Is the future fractional? - NetJets Europe

Is the future fractional?Christian Jensen-Broby, MarriottMats Leander, NetJets EuropeAs NetJets Europe Executive Director Mats Leanderpoints out, the company’s business is predicatednot just on the affordability (or lack thereof) of aprivate jet, but also on the logistics of its operation.“An executive might need a corporate aeroplane totake them from an airfield in Britain to Germany,but their own aircraft might be in New York at thetime,” he explains. Rather than wait for their aircraftto be delivered, and pay for the fuel, positioningcosts, pilot’s time and all the other necessities, it’sa simple question of efficiency to use an equivalentaircraft in a fleet that is closer to home. NetJetsoperates the world’s largest fleet of private aircraft– around 800 worldwide – so ‘home’ can be almostanywhere, freeing our clients from the restrictionsof owning a single aircraft.”47 Park Street is an Edwardian-style developmentin London, owned by the Marriott Group. It offersshared ownership in full-service luxury property topeople who want an alternative to second homeownership. Christian Jensen-Broby, CCO and VicePresident for Europe and Middle East of theDivision for Marriott, explains that it appeals to avery distinct group of people: affluent clients whorequire a London base they can truly treat as theirown. As with NetJets Europe, a large majority (90%)of 47 Park Street’s customers are using the servicefor business reasons.The model is gradually establishing itself inEurope, as many individuals begin to look beyondtimeshares. Marriott’s Jensen-Broby says that40% of 47 Park Street’s customers are Americanstravelling regularly to Europe, but that he is nowseeing increased growth across Europe and Asia too.A recent report 2 indicated that Spain, Portugal,France and Egypt were seeing good growth infractional ownership and that Croatia was takingthe lead among the emerging European nations.Fractional Owner View: Bhanu Choudhrie4Copyright © 2010, NetJets EuropeBhanu Choudhrie, entrepreneur, philanthropist and director of global investmentbusiness C&C Alpha Group, is a fractional owner with NetJets Europe.“If anything, NetJets actually saves me money, because if I couldn’t travel withsuch ease I’d have to employ many more staff to look after the internationalbusiness that I’m covering.“On a more personal level, a recent trip saw me fly from Paris to Switzerland toRome and then to London in the space of two days. No other operation couldhave got me back to my family within that time frame.“NetJets gives me flexibility and freedom. I can fly to pretty much anywhere Iplease with a few hours’ notice and the service is second to none. Believe me,I have been approached by competitors, but no one can provide the level ofexpertise and quality you get with NetJets. My plans change on an hourly basisand my business simply could not cope without NetJets.”

Is the future fractional?Drivers of growthThe most significant developments in the fractionalmarket have arguably only happened very recently.To begin with, people who use it have stoppedreferring to it as “fractional”, focusing instead onarticulating the benefits of shared ownership.Jensen-Broby sees this as a positive thing: “In thelast two or three years we’ve seen a move awayfrom the trade jargon, and with this has come abetter understanding of what the model offers andhow it differs from its sister sector of timeshare.This can only be a good thing, as it differentiatestwo different concepts for two markedly differentcustomer types.”The recession has also brought the fractional modelinto sharp focus for many people and companies.With capital at a premium, savvy investors arelooking to maximise their investments. Leandercomments: “Many corporate jet owners havebeen trying to optimise their aircraft usage. Forexample, one corporate customer had 5-10 seniorexecutives that needed access to private aviationservices. Previously the company owned four jetsat a cost of $35-40m each. But its travel needsare varied – some days it needs large jets doinglong-range flights, some days small jets for shorthops, and some days multiple planes to differentdestinations. This can be a real challenge for eventhe biggest corporate fleet, and of course it’s almostnever cost-effective. By switching to NetJets, theywere able to access our entire fleet whilst seeingtheir overall capital exposure reduced by 80%.”Nick Turner, The Registry CollectionNick Turner, vice president and head of high-endfractional leisure asset company The RegistryCollection, agrees: “For us, the credit crunch hasbeen a catalyst to growth. We saw a trickle ofinterest at the end of 2008, but true growth reallystarted in 2009, when it became much harder forpeople to justify full property ownership.”The trend looks set to continue, even as economicrecovery takes hold. As Leander explains: “We’rein an environment now where large capital outlaysfor corporate or personal assets are less desirablethan ever before, and this isn’t going to changejust because we’re beginning to see the initialsigns of recovery. Risk-averse individuals in thisnew economic era still want the benefits of theassets they might previously have owned outright,but need to demonstrate sensible stewardship offunds, whether to their CFOs or to their spouses.”NetJets Europe owner Bhanu Choudhrie agrees“There’s increasing pressure for individualsand corporations to demonstrate that they areresponsible in the way they do business. For many,it’s simply not price effective to own their ownjets. The economic crisis has been a catalyst forchange. It has lead people to look to alternativesto meet their business or individual travel needs.The fractional model will get increasing attentionas people move further down the path towardssustainable management of their businesses.”The global recession has also reduced thepurchase price of fractional assets. For example,the price of shares in property and jets tends totrack the underlying market value of those assets.As these have fallen, it has become even morecost-effective to enter into a fractional purchase.5Copyright © 2010, NetJets Europe