21st Century Charter: Former Scott Air Charter seeks to set a new standard with turnkey Sterling service

June 8, 2004

Business Profile

21st century charter

Former Scott Air Charter seeks to set a new standard with turnkey Sterling service

By John F. Infanger

June 2004

MILWAUKEE, WI — There’s a sense, an expectation, amongmany in the air charter/business aviation segment that significantchange is in the air. There’s fractionals, and fractionals Chapter2, unfolding now before us. FAA is rewriting the regs. Microjets mayor may not revolutionize charter lite. And, there is the fact that many of the new entrants to business aviation via fractionals are coming to term on their contracts, leading to the question: Who will provide their transportation solutions? Tom Scott, who founded Scott Air Charter in 1983, entered an alliance by selling his company to brothers Chris and Dan Doerr. They see an opportunity to offer a turnkey service — a service, not just a vehicle — to a profiled market.

Explains co-owner Chris Doerr, “The plan is to get the sterling environment, to get the Sterling Program in place here in Milwaukee and have that template. That template can be taken to anywhere else in the United States.”

New co-owner Chris Doerr, left, and Scott Air Charter founder Tom Scott met last November to discuss a business proposal. Scott wanted to manage Doerr’s two Citation IIIs; Dooer suggested he and brother Dan buy the charter company. A handshake later, an agreement to form Sterling Aviation was consummated.

Essentially, the plan calls for delivering turnkey transportation aviation services with a primary target being those fractional ownership program participants who are now coming up for renewal of their contracts. Sterling Aviation wants to fill the aircraft transportation need with its Sterling Program, which offers two buy-in plans and which officials here say will cost far less than fractional ownership. Initially, Sterling will try to attract customers who have a travel profile that’s predominantly point-to-point, with Milwaukee (MKE) being a base. It may require Sterling Aviation buying Marquis Card time for one-off trips that do not fit into the customer’s travel profile — that is, Sterling Aviation buys the Marquis Card and uses it to supplement travel needs of its customers, who then pay one transportation bill.

Explains Doerr, “This is not designed to be a program where a member can call us from Phoenix and say, ‘I need a plane in four hours.’ That’s not what we’re trying to do. It’s really designed for those people who typically have day trips from Milwaukee and come back the same day, or the next day.

“We understand that there’s a need for someone to have that ala carte, point A-to-B, transportation and in fact we’re seriously considering buying a Marquis Card ourselves.

“I want to be the turnkey transportation provider. So, if we’ve got a card that has a home in Palm Springs and we take the customer out there, drop him off and come back, when he calls and wants to go from Palm Springs to San Francisco, I want to say, ‘Look, we’ll have a Marquis jet out there for you right now. Instead of him having to write a check for $50,000 to buy the card, I’ll buy it. That’s the sort of experience that is the concierge service that the Four Seasons would offer.

Tracking Maintennace Sterling Aviation expects to soon offer its Sterling Maintenance Manager program for operators of King Air aircraft.

“It doesn’t make sense for me to reposition an airplane out there, and I don’t want him to look in the Yellow Pages and call the Acme Charter Service.”

While the Doerrs are now the owners of the company and Scott is president/COO, the parties refer to the deal as an alliance. For Scott, it provides the injection of capital he needed to grow his business. For the Doerrs, it was an opportunity to move their two Citation III aircraft into an established charter infrastructure.

Says Scott, “It was a good fit because they needed what we have and they certainly filled our needs with the influx of capital and two fine airplanes.

Chris and Dan Doerr had in 1972 established the Leeson Electric Corporation in Grafton, WI, manufacturing industrial electronic components. In time they grew to 7 manufacturing plants and 28 warehouse facilities. They quickly learned the value of business aircraft.

Recalls Chris Doerr, “We learned early on that when we were able to put together our customers with our team of marketing, sales, and customer service, our close rate was extra high.”

In 2000, they sold the company and put the company’s Citation III and flight department under Volare Partners, with a hangar two doors down from Scott Air Charter. Today, the building serves as Sterling’s maintenance facility.

While both Scott and Doerr praise the success of the fractional ownership programs and recognize the additional charter business the company has received from them, they say there is an opportunity as many fractional owners rethink their transportation needs.

Explains Doerr, “What we’re seeing is that these fractional owners are coming to realize that what they thought was a good deal is really the most expensive way to travel, compared to whole ownership or on-demand air charter.

Sterling Aviation, the combination of Scott Air Charter and Volare Partners, will soon begin an $800,000 makeover of its terminal facility, with upgrades of offices and customer amenities.

“Right now, there are a lot of people coming up on their fifth year anniversary with the fractionals and they’re trying to make a decision on what to do.” Doerr adds that many fractional owners within a 100-mile radius of Milwaukee fit a profile of embarking or terminating here a large percentage of the time, a good fit for Sterling’s new program.

Adds Scott, “We’re offering people a block of transportation rather than buying a one-eighth interest in a specific aircraft. You’re not buying an asset that has the risk of depreciating in value. There’s no upfront huge investment of $800,000 or $1 million to buy your share.”

Marketed as the Sterling Club, the program offers two levels of membership: silver and platinum. “The silver membership level is $125,000,” explains Scott. “It’s an annual commitment and you pay for it in quarterly installments. Platinum is $250,000.

“What you’re getting is access to the planes in our fleet at significantly reduced rates, and you’re getting the option of flying one way or round-trip. You can tailor the transportation experience to the aircraft that most economically and appropriately fills the need.”

The Sterling fleet currently consists of five Citation IIIs; a Citation V Ultra; a Lear 35; a King Air 300; and, a King Air B200. The company is actively seeking new aircraft management deals, and looks to potentially acquire another charter firm in Florida or Arizona, two popular destinations of its current and potential customer base, according to Doerr.

“The first strategy would be to be in Florida or Arizona to be where the planes are going,” he says. “Their going to those locations and they’re coming back empty.”

Adds Scott. “The probability of a backhaul would be significantly enhanced if we owned a company down there.”