Mal Sandford, CEO of Adagold Aviation in Australia, is one of our contributors talking about the good old days of air charter brokerage and the developments that move the business forwards

Looking back, and ahead, at the world of the broker

When the Wright Brothers succeeded in making the first controlled and powered fixed-wing flight, did they ever pause to think about the industry that might evolve from their invention? Charter Broker takes a look at the early days of air charter brokerage, and considers the developments that may support a healthy and accessible market in the future...

Air charter has been around since Orville and Wilbur first made their mark on history. Of course the industry was very different back then, indeed it was very different only ten years ago. “Professional brokerages appeared in the 1970s,” says Tracey Deakin of California-based brokerage Le Bas International. “They were offshoots of the commercial airline industry, and today specialised companies command billions of dollars in worldwide revenues for their selective clientele.”

Here at Charter Broker we decided to take a look at the early days of the air charter broker industry around the world. We couldn't go back to the 1940s, or even the 1970s, but we spoke to a number of brokers who between them represent many years of brokering. They have given us an overview of the 'good old days' way back when, and talked about how the industry has changed and where it is going.

So today as we sit with our feet up on our desks in our high tech offices, let us cast our minds back over the extraordinary journey that the industry has taken.

Time consuming tasks

Adagold Aviation in Australia was formed by current chairman Mark Clark in 1992. CEO Mal Sandford says: “This makes us one of the oldest and most experienced charter brokers in the country. Before Google and email, we were one of the only alternatives to the phonebook when it came to finding aircraft operators for charters. We were based out of a small office in the Brisbane suburb of Hamilton, and Clark developed an extensive network of aircraft operators as well as building a loyal customer base which is still growing 24 years on.”

Australia is a vast country, sparsely populated outside main cities and towns. Often charters to its remote locations require a lot of time researching airfields, ground services and local contractors to complete charters. “Twenty years ago,” says Sandford, “this was a time consuming and often challenging task. In many ways, the Adagold Aviation brokers were a lifeline to businesses wishing to transport people out to rural and remote Australia. The team still has local knowledge and experience, but the internet has made the task a lot easier.

“We have had requests to transport unusual cargo such as radioactive dolphins, giraffes, mining equipment, exotic cars, buses, trucks and military hardware. But we have also been one of the first responders with cargo aircraft for humanitarian aid to some of the world's worst disasters such as the 2004 Asian tsunami. In most cases an aircraft can be found to suit every individual requirement, no matter how peculiar or particular.

“Despite today's ease of access to aircraft operators and information, a partnership with a reliable and trusted charter broker can provide greater value for money, and more favourable outcomes, than relying on the internet as a single source of information. The future of a brokerage's success must be underpinned by service and strong relationships with clients and aircraft operators,” concludes Sandford.

Clive Head is sports charter specialist at Smart Aviation in the UK. He has worked in the aviation industry since 1978, coming to aircraft charter in 2002. He has been with Smart Aviation for 10 years and has, he says, seen plenty of changes over the years. “I've seen quite a few airlines come and go; Court Line, Dan Air, BAF and Laker are a few. There have been many changes in the way the airlines operate and how they do business.

“The biggest change has to be the way we communicate. In the early days telex, or a very noisy fax, were the high tech ways to communicate around the world. Now of course we have email, internet and social media. That doesn't mean it's all online though. We've got some clients who like to be contacted by WhatsApp or Snapchat as a quick and discreet option, but we have other clients who prefer to speak to us on the phone. The increase in technology means we now have more ways to keep in touch, and more choices. It makes business even more personal.

“It's not just the communication channels that have changed though; it's also the processes we use and the way that we do business,” says Head.

Smart Aviation sales director Matthew Savage has been in the charter industry for over 25 years. He recalls: “Years ago, I worked at an airline where everything was manually driven, and availability for over 30 aircraft was written up on cardboard strips on a very long wall. We had six months worth of flying at any one time, and if we wanted to place an extra charter in the programme we would place a small piece of cardboard in the slot to book the aircraft.

“Not the best system in the world, and obviously open to human error, but it was all we knew then. Now of course we can see where aircraft are available across the globe, see photos of their interiors and exteriors and a multitude of other details, with the press of a few keys.

“Change is inevitable and and that won't stop, aviation charter will keep evolving. In the words of Charles Darwin, it is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change. So who knows, we may be offering charters into space in the not too distant future.”

Jason Johnson, co-founder of US-based brokerage Exclusive Charter Service has spent 15 years in the aviation business, 12 of those with ECS, a company he founded back in 2004. “I started out working for Warner Bros at GTC Aviation out of Islip MacArthur airport, but the closest I got to the jets was cleaning them. I wanted to fly them so I began training with TWA at JFK airport but, although I love flying, I didn't like working for the company. And the money wasn't great.

“I had the opportunity to help sell a GIII and buy a GIV for someone I knew well, and that's when I realised what direction I wanted to take. I had an opportunity to work with Air Charter Service in 2002. They were based in London and were planning to expand into the US so they hired me to operate and run their US division. Back then there was no internet, no real communications systems, no Avinode or CharterPad.

“After two years I left to set up my own company. I picked up some yacht charters to make ends meet, and then combined sail and jet by offering yacht and aircraft charter as ECS. The company is based at the airport where I did my first solo flight.”

According to Jonny Nicol, founder and CEO of UK-based online platform Stratajet: “In an industry once regarded as the ultimate in luxury and reserved exclusively for billionaire businessmen, movie stars and presidents, flying by private jet is a reality for travellers who need to be in control of their time. A host of innovations in recent years have claimed to bring private aviation out of the dark ages, but the old-fashioned traits of an industry that is way behind the times in a fast-paced world of technology still exist.”

The online but still 'manual' broker

Former military officer and pilot Nicol is keen to drive these inefficiencies out of the industry, and explains: “After my stint in the military I became a corporate freelance pilot flying private jets, which led me to realise there were huge problems that were always going to stop the private jet industry being accepted by a wider audience.”

“The first major problem,” continues Nicol, “stems from the traditional method of booking a private jet, which involves phoning a broker, who in turn phones a very fragmented base of private jet operators. Getting a number of quotes through and aligning them with what the customer is able to pay is often a process that takes hours.

“While new providers to the industry are claiming to streamline this process by offering online quoting systems, what they do is use a website to collect requests. The manual element still exists as the operators themselves then have to do the necessary calculations to provide the quotes back to the broker. So to some extent the industry hasn't really changed; that situation is the status quo for the majority of private jet bookings. Private jets are the only mode of transport that isn't instantly available online and this has prevented them from being seem as an accessible form of transport. They are only seen as a thing of luxury.”

Nicol wants to address this stigma of private aviation only being accessible to the upper echelons of society. “While flying by private jet is assumed to be an expensive business, this doesn't have to be the case. In the industry around 40 per cent of all private jet flights are flown empty. Last year, in Europe, around 260,000 private jet flights moved without any passengers. All this has to be paid for by the people who fly privately, which means the cost of a private flight is very high as you're not just paying for the trip you take but the return leg too. If you go to the South of France for a week, you're paying for the plane to take you there, then fly back empty, return to pick you up empty and fly you back. Until now no-one has had the ability to really solve that problem.”

Nicol draws an analogy with the road industry: “Imagine aviation as being split into buses, which represent the scheduled airlines, and limousines, representing the private jets. There's nothing in between at the moment, but Stratajet's model allows us to take the world's supply of limos and turn them into taxis. If you need to get from central London to Heathrow, in the same way that it's cheaper for three guys to share a taxi than buy three train tickets, the same is true with private aviation. If you have a number of people travelling together, it's not just competitive, it could actually be cheaper to take a private jet with a partial empty leg than it is to all fly commercially in business class.”

Embarking on the point to point model

Johnson remembers: “When we first started it was like the Wild West, and in part it still is. The Air Charter Guide was our bible. It was the book where you had 100 post-it notes hanging out of the side. You knew which aircraft were where, and you would pick up the phone and call somebody; it wasn't done over the computer. But the prices were twice what they should have been, because there was no such thing as empty legs or one ways and there were no companies with floating fleets like VistaJets or NetJets.

“If you were in New York and wanted to fly people down to Florida, you would call someone in New York to get you an aircraft. If the passengers were staying for more than a day or two then you would pay for the plane to drop off, return home, fly back to Florida and return with clients. In effect they were double round trips and a trip like that would have cost around $50,000; today it's less than 50 per cent of that.

“With the advent of companies such as NetJets, which invested in a large fleet of different jets and used them as depreciating assets, and through improved communications technology, it became possible to charge the client only for the legs they flew. The operator would be able to set up a virtual base at the destination airport in, say, Florida, but then market the aircraft and get someone else to use it in the interim, thus reducing the price to the original customer.

“This was the first point to point model, where it didn't matter where airplanes were based, and was a big step in business jet history, because it really changed the way everyone was thinking about the future, and about how to bring more people to business aviation.”

Johnson continues: “The communication that came with the point to point model has led to the creation of systems like Avinode and CharterPad, and on the latter I can email say, 300 people in one go to capitalise on an empty leg, and I can pass on that saving to my client who then only has to pay $12,500 for each leg, which is half the price of before. Communications technology allowed the industry to reduce costs by around half. Fifty per cent of private aircraft flights before 2002 had no one in them, but the ability to exploit empty leg availability has caused costs to drop dramatically.”

From the other side of the fence

Linda Schiavone, charter sales manager at US-based operator White Cloud Charters, has seen the number of brokers increase significantly over the past 10 to 15 years. “There is much more competition for clients,” says Schiavone. “We are more dependent upon brokers as an operator because brokers have access to retail customers. Clients are more apt to contact brokers because they can source a multitude of operators. “Brokers are now becoming Wyvern and Argus rated. They are also partnering with operators or with other brokers for maximum exposure. Some also offer concierge services such as hotel and restaurant reservations and tickets to sporting events or concerts.

“In terms of technology, the use of smart phones and apps gives us the ability to charter aircraft at any time from any place. Scheduling software and online booking sites give brokers and retail customers unlimited access to private jet charters as well. Brokers are much more knowledgeable in terms of aircraft safety ratings and their customers' expectations. Customers increasingly demand international and domestic wi-fi on their flights, and we have to ensure that we offer what the clients demand. There seems to be more family travel nowadays, and people like to travel with their pets. We also see a lot more young children. Catering runs the gamut from gluten-free and allergy-free, to sushi and occasionally to dog biscuits.

“Some of our more memorable trips have been to Bora Bora, Easter Island, the Galapagos Islands, China and Australia. Recently a client surprised his wife and children with a trip to the Caribbean. He did not tell them where they were going and asked that we turn off the Airshow. It was a great trip and fun to be in on the surprise,” says Schiavone.

Consolidation and values

“One of the biggest changes in the industry since 2012,” says Johnson, “is the consolidation of companies. Part 135 operators have realised that in order to stay in business they must embrace the charter market as another means of revenue. They can't just charter their own fleet; if they have no availability for a customer they must turn broker themselves and source an aircraft. And likewise brokers, like me, can become operators.” ECS has a fleet of Piaggio Avanti IIs which it markets through its Aero Club membership.

“Companies are buying each other up. Signature bought Landmark Aviation, Gama Aviation bought Hangar 8. The bigger companies are picking up smaller ones. And manufacturers are partnering with charter companies by leasing them their aircraft. Leases are cheap and therefore charter prices can be low.”

“But if a few large companies are buying up all the competition,” Johnson continues “there will be less price efficiency and we could see costs rise again. In another 10 years or so, there may be no more brokers as we know them today.”

“One of the most valued qualities in the market place is decency,” says Deakin at Le Bas International. “A good broker is, and always has been, neutral. Even though he may have dealt with some operators for years, a good broker will work for the good of the client.”

Deakin would like to see the creation of a broker-specific college which would teach ethical boundaries. “Air colleges such as Embry-Riddle train people in any capacity in aviation; air traffic control, pilots, maintenance. It is the Oxford and Cambridge of aviation. But it would be good to create more specialised broker training.”

“In Australia, the brokerage of charter aircraft is an unregulated activity with virtually no barriers to entry,” says Sandford. This allows anyone to build a website and provide brokerage services across the country. Not only does this allow for inexperienced and ill-equipped brokers to operate in Australia, it also adds weight to the importance of engaging with a broker who has proven experience and a large client base as well as well qualified aviation professionals on staff and in management. The importance of local knowledge and experience should not be underestimated. Understanding the local market is not as simple as opening an office in Sydney or Melbourne and claiming local presence. You must understand the nuances of each of the states and regional locations by travelling there.

“The future success of charter brokerages in Australia will rely on the ability to provide a high level of value by delivering a range of services rather than just simply 'search and select' an aircraft for a charter. Diversification into niche markets and specialised services is integral in providing clients a complete and convenient service. Clients expect their broker to have the knowledge to manage a range of requests, especially at short notice. Technology is increasingly becoming an important factor in delivering these services,” says Sandford.

Innovation, not disruption

“Private aviation is a phenomenal and under-utilised resource,” concludes Nicol. “There's no hassle, no security, no sitting around waiting. It's effortless and saves vast amounts of time. For the first time people can see in real-time what private jet is available and what it's going to cost them. Furthermore, they are able to do it all electronically. This is a fundamental change in the way people travel.”

Huge changes have been applied to the business of brokerage over the years, and it has certainly faced its fair share of challenges. Navigating the next few years promises to be interesting – facing the challenges of consolidation versus individuality, and online technology versus personal contact. Is it possible to get the best of both worlds? It's challenging and perhaps makes one long for the old days of cardboard job slips and rotary dial telephones.