more than 70 other operators as customers and, of the 2,500 crew training so far in 2011, only a quarter were from TAG,” he says.
“We never force the client to take anything; if it is in the client’s best interest to have maintenance performed by a third party, we will arrange it.”
Returning to aircraft management and Williamson describes the model employed. “We charge a management fee for what we do. For this fee we will deliver, import, crew, maintain, dispatch and plan everything for the customer 24 hours a day. We are the operator so all bills and charges come to TAG and we provide the client with a single consolidated invoice every month. The client tells us where he wants to go and when; we take care of everything.”
He is also at pains to emphasise that TAG never marks up invoices and always passes through discounts to the customer. “For example, our global fuel programme is currently running at 14% below market rates. Our fleet insurance programme enjoys reduced premiums that can be 40% below market,” he says. “Another example is our partnership with Flight Safety International, who provides most of our simulator requirements; again the economies of scale allow us to pass on significant benefits to our clients.”
Another string to the TAG bow is the role the company plays in an aircraft financing. “Many of our clients’ aircraft are financed and, of course, we have a strong relationship with all of the principal lenders,” he says. “In many cases the lender will require the appointment of a legitimate operator a condition of the loan and we are privileged to be at the top of the list for many of the major lenders in the industry.”
So far, says Williamson, TAG’s maintenance, management and FBO businesses are doing well and have been strong throughout the last five years. Charter did see a significant downturn in 2009 and 2010 but 2011 has shown a sustained recovery in volume and market share. Traffic movements in Europe are 5% better than the same period in 2010. This improvement in fortunes is partly due to more capacity from managed aircraft but has also been a result of a sustained effort to attract new charter clients. “Spain and the UK have been particularly good in recent months,” says Williamson. “The strength of the Swiss Franc does have an impact on pricing for our Swiss fleet in Europe and an overall growth in capacity has made pricing much more competitive.”
To a large extent, success at TAG comes from treating each managed aircraft as unique. “We invest a great deal of time in building the crew, each one dedicated to one aircraft and customer, and we recruit with our clients to ensure they are a perfect match,” says Williamson. “Our crews play a central role in delivering our clients’ operations and are pivotal in our relationship with the owner.” As well as the crew, each client has nominated and dedicated Client Support, Account Managers, Finance Controllers and a specified Senior Manager who they can call night and day.“Our clients do not want to talk to call centres; they want to have a small circle of trust from people who understand their unique requirements,” he concludes.