The key to success for business people lies in their efficient use of time, material and financial resources. This is especially true today, when business with its modern dynamics of development and wide geography requires a quick solution to all issues, most often at the local level. Therefore, flying in a private or chartered jet is the perfect choice for a businessman. Indeed, for business people who, in an hour of their work, sometimes solve issues that cost millions of dollars, it is much more profitable to book a flight in accordance with their own business schedule than to adjust to someone else's.
In Kazakhstan, the history of business aviation began with the development of big business in the 1990s and 2000s. The first private airlines were often created without preliminary analysis, planning of activities and financial calculations, to serve only one private aircraft (AC). At the time, certifying a new airline was relatively easy and inexpensive. At the forefront of businessmen put the desire to fully control the processes related to the operation of their aircraft, and the confidentiality of flights. But for many of them, the high costs associated with inexperience in organizing the operation of the aircraft came as an unpleasant surprise. The wrong choice of the type of aircraft for certain tasks, the lack of planning for maintenance, training and support for the qualifications of the airline's personnel – these are the frequent mistakes of such companies.
Today businessmen understand that the maintenance of an aircraft and the maintenance of an airline are essentially different stories. It makes no sense to create a company to service one aircraft. Indeed, in addition to paying the funds borrowed for the purchase of an aircraft and other inalienable expenses, such as maintenance, insurance, hiring a crew and technical personnel, it will be necessary to maintain the qualified staff required for the operation of the airline, pay for the certification of the airline, bear administrative costs, and so on. Today, the cost of maintaining the managerial and administrative staff required by the aviation authorities, as well as the associated administrative costs of an average airline, amount to at least $ 45,000 per month.
If an aircraft owner wants to reduce the cost of his flights by selling a certain number of flight hours to commerce, then this is only a matter of minimization, not a business. The aviation business starts with a larger number of aircraft (at the moment, the aviation authorities require three), it is very complex and needs highly qualified management personnel who would take care of the maximum efficiency of all divisions, cost optimization, clear planning of all work processes and, most importantly , about stable sales of air transportation services. The economy of aviation is such that the less equipment flies, the more expensive its flight time is (due to constant fixed costs for parking, maintaining its airworthiness and personnel qualifications). In this case, it is necessary to increase the number of flight hours either by flying more often by yourself and paying for expenses, or by selling flight hours to others.
A good solution for businessmen who want to have their own aircraft today can be management companies that appear on the market. For a certain fee, much less than the maintenance of their own airline, they undertake obligations to monitor the technical condition of the aircraft, ensure flight safety, organize flight operations, maintain the necessary material and technical base and personnel qualifications, maintain the necessary documentation, and comply with the requirements of the aviation authorities and other government agencies, and most importantly, act as an agent for the sale of flight watches.
There are also aviation brokers on the market that organize the sale and purchase of aircraft, providing consulting services on technical, legal and financial issues in the process of selecting and purchasing aircraft, including determining the most appropriate form of borrowing funds for the purchase.
Jet Airlines combines the functions of a managing airline and an aviation broker in its activities.
Born in the sky
The idea of creating such a company was hatched for years by a young aviation enthusiast Daniyar Bizhanov, who for 10 years did everything to get the necessary knowledge and experience to make his dream come true.
The case helped. Future partners – Daniyar himself, a graduate of the Embry-Riddle Aerospace University (USA), but already with experience in the aviation industry, and the famous media mogul Armanzhan Baytasov – met by chance in the business class of the Almaty-Astana flight and, having talked, discovered mutual interest in creating airlines of a new level. Later they were joined by another business partner, an old acquaintance and colleague of Bizhanov, an aviator with extensive experience Abdulatip Isaev.
It should be noted that this decision came at a time when the requirements for existing airlines in the air transportation market were constantly tightened by the Civil Aviation Committee of the Ministry of Transport and Communications of the Republic of Kazakhstan, one of the main tasks of which is to control and prevent flight safety of Kazakhstani air carriers, and to open new airlines and a moratorium was imposed at all. And all in order to ensure the transition of civil aviation to international standards of work. As a result of such actions, over 10 years the number of players in the business aviation market has decreased 3-4 times – to five or six, but the market has not yet formed.
Therefore, the partners began to search for the so-called flag – an airline with a valid operator's certificate, which could potentially be bought and developed. The selection process started in October 2012. “We carried out a brief due deligence of each airline that would satisfy our requirements by analyzing information on the market, as well as the available certification, accounting and technical documentation,” recalls Jet Airlines CEO Abdulatip Isaev.
The choice fell on Jet Airlines, which at the time of purchase had shown itself to be the company with the fewest existing and potential problems. The company was founded at the end of 2004 and made its first flight at the beginning of 2006 – from Almaty to Astana. In the future, her track record was replenished with flights to the countries of near and far abroad and began to number more than 250 corporate flights a year in the pre-crisis time.
The buyers knew Jet Airlines firsthand, since both Bizhanov and Isaev worked in it at one time. “We believe that we were lucky, because we knew this company very well,” says Business Development Director Daniyar Bizhanov. “She has a rich history, her own staff of professional employees, and at the time of purchase, one plane was flying her flag.” As a result of a series of negotiations with the owner, which lasted more than half a year, on May 23, 2013, the purchase and sale process was successfully completed.
The cost of the transaction was not disclosed, but for comparison, we can cite the example of the Russian market, where millions of dollars are needed to buy an operating airline with a pair of aircraft. In Kazakhstan – ten times less, but sooner or later our market will come in line with the pricing policy of our northern neighbor, the aviators are sure.
Strength is in control
The main tasks of the new management were to analyze the existing staff and material and technical base of Jet Airlines, optimize costs and put the existing aircraft on the wing as soon as possible, because, despite the wide geography of flights, for several years the company did not develop and for one year it the only plane had only 30 flight hours. It was also necessary to organize work on the provision of services for the purchase of aircraft on a turnkey basis.
By 2017, the company plans to undergo certification for quality standards (IOSA, ISO9001: 2008 and AS9100: 2009), as well as obtain a second operator certificate – AOC in a European country. On the latter issue, the Jet Airlines management is already negotiating with the Civil Aviation Administration of one of the states. In case of a positive decision, the European sky will open for the airline.
“In a situation where the requirements of the regulatory authorities are constantly increasing, the cost of maintaining the airline will undoubtedly increase,” says Isaev. “In such conditions, only a self-sustaining company will survive, and this is possible only if it is highly organized and competently managed. Moreover, the average profitability of such a business is about 15%. Otherwise, he sits on his owner's neck. “
Today, Jet Airlines employs about 40 highly qualified flight, engineering and management personnel with extensive experience in the flight support system for high-ranking government officials of the republic. The company takes over the private jets of corporations or businessmen, organizing domestic and international private and charter VIP flights. In this case, the more aircraft are under control, the lower the total personnel costs per aircraft and, accordingly, the lower the cost of flight hours. Therefore, since the purchase of the “flag”, as a result of systematic work with the owners of aircraft available in Kazakhstan, the airline's fleet has already increased to four aircraft. At the same time, Jet Airlines provides consulting services on the purchase, sale and even trade-in of VIP-class aircraft, from the choice of the model to the organization of their operation.
“The business scheme we have chosen is already bearing fruit. Before our arrival, the company was 100% subsidized by the owner. We now have very good working capital. Airplanes fly over 40 hours a month. The monthly profit is about 30-40 million tenge, ”emphasizes Abdulatip.
It should be noted that business aviation is a 100% customer-oriented area. The relationship between the client and the operator takes a long time to build, in the process of negotiations and subsequent joint work. The operator company must establish itself as highly professional, efficient, safe, providing the proper level of service at a competitive price. It is very important to earn such a reputation, especially when it comes to the emerging Kazakhstani business aviation market. Today, not only people from the top ten of the richest businessmen, but also representatives of the “middle management” can afford to book a business jet flight (a jet plane for business aviation), often it can be group flights. Basically, these are, of course, businessmen and large corporations.
“To attract a client in such a narrow segment of the aviation market, you need a good reputation, experience, established contacts and, what is important, attractive, preferential terms in terms of the purchase of an aircraft, its maintenance and organization of operation,” noted the aviators. In this regard, Jet Airlines has favorable agreements for receiving priority offers and discounts when purchasing resource aircraft from American and European brokers with financing and installments, working with handling companies for efficient and cost-effective organization of flights around the world has been established, and operational communication has been established with the aviation administration. RK. The airline also has close ties with the American Flight Safety training center and receives favorable conditions for personnel training.
Lean on your shoulder
The company plans to become more active in the sales of the so-called free shoulder – Empty Leg. Empty Legs are already paid sections of the route, along which a private jet travels without passengers, which makes it possible to order it at an attractive price, sometimes up to 50% of the cost of a full lease. Here, informing potential customers through subscription to the newsletter about Empty Legs, website, social networks, SMS and so on plays an important role. The company is currently working on a new interactive website.
Air taxi for EXPO
In an effort to fully meet the requirements of a potential client, Jet Airlines is considering several projects that it plans to implement in the short and long term.
One of the projects the airline wants to coincide with “Astana EXPO-2017”. It plans to connect Astana with all major regional centers by air taxi routes.
The project is designed for businessmen and middle managers. It will be enough for the client to contact the airline by phone or via a mobile application, order an aircraft for a certain time, and the operator will always be able to provide the aircraft at its services. Moreover, customers will not pay for the “approach”, the nearest liner or the one that is already in the right place will arrive to them. For the implementation of this project, Jet Airlines plans to use both light and ultralight jets with a capacity of four passengers. Options and lease of ships available on the market, and their purchase on credit are being considered. “We believe that the market is ready for this product, and we plan to launch the project by 2016,” explains Isaev's work plan. – On paper, it is ready, everything will depend on the pace of development of the company according to the existing strategy. Therefore, let's start with two aircraft, one based in Almaty and the other in Astana. As our project progresses, we plan to increase the fleet to eight aircraft ”. In order to carry out the plan, the Jet Airlines management is going to attract an investor.
Big size
At the same time, the company plans to occupy the niche of business jet flights with the VIP class of large aircraft with a capacity of 30 to 50 seats. “In Kazakhstan, in this segment, there were more often Yak-42, Tu-134 and Tu-154 aircraft converted into VIP-cabins. In view of the fact that prohibitive measures are now more and more applied to them and the economic characteristics of such aircraft are worse than their foreign counterparts, the market for them is limited. Therefore, we have several projects to re-equip Boeing and Airbus aircraft into VIP cabins for 40-50 seats, ”says Bizhanov.
This will allow the airline to occupy the market where the transportation of passengers in the amount of 30 to 50 people is required – government and business delegations, sports teams, VIP tours, etc. This is a promising business that requires a systematic and integrated approach.
Split and fly
It is not excluded from the plans of the company and the introduction of a fractional ownership program, which will make business-class aircraft available to the upper middle class.
A business jet costs from several to tens of millions of dollars, so it is extremely rare to buy an aircraft immediately on a 100% prepayment – financing or a certain installment plan is provided. To reduce the purchase and maintenance costs in Europe and the USA, equity participation is also practiced, when the owners of one aircraft are from two to 16 co-owners. When buying an aircraft, they divide the purchase price, and depending on this, shares of ownership of the business jet are distributed. The expenses for the maintenance and services of the management company are also divided. In accordance with the share, the corresponding number of hours for air travel is credited during the year.
“This is a very good cost optimization tool. A fractional ownership management company helps to split and minimize the cost of maintaining an aircraft, while putting it into commerce and making money for its owners, ”explains Daniyar. – At the same time, she assumes obligations that will provide the aircraft to the co-owner on demand within a certain number of hours after the application is submitted. The more aircraft under control, the faster the request is fulfilled. Also, a certain discipline of customer relations, regulated by special agreements, helps here. When customers plan their flights well in advance, it is much easier for the management company to ensure the availability of aircraft and plan flights for other customers, commercial flights and other operations, including periodic aircraft maintenance. This business has a lot of its own secrets and peculiarities, which I studied in detail in the United States. “
Another advantage of the fractional ownership program is that the management company takes care of updating its clients' equipment. The program is usually designed for five years, then the aircraft is put up for sale (it even happens that they buy for an amount higher than the original purchase price – it all depends on the market situation), the money raised is distributed among the equity participants.
There are no companies in Kazakhstan that offer fractional aircraft ownership programs, and one of the reasons is a very complex business that requires a high degree of professionalism and internal organization. Proper management of financial resources is very important. “In addition, the business community of Kazakhstan is not yet mentally ready for fractional ownership. It's like buying one VIP-class car for two or three owners and sharing “show-off” and maintenance costs, – Bizhanov jokes. – And Kazakhs do not want to share “show-off” for the sake of economy. Therefore, today the idea is still only in the air, and we are meeting with different people, trying to find out their opinion on such a project. “
Among other long-term plans of the aviators is the development of jet medical aviation in the country, which is practically absent today. In a ten-year perspective, it is planned to increase the aircraft fleet to 30 aircraft. By European standards, it is the average airline in the business air travel business.
The development potential of the domestic business aviation market has promising prospects. The aviation legislative base is being improved, the state is providing support to entrepreneurship, the development of tourism and the industrialization of regions. Jet Airlines strives to be at the forefront of this trend and offer new services and opportunities. “We have many other ideas and projects, we are constantly looking for the best solutions and are always open to any cooperation and dialogue. This area is so interesting, multifaceted and dynamic that it provides an ocean of opportunities for integrated solutions and achieving synergy, ”Daniyar sums up.
