Man with a plan
Chadi Saade, sales director of fractional aircraft ownership provider Netjets, on developing its Mid-east operation.
What does Netjets do?
The company started in the states in 1986 and is now the largest aircraft operator in the world in terms of private jets, with 150 aircraft. It has an established operation in Europe and has since expanded in the Middle East in recent years.
We've decided to re-launch this region's operation and plan to bring in 60 new aircraft. We already have 16 aircraft being upgraded, but want to market the company in this region after ordering more planes.
How is Netjets different to the industry's charter operators?
Many people call us a charter operation but we don't do that. We offer fractional ownership, so clients own a share of an aircraft with the title transferred to them, and they are guaranteed availability.
They also have transparency on guaranteed costs, which they don't have with charter operators. There is access to a whole worldwide fleet, so you pay a fraction of an aircraft's cost and can fly 365 days a year. Whenever you want to fly give us a call. We will then pick you up and fly you where ever you want to go.
How will the company be different after the re-launch?
There wasn't any aircraft available for sale, so there was no need for marketing. Our model is based on fractional ownership, so once you have sold all the fractions of an aircraft you have nothing else to sell - you just have to upgrade the plane. We have placed an order for 60 aircraft and plan to sell fractional ownerships for them. We are re-launching the sales and marketing activity in the Middle East because there is huge growth expected here.
So you believe fractional ownership is like time-sharing?
It is to an extent, but that's not completely true. If you want to fly private jets you have three options. You purchase your own, charter one or go for fractional ownership. If you purchase you are paying a huge amount for little use in terms of hours. You are paying $35 million to fly 100-200 hours a year, which is a big financial problem. People are spending lots of money for little flying time.
Also, they have to set up a mini airline by sorting out pilots, maintenance and catering, so it's a big headache. Also the aircraft is not available all year round because it sometimes has to go into maintenance.
Why rule out chartering when it's more flexible and less expensive than owning an aircraft?
Chartering is fine for people who fly less than 50 hours a year. But charter operators don't guarantee availability for your aircraft, especially in the Middle East where there is huge demand for planes. You call and say you want to leave tomorrow and travel somewhere but the operator says Ã¢â‚¬Ëœsorry, we don't have an aircraft' meaning you're stuck.
We guarantee the fractional ownership cost over a five year period while charter operators' prices can fluctuate every 12 months. We guarantee access to a fleet of 750 aircraft worldwide, which for a fraction of the cost allows you to access that many planes.
What other benefits are available to fractional ownership clients?
By purchasing a share in an aircraft you can fly a certain number of hours, so acquiring 1/8 of a plane relates to 100 hours. If you don't fly the 100 hours this year you can carry the remaining time over. You can also borrow hours from next year.
If you are flying to Europe or the US you can access aircraft there. You are spending 1/8 of the $35 million that someone would pay for their own aircraft and you have access to 750 planes. You can upgrade or downgrade depending on where you want to go and how many people you have.
Do other companies offer the same kind of flexibility?
No one does it in the Middle East unless you buy your own aircraft. However, even people who have bought their own plane could spend far less for 1/16 or 1/8 of an aircraft with us.
When did you join Netjets and how big is the company?
I've been here since February and was with Airbus before. There are some common things between us, with both companies focused on selling aircraft. People are buying planes, whether they work for airlines, companies or on an individual basis.
But while ourselves and Airbus are similar in that respect, Netjets is very small in comparison. Airbus has 55,000 people while we employ 7500 people worldwide.
When was Netjets' Middle East operation launched?
It's existed since 2000 but we weren't marketing it much recently because fractional ownership on all the planes had been sold. One of the huge advantages is we now have more aircraft coming in. If you want to order a plane we can guarantee one will be available tomorrow.
If you sign with us and pay today you can fly tomorrow. The title of the aircraft is transferred to you, so it's like you own the plane. This is the fundamental difference with charters or other operators. Safety is very important and people charter from their friend or whatever, but they have no guarantee whatsoever in terms of safety standards. Who's maintaining and flying the aircraft? With the shortage of pilots today, people can hire anybody.
They can hire you and give you a few hours training. We follow the US standards in terms of number of hours the pilot needs before joining our operation. They also need to have spent a certain amount of time in simulators or on training days each year, while crew and duty time are also taken into account.
So local operators don't have the same standards in place?
I prefer not to talk about the others but I can guarantee our safety standards are some of the highest in the world. It's a question of costs. Some companies can cut costs by reducing the number of pilots or crew members and taking on freelance cabin crews. There are a lot of operators that do this but the crews may know nothing about onboard aircraft security, for example. We don't do that - we have permanent staff.
How does the Middle East charter market differ to Europe?
It's similar, although Europe has many big operators. In this region, there are smaller ones operating with three, four or five aircraft. This is why they are facing availability problems. Some planes are fully-booked for the whole year, so a CEO who has an important meeting tomorrow won't be able to charter an aircraft.
There is a difference between us and other operators in terms of pricing. We have a clear pricing policy whereas charters announce hourly rates but have many hidden costs on parking, overnight positioning and ferry fees.
Are service levels better here than other regions?
People's expectations are higher here than Europe. Many people flying in Europe don't insist on having cabin crew. They can help themselves, especially in small cabins but in the Middle East there is no way you can imagine a flight without cabin crew. People here expect the service standards to be higher.
Apart from buying aircraft, what are your plans for the Middle East?
We are looking to have the same operation that we have in Europe and the US, so we want 50-60 aircraft across the region. We will then be able to reduce the waiting period to less than 24 hours whenever you need an aircraft. The target is to have as many aircraft so we can enhance the company's ongoing guarantee of availability.
Do you expect to see more charter operators launching in the Middle East?
There are companies that want to do this, but history proves our model works well in the states and Europe. That said, we don't have the same model as charters so we are not really competitors. Owning a jet is good for people who fly more than 600 hours a year.
All these people flying 50-600 hours are our target customers and once we sit down with them and explain the model they realise it's time to change. They think Ã¢â‚¬Ëœwe bought an aircraft and fly 300 hours a year so let's sell it, buy a share in Netjets and forget the headaches'.
Will other operators follow the fractional aircraft concept?
Yes, other people are thinking of it. We've heard about one recently that wants to start fractional ownership in this region. The advantage that we have is people know us worldwide.
There are a lot of people from this region that fly in Europe and the states, so they know who we are. The experience we have and the aircraft we are getting gives us an advantage over potential competitors.
How will Netjets' Middle East operation develop in the coming years?
We need to recruit marketing and sales people, and pilots because with every aircraft that arrives we have to expand the operation. We have about 250-350 people and are expanding pretty quickly. There is huge potential in this region and demand is here.