Although the Lehman Bros. bankruptcy reverberated throughout the global economy, it hit especially close to home for Ronkonokoma-based Executive Fliteways Inc.
The private jet charter firm based at Long Island MacArthur Airport used to count Lehman Bros. ’ aircraft as a large part of its fleet.
“We had 18 to 20 people dedicated to the Lehman account,” President John Grillo said. “We were required to downsize as a result. ”
After four years of lackluster performance, EFI and other charter companies are seeing their fleets begin to grow again, although the number of flights they’re handling isn’t keeping pace.
That’s a problem, as revenue from managing and storing private aircraft covers only a charter company’s overhead. Flights and the related crews and maintenance generate the additional revenue needed to turn a profit.
“People think it’s a beautiful business, but the costs are very high and it’s manpower and space-intensive,” Grillo said. “You have to be a busy company. ”
Each aircraft requires three to four direct employees to maintain, although additional staff is needed to handle the infrastructure of a charter flight company, said David Rimmer, president of Ronkonkoma-based ExcelAire. The of hangar space required for a private aircraft varies depending on the size of the jet.
Each private aircraft also generates more than $1 million in economic activity, said Joseph Loccisano, president of the Long Island Business Aviation Association.
Charter flight companies manage private aircraft for corporations and individuals, providing pilots, flight crews and maintenance workers when the plane’s owner needs to take a trip, and in many instances, chartering out the aircraft to others when the aircraft is idle.
The number of flight hours dropped by almost 45 percent from 2008 to mid-2010. Those numbers regained some altitude in 2011, but are still 10 to 15 percent off their 2007 levels, said Dan Hubbard, a spokesman for the National Business Aviation Association.
Local statistics follows the trend. Republic Airport, for example, had roughly 19,400 business flights in 2007 before dropping to about 13,700 in 2009. Both 2010 and 2011 saw flights rebound slightly to about 15,000 annually. Michael Geiger, airport director for Republic, said flights will likely hover around the 15,000 mark for 2012 as well.
Geiger also noted that as of April, the number of private jets at the airport had remained the same. But since then, several local charter operators have seen a change, as purchases of used aircraft has picked up slightly, thanks to rock-bottom pricing.
Just like real estate, the price of used private jets has fallen almost 50 percent from 2008 levels due to the economy. That’s a far cry from the 2 percent annual depreciation private jet owners used to see.
And similar to flight hours, private jet sales have tanked in recent years – 20,000 aircraft manufacturing workers have been laid off nationwide since 2008. Sales are only now beginning to show signs of life.
While most sales are now coming from overseas countries like China and Brazil, some domestic companies with manufacturing operations in foreign countries like India and China are starting to buy large-cabin, long-range airplanes to help executives check on their overseas endeavors, said Kent Jackson, founder and managing partner of Kansas-based corporate aviation law firm Jackson & Wade.
That’s good news for the industry, but New York will struggle to post as many gains as nearby states due to the Empire State’s inclusion of sales tax on aircraft. Nearby Connecticut has no such tax and and has actually added 31 private jets over the past 10 years – a period in which New York lost 698.
A sales tax exemption bill failed to gain traction in Albany in June.
EFI may soon add two more private jets to its fleet of nine aircraft – down from 16 prior to the recession. Grillo said the company is close to getting a contract to manage a new aircraft and is in preliminary talks for another. Barring unforeseen obstacles, the first transaction should be completed by the fourth quarter, at which time EFI would hire a few additional employees to staff the new aircraft. Grillo declined comment on the company’s financials.
Similarly, ExcelAire, also based at MacArthur, just added three private jets to its fleet. Rimmer said he expects to add an additional four or five aircraft to its fleet of 23 by year’s end, making it the largest fleet in the firm’s 25-plus year history. As a result, the 140-employee company plans to hire 12 to 15 more pilots, mechanics, avionics technicians and accounting staff to manage the new aircraft.
“Most of the people we’re seeing who are new owners have been charter customers in the past,” Rimmer said. “They’re seeing prices on aircraft have gone down enough that it makes sense to buy. ”
Copyright 2012 Dolan Media Newswires
