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December 2016
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Magnus Henriksson, global business director, PayNode, joins the conversation about the impact of automated systems on charter booking on pages 16-21

Platforms: disruptive, divisive or desirable?

The influx of pricing systems continues unabated and we take a look at what they do and why we might need them. As one of the last industries to go fully online, how does the business aviation charter market assimilate such high speed technology into broker searches in such a way as to protect the best levels of efficiency, safety and value to the client?

A pricing platform is a marketing and distribution channel for an operator's aircraft according to Adam Twidell, CEO of UK-headquartered PrivateFly. There are two types says Steve Westlake, aviation director at Returnjet. The first is where an individual broker has applied a search facility to its website with a database of aircraft and some basic pricing elements. It then applies a margin of 10-15 per cent and presents this to the user as a quoted price. If the user requests this aircraft the broker will check for availability and quote a final price. This is really just an ordinary broker service but gives the impression to the user that they are getting a live online comparison service for private jets.

The second is the online search facility dedicated to industry professional charter brokers of which there are, according to Westlake: “Only really two players in the global market: Returnjet and Avinode.” Nevertheless, in the US there are a few more and they provide a dynamic search facility to enable the broker to find the best aircraft for each trip. The Returnjet system is free for brokers to use and is a database of all charter aircraft worldwide and their bases. Where an aircraft has live scheduling feeds the platform also knows when it is available in a transient location.

These platforms also provide API (application programming interface) search boxes and apps that the broker can make available to its clients to carry out their own searches, comparisons and selections. When the user makes a quote request the enquiry goes back through the broker dashboard so details can be checked and a margin applied.

Different things to different people; there are still mixed feelings about the usefulness and value platforms bring to the market. But as the rest of the world embraces the technology of online shopping, must business aviation not inevitably follow suit?

Technology is woven into Avinode's DNA

Per Marthinsson, co-founder and US managing director at Avinode, says: “This has been a great year for Avinode and the whole industry as we can see a huge shift in how the charter world is operating. A few years ago, people were sceptical about the idea of high net worth customers wanting to book a private jet through a website or app on their phone. But we can see this is where the industry is heading.” Indeed to date, the company has enabled 2.3 million searches through online bookings.

“We are firm believers that hi-tech disruption married with hi-touch customer service can provide a greater level of transparency and trust for fliers and industry partners alike. More than that, this combination improves the cost-effectiveness, ease and efficiency of booking charter on-demand,” he adds.

General opinions about current state of play

Paul Touw, CEO of Silicon-Valley tech company Stellar Labs, estimates that consumers spend over $60 billion a year on business aviation, with around $34 billion of this coming from the United States, and there is still huge potential for growth. As an example of technology's promise, he points to the period between 2000 and 2005 when, despite the commercial airline industry facing significant challenges from fuel prices quadrupling, the dot.com recession and heightened security post 9/11, online travel marketplaces helped it grow passenger revenue miles from 24.38 billion to 67.41 billion, the fastest the industry had ever grown. Other travel marketplaces such as Uber and Airbnb have had similar impacts in their core industries, and with the launch of Stellar's Marketplace he says he wants to have the same impact on the private aviation sector that the likes of Sabre, Priceline, Uber, Airbnb and others had on transportation and hospitality.

Fernando Lacerda is executive director of AeroBid, a Brazilian platform which is targeting his home charter market. He observes that while many online initiatives for business aviation may be “well-constructed and visually attractive with bold frameworks, in many cases they lack a real knowledge of and adaptation to the dynamics within the day-to-day operations and demands of executive aviation.”

Here, the focus on the online capability of the technology naturally precludes an ability to deal with the offline side of operations. Some platforms focus on digital payments, but while business aviation transactions are characteristically of very high value, and according to Avinode the average value of a charter transaction is $35,000, this is only a small part of the entire process. “Other platforms,” he says, “are lost in a calculation covering countless parameters, even down to estimating the ground transportation time from the passenger's residence to the point of embarkation.” Perhaps these assume too high a level of aeronautical knowledge and interest on the part of the passenger?

“We absolutely use quote and pricing platforms,” says Osman Erazo, founder, chairman and CEO of Canadian brokerage Erazo Jets. “As a matter of fact we use a few of them, because when we merge the information from each, along with our industry knowledge, we are better able to assist our clients in making more informed decisions.”

There are so many factors to consider when sourcing aircraft that having all the necessary information at one's fingertips facilitates things greatly. “As a pilot,” he continues, “I learned to use all available resources to get the job done and I apply that way of thinking to my business and life. I find some of these platforms are a great resource and they have had a positive impact.”

Some will have a lot of aircraft in their database but won't have all the necessary information, while others will have the information but a more limited aircraft database. “I think that the major companies providing the platforms are doing a decent job of listening to what professional brokers are looking for and, over time, we will be seeing some major improvements,” Erazo adds. “As great as it is to have this technology around, we still need to have a solid understanding of the industry and how pricing works so that we may provide a greater benefit to clients.”

Large aircraft charter needs constant interaction

French brokerage Kevelair doesn't use platforms as its main business is for 75 seats and over. Not only are platform databases composed mainly of business jets, but when CEO Fabrice Mandon trialled Latin American capacity, he was offered European based aircraft.

“Imagine arranging flights for 20,000 fans for the Champions League football finals. Some will go out Thursday or Friday night, some on the morning of the match, and all may want to return immediately after it ends. All this on different aircraft and from different departure airports. I don't think that automated systems would adequately cope,” says Tim Procter, MD of London Gatwick airport-based Air Charter Travel Ltd, brokers of large aircraft charter.

“The complexity of the enquiry demands the finesse of face to face negotiations; this cannot be replaced. I understand it's got great mileage if you are taking two or three passengers from London to Cannes and back, but to do it with up to say 10 different airlines flying planes with more than 250 seats, on behalf of a moveable feast of fans who may or may not travel depending on the economies, on different days – there isn't a computer programme on earth that can handle that kind of business.”

Is reducing the price of luxury good for the market?

"When you go and get a price online, you don't know if the aircraft is available,” says Le Bas International's COO Tracey Deakin. “The system will give you a price but you still have to go and speak to the operator about air crew availability or some other hindrance.” And as for lowering prices in the market, he says: “When you are dealing with this type of aircraft, it is very strange to me why people want to 'buy down'. This is a 'buy up' product. When you get into an executive aircraft it is like going into a luxury hotel; you expect good service and you expect the staff to be nice.” And if you don't get that information from the platform, will the marketplace ultimately become frustrated?

Ross Kelly, sales manager at Light Jets Australia, agrees that when clients are making a decision on booking a private jet they like advice, and they like to speak to someone about the options. “Although there is a lot of hype around these booking platforms, booking a jet will never be like booking on Uber and there will always be a need for a traditional broker who is on the phone for their client, especially when something goes wrong,” he says. While platforms may make it more competitive, the business aviation sector is a niche market built on relationships. “Long term I think only a few players will survive, or will shift to a more traditional broker business. People may use these platforms for simple bookings, but for complex charters or multi-leg tours clients will always rely on the expertise of a professional broker service and someone they can speak with.”

Deakin remembers back in 2007 Richard Branson launched Virgin Charter with the tagline 'the smarter way to charter', but it failed, even after he had put millions of dollars into it. “Until you can tell me there is a product there, with an aircraft, pilot and crew, ready to go, where everything has been checked, and you've given me an offer that is good and solid, until we get to that place the market is not going to move very much,” he adds. “And maybe you need to teach the client more about the market too.”

This was picked up by Vladislav Zenov, CEO of Moscow, Russia-headquartered booking service Charterscanner when he realised that after three years in business his customers were struggling to understand how to use the app. “It has been a long, hard road,” he says. “Our idea was to create a fully automated platform that would allow users to book a business jet directly from operators online. However, we came to realise that is very difficult to 'teach' customers how to order a jet via the application; they often need an individual approach, so now we are focused on our client service.”

Underestimating complexity of accurate online quoting

Stratajet founder and CEO Jonny Nicol argues that for an online marketplace to do exactly what it is designed to do. “It must completely remove the manual involvement of the operator in the booking process and provide 100 per cent accurate costs which are instantly bookable.” This is the basis of the Stratajet model.

Nicol claims to be the only provider that has personally met with every single one of the 385 US and European operators on his system. “These operators plug their aircraft directly into our scheduling software, so we track every aircraft on a live basis,” he says.

But there is another major complication, and that comes from the number of fees that need to be calculated when pricing a flight (see box)only one of which, the aircraft itself, is controlled by the operator. The Stratajet software removes the fluctuation of prices says Nicol: “It is the only provider that has gone to the trouble and effort of compiling all its own data and building its own exceptionally sophisticated pricing engine. With a continually updated database of over 460,000 lines of data and hugely complex algorithms, it is the only platform that provides accurate availability and prices of private jets every time, and a fully-automated, end-to-end booking service, with no manual input from the operator.”

Pricing discrepancies

Emanuele Pavoncello, CEO of Rome, Italy-based Private Jet Finder, has his own operator database and uses real, historical data to work out the price of each flight. Following a period of fine tuning his system he says he can now give more accurate prices to clients with a maximum error margin, generally, of five per cent. He believes that a number of pricing platforms display estimated prices from operators in order to attract business, but on further communication a higher price is usually achieved. “I can say that the average price increase discrepancy on charter pricing platforms can vary from at best five per cent to up to 35 per cent,” he says. For him, the final outsourced and negotiated price is “always higher, never lower.”

Giving operators access to a significant global customer base

“Using an online platform is efficient for broker, operator and customer,” says PrivateFly's Twidell. Whereas some B2B quoting platforms charge significant monthly fees per tail number, PrivateFly's platform is free to use for operators; there are no subscription costs or booking fees. Recent enhancements include the launch of a series of API integrations with aircraft operators via their scheduling software, such as FOS, Air Ops and BoldIQ (now licensed through Jeppesen). The platform pricing now reflects live aircraft locations, future scheduling and takes in automatic feeds of empty legs, which in turn has made it much easier and faster for operators to quote.

“Inviting relevant aircraft operators to quote more easily, gives faster response times and greater transparency,” says Twidell. This in turn means PrivateFly can operate at lower margins, an attractive proposition for today's charter customer. He predicts that the integration of further data such as airport slot and parking availability will become essential. “When third party suppliers are fully online and integrated, the customer will have a service comparable with booking an airline or hotel; instant price and confirmation of availability without any hidden costs or requirement to change schedules. At this point our industry will be able to attract a larger customer base and truly highlight the benefits of private flying.”

The price of the platform, packages and problem solving

Lisa Campbell, charter procurement specialist at New Hampshire, USA-based Symphony Private Jets highlights another concern which is that, as a start-up, her company is extremely budget conscious so currently does not subscribe to any platform. That's not to say that it is not a priority however: “Despite our fledgling status we have researched the marketplace and have taken advantage of trial offers, demos and conference calls in an effort to understand each platform and how each will benefit us. We have concluded that when the time is right we will be subscribing to Avinode as it offers not only a complete package for our needs but also additional support platforms that we can subscribe to as we grow,” she says.

Occasionally broking third party charter for customers, NEXUS tends to reach out to known operators directly versus sourcing via a quoting platform, according to Steve Saxton, VP of international business development at the Jeddah, Saudi Arabia-headquartered flight operations company. However, he believes these platforms will continue to gain momentum as, with all things, affluent end users get comfortable with technology and with making large purchases from a smartphone or tablet. “As Uber and Airbnb become ubiquitous, purchasing services online will continue to grow, even for expensive services. End users also prefer the ease of use, speed of response and the anonymity of these platforms and the ability to secure charter quickly and efficiently on the go,” he adds. But one challenge will be to ensure that every participating operator adheres to the highest standards. “The end user will not be savvy enough to differentiate among operators, especially with regards to safety.” Along with Le Bas' Deakin, he feels that platforms will need to offer end user rating systems and some type of visible mark or indication for the operator that shows that they adhere to a higher level of safety than regulations require.

Ontario, Canada-based FlyEasy Software has developed OpenPoint, a free to use global, map-based business aviation search platform. The company is a technology gateway between the user and the organisations listed and does not view, process or solicit leads generated within its platform. It generates revenue from professional user subscriptions, technology development, IT consulting services and the FlyEasy product line. Currently mainly North American in coverage, the target is 98 per cent of all available aircraft and operators worldwide. CEO and co-founder Shaan Bhanji believes this will be possible: “There is no cost to operators to publish their information.” However, the onus will rest with these operators to manage their fleet and company details. Where operators do not use the platform, FlyEasy's software analysts scan civil aviation authority data to keep information as up to date as possible.

Bhanji adds: “The big difference between us and others is that we don't put the system under lock and key and charge people to get access to the information. For a broker, the primary thing is to source an airplane. OpenPoint gives them the opportunity to do so without paying a single dime. We are not replacing scheduling software, this is purely a communication tool.”

Optimisation of prices

While some systems offer the user a range of flight options, managing director of Swiss-based Jet Scout and co-founder of Aeronautica Consulting Stefano Costi has engineered an optimising B2B and B2C search engine which allocates the user, whether customer or company, just three optimal flight offers. “The optimisation process filters through all matching offers to exclude all the cheap and nasty flights; the optimum is not the price, it's just the flight that best matches the request,” he says.

Costi says his platform, Jet Scout, does not take the place of broker: “We are giving support to brokers, operators and business jet travellers.” It's free to use and personal assistance is available at every step. Integral to the platform are individual accounts which track users' enquiries and bookings but all processes are anonymous and no identities are revealed by the platform. “And last but not least, you cannot influence it,” adds Costi. The 200 algorithms allocate up to three operators, or service providers, for each request. “Then it gets interesting. The end user will call each offered operator and negotiate the trip. We do not interfere. We are not a broker or an operator, but we do facilitate business for all of them.”

As well as being a software designer, Costi is a business and commercial pilot so he understands the booking problems arising from, say, a last minute AOG: “We know the expectations of the industry and how 'uberisation' has revolutionised end users' bookings. We can serve all the needs of the modern private jet user.”

How painful is payment?

Returnjet's Westlake says: “Online payment is a current development but needs to be a low cost or no cost option to be viable. Users do not want to pay a three per cent surcharge for making a payment by card, but a credit card hold may be sufficient to confirm the booking until a bank transfer has been made. Most platforms are now looking at instant bank transfers by the end user or broker which can confirm a booking instantly at minimal cost.”

Using regular credit cards, payment currently takes three days in the US, six in the UK and seven in the rest of Europe. Introducing a third party payment service provider can increase this to up to 30 days, while further delays through chargebacks or disputes over specific details can affect profits and cause time-consuming administration and record searches. Current payment processes take a member of staff an average of 30 minutes per transaction and the faxing or scanning of cardholder details is insecure. Not only can the documents be held as hard copy but payment is taken without the customer being present. “This situation does little to protect the customer's data and financial interests,” says PayNode global business director Magnus Henriksson.

He believes that it's an area ripe for improvement: “It is inefficient, costly and insecure, placing unnecessary strain on brokers and operators' businesses, and giving customers insufficient protection of their payment details.” Hence Avinode's recent launch of PayNode, an end-to-end payment platform which, in conjunction with American Express, facilitates credit card payments for card members, brokers and operators.

“From entering flight details to hitting send takes less than 60 seconds,” he says. Settlement is then made after confirmation that the services have been rendered, so the money will be in the merchant's bank account the following day. The system increases profitability through competitive processing rates for all users and, combined with faster pay out terms, should significantly improve revenue management. Luis Barros, CEO of Dallas, Texas-based Horizon Air Charter, notes that: “When we took a deeper dive into how much time and money it will save us each year, we were impressed. PayNode will streamline our payment process and beat the already competitive rate we had.”

Platforms must be intelligent and evolve, but expert advice alongside is still critical

Westlake acknowledges that prices can change between online quotation and deal closure because operators need to make checks before they can commit to the quote, but the industry is moving forwards: “Scheduling and quoting providers such as Avmosys, FOS and BoldIQ are providing interfaces which allow the search platforms to interrogate the flight planning/scheduling software and throw up confirmed flight availability at a confirmed price. This will then cut out the requirement for a second phase of communication from operator to broker to user to confirm both availability and price.”

There will always be some situations where owner approval needs to be sought or maybe a crew change is required. In these cases, the platforms will need to post a notice to alert the broker and user that a particular option needs another round of checks before it can be booked. “But the future of the online search and booking facility is to eventually enable an end user to click and buy charter anywhere in the world,” Westlake says.

And it is for the pricing reason that Yann-Guillaume Jaccard, CEO and co-founder of Swiss-based Simply Jet, believes that while Avinode is in a strong position in terms of its product development, there are still opportunities to be exploited by competitors or new players: “The cargo, commercial (50+) and helicopter markets are poorly covered, but we are also very curious to discover if the various broker APIs that were recently launched to provide instant operator pricing to end customers will prove to be a true success given their heavy development costs.”

UK-based SHY Aviation COO Dan Hurley believes that platforms can only continue to become more and more prevalent as technology and ease of access to pricing becomes more relevant within the industry. And with that comes increased competition. “I can see only a handful making a significant impact though as operators in particular won't entertain more than a few platforms, it's simply not practical for them,” he says.

However, Symphony Jets' Campbell says of the business aviation industry: “It's so dynamic, and constantly reinvents itself in an effort to maintain some sort of toe-hold, so who knows the future of pricing platforms? Niche markets are prime for a decline, by which I mean that it is becoming increasingly uncommon that an FBO is just an FBO. Many are reinventing themselves to also have their own charter department or Part 145 repair station, or both for that matter, in an effort to remain competitive.” And brokers are doing the same; selling aircraft as well as sourcing them for charter. She wonders whether, as niche markets become more diverse, there may be less of a need for quoting platforms if FBOs begin quoting internally for their own fleets and brokers continue to diversify, consequently creating their own internal pricing models. “However, the resilience of this industry never ceases to amaze me,” she adds. “No doubt the pricing and booking platforms will also find ways to reinvent themselves and remain not only relevant but also thrive.”

But be careful what you wish for …

When the quantitative analysts brought their technology into the financial markets post crash, margins were eroded. There is much less individuality now and the markets have become over-regulated. Will business aviation go the same way? The financial markets may now be transparent, but only for the basic 'vanilla' trade. If you want to do something more individual you won't find it on a booking platform. The parallels here are obvious – the added value of a broker is with individual requests and personal service. Without them, no 'tutti frutti'.