NJA Capt said:
Avolar's demise had little to due with labor. It couldn't get investors (or enough owners). And while your explanation looks good on paper, it obviously was not true in the real world. It was not catching on before 9/11, which was only the final straw.
This only helps prove my case that airline perks don't mean much in the frac world.
I know more about my company than you give me credit for. I also know that American backed out of the frac world early on (with BJS, now part of Bombardier) and United barely got out of the blocks with Avolar. While NetJets has been around for 15 years and its' competitors for 5+ years. As far as frac owners not being able to by the "whole" airplane, """"BIG"""" misconception.
No one giggled, eh?
[Fractional patriarch Richard Santulli, holder of an advanced degree in mathematics and founder of Executive Jet’s NetJets program in 1986, scoffed at the validity of such research. Last summer he told AIN, “That’s bull. Who did they survey? Do you think the top management of Fortune 500 companies would choose [United’s program] over a company that has the reputation and experience of Executive Jet?”]
AIN-Jan 2002
If you'd like to compare smuggness. Judging by your profile you are a commuter RJ pilot, who never flew frac (big 3), where I have worked for 5 years. And you claim to know more about my business than me?
My basis for comparison is this:
99% of fractional pax HAVE flown on an airliner, where 99% of airline pax have NEVER flown frac.
100% of our (fractional) pilots talk to each passenger onboard, where 99.99% of airline pilots never talk to ANY passenger.
Who is in a better position to judge what passengers want?
Hint: It's not about money. Airline tickets are 1000 times cheaper than frac shares.
First, you probably shouldn't try and judge someone's knowledge based on your supposition of an internet profile. Second, you sound like you really take this all very personally. It's just business, you know. Third, you keep trying to turn this into a frac. vs. airline debate, which it never was. Apparently this confuses you, perhaps because Avolar the frac company was to be owned by United the airline. If buying a frac share in an Avolar aircraft meant that the customer was forced onto an airliner and forced to eat peanuts, you might actually have had a point.
Now, you'd like to believe that somehow competition forced Avolar out of existance rather than internal pressures (labor who was being squeezed for $$, and pilots being furloughed and aligned against it because there was no guarantee of a flying job at Avolar for them), and it's good to see someone so rah-rah about their own company. Santulli, (ever the salesman) skews the issue in his PR quote because the vast majority of " top management of Fortune 500 companies" don't opt for airlines OR fracs.....they opt for operating their own corporate flight departments.
A handful of Fortune 500 co.'s have dissolved their own in favor of fracs, but most who've purchased frac shares have done so simply for use as supplemental uplift to their own departments because of improved logistics, cost-planning, and by being able to depreciate the value of the share, it's more cost effective than charter if such uplift is needed more than about 100 hours per year. Most frac customers remain first-time neophyte "owners" of aircraft, or those who's annual needs are between about 100 - 350 flight hours. Above this, frac doesn't make much sense economically and most corporate boards are well aware of this. And again, this doesn't address security, privacy of itineraries, and knowing who is flying your airplane. On those issues, fractionals take second place to running your own show, and for many Fortune 500 companies, those issues are paramount.
I know your customers pretty well, because until recent airline experience I spent 12 years in corporate aviation, watched the fracs grow from infancy, flown the same-type passengers, run the numbers to compare, as an Av Dept Manager and Chief Pilot listened to frac salesmen, ridden on their airplanes, and conducted audits on their operations for two different corporate boards. That last should be an indicator to you that even if you think you "know them", they don't know you better than their own personnel, but are seen as a better alternative than chartering, which is fraught with unknowns and fewer tax advantages.
I've also watched the frac pilots Pay for Training (they still had that when you joined your company 5 years ago, didnt they?), unionize, and then ironically work for wages so low they earned "scab status" in the opinons of non-unionized corporate pilots flying similar aircraft. I've met great frac pilots out there, but on the other hand, I've heard some bad-mouthing their customers as soon as they drive away. No doubt customer service is much better than found at an airline..but all that's saying is that you are doing your job as it was promised and what the customer expects.
As for individual "owners", aside from those companies discussed earlier, I'm not under any misconception about them being able to afford buying and operating their own aircraft. I know what that costs per year for different aircraft, whether frac share or outright. Selling shares allow individuals who could not otherwise afford corporate jet ownership the illusion of doing so as long as thier travel needs remain limited. That's the whole point. Gulfstream figures that an idividual has to be personally worth $400 million to afford to own and operate their own G-lV. Hmm, let me know when Imus or Sampras get to that level.
Fracs have been successful because the real work is done by the salemen selling contracts. They are the best in the business. But it doesn't take "an advanced degree in mathematics" to know that a given frac share's "occupied hours" (a term entirely of their own making) does not equate to actual flight hours as the rest of the aviation world knows them (the hours that determine DOC's, aicraft & engine life-limits, etc). Industry-average stage lengths X the .2 extra hours for every flight charged for taxi means a 200 "occupied hour" frac share translates into perhaps 170 flight hours. The other 30 hrs the customer pays for, but really don't exist for use from Point A to B. 30 X $3,500, for example. Aircraft shares are sold based on retail price of each aircraft, but the large frac companies get deeply discounted prices per unit because of the large order numbers.
For these reasons and others, selling a frac share is money in the bank as soon as the dotted line is signed, and a frac aircraft makes money whether it flies or sits on the ramp. Buffett knows this, and the people planning Avolar did also. Labor at United, living in their airline cocoons, didn't. Don't get me wrong, fracs fill a niche and provide a service far superior to the airlines for a price, and they are here to stay not unlike timeshare condos. What you are missing is that for good salesmen (who are guns for hire, and the heart of the frac business) the airline connection can easily be turned into an additional selling point.
Case in point; the so-called "occupied hour" is flight hours plus 6 minutes of taxi time at each end of the leg. A good salesman tells a customer "we will ONLY charge you 6 minutes of taxi time, no matter how long it takes!" Of course, no time is charged against the aircraft's airfame or engines for mx purposes during taxi, only actual flight. DOC's are figured on flight time, not flight time plus taxi time. A newbie customer doesn't know this, and so that 12 minutes per leg that helps eat up his share's yearly allotment he believes to be a great deal when he sits for 30 minutes on a taxiway. It's all about perception.
