Procuring services for the business aviation industry

Miles Bailey is director of sales and customer service for UK-based SmartFly, a global procurement agency for business aviation that seeks out the best deals for clients and helps them boost efficiency

How did you get into the aviation industry?

Aviation has been my life since I graduated in 2006. I studied Aviation Technology with Pilot Training at Leeds University, which set me up for the variety of roles I’ve held over the last 13 years. Although you’re now more likely to find me behind a desk than in a cockpit, flying is in my bones – at the weekends, you’ll find me at Bicester Gliding Centre, where I’m a volunteer tug pilot and instructor.

How has your career progressed?

I started out as a cadet pilot with West Atlantic Cargo, but decided I preferred working directly with customers to piloting. So I joined Bookajet, a busy brokerage based at Farnborough airport, tasked with managing flight requirements using a network of partners. From there, I held various roles in sales, business development and supply chain management at Gama Aviation, MoonJet Flight Support and Aviaa. I joined SmartFly at its inception earlier this year.

What are the highlights?

I’ve been fortunate to work with fantastic people and teams throughout my career. All the opportunities I have engaged with have been on the recommendation of others – which serves only to reinforce the vital importance of networking and maintaining personal relationships.

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SmartFly

What is SmartFly and how does it work?

SmartFly was originally formed as the outsourced procurement partner for the Luxaviation Group. Luxaviation was running procurement across 14 air operator certificates and realised it needed an independent agency to manage costs, and strategise what to spend and how to spend it. Now, SmartFly is committed to helping everyone, from individual aircraft owners to large operators, achieve the best value for their operation.

Procurement is about more than just pricing – it’s about service, value, time and strategy. Our customers still work directly with their suppliers – we just build those relationships for you. There’s nothing we don’t negotiate. For instance, one of our customers was having difficulty getting aircraft parts turned around quickly, which impacted their profit. We reduced that time from 28 to 21 days.

What are your responsibilities at the company?

I’m involved with attracting new business, developing strategy and products and looking after existing customers – although, as we’re a start-up, no two days are the same. I work closely with our procurement teams to keep them appraised of our customer requirements, ensuring they’re prepared when entering negotiations.

What are the challenges?

There’s a lot of global uncertainty around business aviation today. External pressure from regulators and increased market competition is causing margins to contract and prices to escalate, which is why having a partner like SmartFly is so important.

Aviation can be resistant to change. The prevailing mentality is “we can’t, because…” – which is the opposite of my “we can, if…” outlook!

What do you enjoy most about your job?

It’s satisfying to see first-hand the results of our efforts. For example, for a recent customer of ours, we more than halved the number of contracted providers they were using, from 70 to 30. This reduction boosted efficiency and consistency and mitigated costs. Ultimately they could forecast much better and had improved visibility for the next 12 months, which is crucial in an uncertain market.

Each customer must be approached differently. Understanding how they operate and where they can benefit from outsourced procurement is great fun. As no two owners or operators are identical, there’s no “one size fits all” solution.

Lastly, I’m fortunate to travel regularly. Whilst this invariably is using scheduled transport, I’m occasionally able to fly myself to customer meetings – which certainly provides an ice-breaker!

How do you see the SmartFly service evolving?

As we gain more customers, our aggregated buying power will go from strength to strength. We’ll have better negotiating leverage and volume, ensuring our customers continue to access the best value propositions throughout the whole supply chain.

Several exciting product developments are in the pipeline within our services portfolio and in the way SmartFly will be embracing technology. The evolution of IT in private aviation over the past 10 years has been fascinating to watch, and I’m excited to be playing a part in it.

If you would like to feature in Working Week, or you know someone who would, email your pitch to kate.sarsfield@flightglobal.com

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SMBC Aviation Capital chief executive Peter Barrett


Three decades ago, Peter Barrett would be sitting in a lonely office in Shannon, manning the phones at ­Guinness Peat Aviation (GPA). As an analyst, he had the unenviable job of staying late to finish his work and answer the phone. This was Barrett’s initiation.

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FlightGlobal aviation training questionnaire part 2

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CAE and Directional Aviation complete strategic partnership

A strategic partnership between flight training provider CAE and corporate aviation investment firm Directional Aviation – announced in August – is now complete after the two companies concluded the deal in early November.

Under the agreement, CAE has created a joint venture with Directional affiliate Volo Sicuro and acquired, for $85 million, a 50% stake in simulator-based training company Simcom.

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Simcom

In turn, six other Directional affiliates – manufacturer Nextant Aerospace, and operators Corporate Wings, Flexjet, Flight Options, Flairjet and Sirio – have signed a 15-year exclusive training services agreement with Simcom and CAE. Together, the operators have a fleet of 175 business jets and turboprops, and more than 80 aircraft on order.

CAE chief executive Marc Parent says the agreement will “further strengthen CAE’s position in the business aviation training market”.

This includes the company’s $645 million acquisition of Bombardier’s Business Aviation Training arm. The deal was completed in March, bringing 12 new Bombardier business jet full-flight simulators – located in Dallas, Texas and Montreal, Canada – into its training network.

As part of the agreement with Directional, Simcom will purchase equipment from CAE, including five full-flight simulators: two Bombardier Challenger 350s, one Embraer Phenom 300, a Legacy 500 and a Gulfstream G650.

Simcom already has nearly 50 simulators – spanning jets, turboprops and piston-engined aircraft – across its facilities in Orlando, Florida, Scottsdale, Arizona, and Humberside, the UK.

Directional founder and principal Kenn Ricci says: “CAE’s investment in Simcom, along with our new long-term partnership, will allow us to realise our vision of creating industry-leading training solutions for private aviation.”

He adds that Montreal-headquartered CAE’s technology and training expertise will allow Directional’s affiliates “to better serve both internal and external customers”.


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Mitsubishi Heavy’s aviation unit turns profitable in first half

Mitsubishi Heavy Industries’ (MHI) aircraft, defence and space unit continued to remain in the black, posting a first-half operating profit of Y12.6 billion ($117 million).

This was a stark contrast to its performance for the same period a year ago, when it posted a loss of Y22.1 billion.

MHI says this was the result of increased revenue from its commercial aircraft business. Revenue for the six months ended 30 September grew marginally — at 1% year-on-year — to Y310.5 billion.

However, the value of orders for the period fell nearly 15% to Y192 billion, dragged down by defence and space segments.

In the second quarter of the fiscal year, MHI’s commercial aircraft business delivered 14 shipsets for the Boeing 777 programme, compared to 11 the same period a year earlier. It also increased the number of 787 shipsets for the quarter, delivering 42 this year, compared to 36 last year.

MHI adds in its mid-term business plan that it is “accelerating [the] SpaceJet M90 development towards type certification and first delivery”. It did not specify any dates, nor did it address any rumours of a delay in the programme.

A day earlier, Mitsubishi Aircraft announced that Trans States Holdings, which owns several US regional carriers, had cancelled its order for 50 SpaceJet M90s, along with options for 50 more. The airframer said the decision was made to axe the orders for the 88-seat variant as it “does not meet the requirements of the United States market”.


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​Aviation in Brazil hampered by litigation, taxes, regulation

A litigious culture, high taxes and regulatory issues are the main obstructions to aviation growth in Brazil, South America’s most populous country, and one that is generally considered still severely underserved in terms of air transportation.

A panel of two aviation executives, a regulatory official and a government representative speaking at the ALTA Airline Leaders Forum in Brasilia on 29 October agreed that the number of legal cases being brought to the Brazilian courts by disgruntled, delayed passengers as well as arduous administrative barriers are big drags on the sector.

“The cost of this judicial-isation [litigation] is paid by whom? In the end it is the customer,” says Gol’s chief executive Paulo Kakinoff. Legal costs are passed on to the consumer through higher ticket prices for air travel. “This cost will be reflected in the fares that everyone is going to pay.”

Aviation is a much criticised industry in Brazil, and suffers from a lack of understanding by the general public, Kakinoff says. “It’s complex communication, but we have to recognise that we are not doing a good job on this.” Gol is Brazil’s leading domestic low-cost carrier.

“Passengers need to know that if they take a flight, that flight may not happen for many different reasons,” says Ricardo Catanant, superintendent for aviation services at Brazilian regulator ANAC. “Often it is totally beyond the responsibility or control of the airlines.”

LATAM Airlines Brazil chief executive Jerome Cadier says that while 50% of the airline’s operating costs have their origin in Brazil, the country accounts for 99% of its legal costs. He echoes Kakinoff’s calls for improving consumer education about the aviation industry, but also that of the judicial officials who decide the cases that are brought against the airline.

Ronei Glanzmann, the Brazilian secretary of aviation infrastructure, tells conference participants that Brazilian judges say they are not sufficiently schooled in aviation law and therefore have a minimal understanding of it. The government is making an effort to counter this unfamiliarity by offering courses in the legal framework that governs the sector, in collaboration with the country’s association of federal judges.

“For them it’s a matter of a contract, but they don’t have the context for what that means for aviation,” he says. “For example, that you cannot control the weather.”

Supplementary taxes are also deterring more Brazilians from travelling by air within their own country, Gol’s Kakinoff complains. The so-called ICMS levy is a tax on sales and services and applies to the movement of goods, transportation and communication services.

He gave an example of two aircraft from the same airline which receive fuel from the same tanker truck, with one aircraft going to Buenos Aires, while the other is headed to a domestic destination of equal distance.

“The fuel going into the plane to Buenos Aires has zero ICMS and the plane next to it has a 25% ICMS,” Kakinoff says. “That tax structure has a very damaging impact, stimulating Brazilians to spend their vacations in Buenos Aires rather than in Brazil.”

More than half of Brazil’s 27 states have begun reducing their fuel taxes, with Sao Paulo state’s tax rate down to 12.5% from 25% previously. This has led to an increase of 591 flights per week from Sao Paulo’s airport, with another 200 planned, officials say.

LATAM’s Cadier also calls for industry deregulation to accelerate, which would lead to more competition.

“When passengers have two options for a route, companies are going to be extremely aggressive to capture these passengers,” he says. “We need to think about how to stimulate these routes where now just one company is running it.”

Glanzmann says the new government has a very pro-market agenda and supports deregulation. It is now in a position to tackle long-overdue issues and to open up the country to more competition. “We are working on this institutional regulatory environment,” Glanzmann says. “It’s the first time that we have a highly competent team and all the conditions necessary for this to work.”

In order for the industry to flourish, Brazil must also factor in competition from abroad, Cadier says. Restrictive labour laws and diverging rules between countries are another differentiator when it comes to the cost of flying.

“My crew members are less protected flying to France then a French pilot coming the other way,” he says. “We need to think about the impacts about the Brazilian companies’ capacity to compete with other companies that are not subject to the same Brazilian labour laws.”


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Chile is most competitive in Latin American aviation: study

Chile took the top spot in a new aviation competitiveness index published by Latin American industry association ALTA and technology solutions company Amadeus.

The “Aviation Industry Competitive Index in Latin America”, published on 29 October, aims “to identify and analyse the different factors and conditions that affect the development of air operations” in eight Latin American countries.

“The countries analysed are going through different moments of growth, but are aimed at achieving it,” the report concludes. “There is a growing awareness on the part of governments of the importance of strengthening the aviation industry because of the benefits it brings to countries and the opportunities it generates.”

An increasingly wealthy middle class coupled with new entrants and network expansions in what is often considered an underserved air travel market demands greater investment across a host of categories.

The six criteria for which each country received a rating between 0 and 100 included: infrastructure, taxes and fees, the facilitation of processes for passengers within airports, the release and opening of air transport, the willingness of citizens of a country to travel, and technology and digitisation. Each country then received an overall score.

Chile landed on the top spot with an overall rating of 82 points out of a possible 100. The country had the highest scores in the categories of “technology”, “taxes and fees”, and “propensity to travel”.

“It’s no surprise that Chile comes out on top, despite all the challenges” the country currently faces, says Julia Sattel, president of airlines at Amadeus. A strong national airline like LATAM is a clear driver of modernisation efforts in the face of current national unrest, she adds.

In the past weeks, violent protests in Chile have led to hundreds of flight cancellations and several deaths.

Panama took second place with a total score of 75, and led the group in the “infrastructure” category. Brazil took third place with a total of 71 points, but achieved a perfect score of 100 in the category “facilitation”.

Columbia, Mexico and Peru landed in the middle of the pack, with Argentina and Bolivia rounding out the bottom of the list, with totals of 57 and 44 points, respectively. Both countries scored less than 50 points in the “infrastructure” category – 45 for Argentina and 26 for Bolivia – which pulled their ratings down.

Six of the eight countries studied scored more than 75 points on “technology and infrastructure,” indicating that digital transformation is no longer just a catchword for the Latin American aviation industry. Governments and airlines are keenly aware that increased investment in technology networks directly correlates to ease and efficiency of passenger movement and higher rates of travel. In addition, a healthy aviation industry is an important economic stimulus and a job machine.

Executives at this week’s ALTA Airline Leaders Forum meeting in the Brazilian capital of Brasilia repeatedly emphasised Latin America is still far behind other continents in terms of air transportation, with an annual average of 0.4 flights per capita, as opposed to 2.2 flights per capita in Europe, and has great growth potential to transform the continent.

“It can grow five to six times, and Latin America could represent 8-10% of worldwide travel,” Amadeus’ Sattel adds. “It is a great opportunity for airlines and countries to open up. As technology providers we need to make travel seamless for the user so that people will choose air transport, and that the airlines have the environment and liberalisation to do their business without disturbance,” she says.

The report’s authors conclude that in order to compete on the global market, the region must make a commitment to continue improving in all of the categories in order to support a more-efficient aviation sector.

“Improving infrastructure is the first step in developing the industry and ensuring that the traveller’s experience is successful, followed by the implementation of new technologies and innovation, which will ensure that the processes are fulfilled in the best way and will help ensure unique communications,” the report says. “Reducing taxes and fees will increase the flow of passengers and operational improvements will reduce waiting times and traffic jams at the terminals.”


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Social unrest in South America ‘will not disrupt aviation’

Aviation industry leaders at the ALTA Airline Leaders Forum in Brasilia warn that long-term political instability could have an impact on the progress of the sector in one of the world’s fastest-growing regions.

In the past month, Chile, Bolivia and Ecuador have seen strikes and violent political protests which sent millions of demonstrators into the streets. Argentina is holding a contentious national election, which could also bring unrest to that country.

Pedro Heilbron, chief executive of Copa Airlines and president of ALTA’s executive committee, said on 27 October that despite the protests, which have prompted at least one airline to cancel flights, the aviation industry anticipates normalcy will return soon.

“Aviation always has to deal with all sorts of political events,” Heilbron says. “I hope that the situations are temporary.”

But Luis Felipe de Oliveira, the executive director and chief executive of ALTA, warns that it is integral for calm to return soon so as not to endanger the continent’s long-term prospects.

“Every year we have had some crisis,” de Oliveira says. “We hope these current events will be solved quickly and will not have an impact on the growth of the entire region.”

In Ecuador, demonstrators were protesting austerity measures including the cancellation of fuel subsidies. In Bolivia, the demonstrations last week targeted president Evo Morales and called for greater autonomy for eastern regions. In Chile on 26 October more than a million people took to the streets of the capital, Santiago, to call for social and political change in the country.

LATAM Airlines cancelled hundreds of flights on 20-23 October after Chile’s government declared a state of emergency on 19 October, covering Santiago and many other regions of the country, following widespread looting and rioting. Several people have been killed in the violence.


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CAE boosts its business aviation presence

CAE lands at this year’s BACE having significantly bolstered its business aviation presence in recent months. In March, the world’s largest flight training company and simulator manufacturer bought Bombardier’s Business Aviation Training arm from its Quebec neighbour for $645 million. The move added 12 full-flight simulators – in Dallas and Montreal – to CAE’s training network, taking its Bombardier machines to a total of 29. The acquisition also consolidated CAE’s status as dominant training provider for the Canadian airframer’s business jets.

CAE also expects to close a strategic partnership arrangement with investment firm Directional Aviation in November. As part of the deal, CAE will take a 50% stake in simulator training subsidiary Simcom, while Directional-owned subsidiaries Corporate Wings, Flairjet, Flight Options, and Sirio – which operate 175 business jets and turboprops – will use Simcom and CAE exclusively for their training under a 15-year agreement. Simcom, a specialist in general and business aviation training with two sites in Florida and a third in Arizona, is also buying five CAE full-flight simulators.

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CAE

The two moves reflect a trend in the business aviation market for aircraft manufacturers and large operators to partner with one or other of the major providers for the bulk of their training needs. CAE’s main rival in the business aviation market is FlightSafety International, which has close relationships with both Gulfstream and Textron Aviation, although these are not exclusive.

In April this year, FlightSafety International and Textron subsidiary Tru Simulation formed a new company called FlightSafety Texron Aviation Training to provide training services for all Textron Aviation’s aircraft. FlightSafety has also been a partner of Gulfstream for more than 50 years, and the New York-based company is also the original factory-authorised training provider for Dassault.

CAE won some ground back by becoming the exclusive “Dassault-approved training provider” on the Falcon 5X, which was launched in 2013, a relationship which has continued after the twinjet’s replacement with the 6X. Now with Bombardier on board as well, Nick Leontidis, group president, civil aviation training solutions, says he wants to “create that relationship with all” the manufacturers. “You get a sense with this of the sort of investment we are making with the OEMs,” he adds.

The business aviation market shares many of the characteristics of the airline sector, where CAE is the leader in flightcrew training. One thing they have in common is the desperate need for pilots. This year, for the first time, CAE included business aviation in its 10-year forecast of pilot demand, estimating that the industry will need 40,000 new pilots by 2028 as a result of a growing market and an average 4% annual attrition due to flightcrew retiring or leaving the profession for other reasons, including joining airlines.

Other aspects are different. Leontidis describes business aviation as a “transactional market”. Unlike major airlines, even the largest business aviation companies do not tend to operate their own simulators. Aircraft are also “always moving around” creating the need for training facilities as close as possible to the customer. However, Leontidis also says it is a sector in which there is “a lot of loyalty”.

The 12 Bombardier simulators take CAE’s tally of training devices for business aircraft and helicopters to 85, including those it operates in joint ventures such as Emirates-CAE Flight Training in Dubai or with rotorcraft specialist Abu Dhabi Aviation, also in the United Arab Emirates. That is out of a total inventory of about 300 machines around the world across commercial, military and general aviation. The Bombardier Business Aviation Training acquisition also gave CAE some programmes that were not in its portfolio, such as the new Global 7500 flagship, deliveries of which began this year.

Read all the latest news and information from the 2019 NBAA show on our dedicated page


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​Islamabad highlights defence aviation progress

The Pakistan military’s yearbook for 2017-2018 disclosed that Islamabad has obtained at least 60 CM-400AKG air-to-surface missiles, and that work continues on a future fighter concept.

During the two years covered in the yearbook, which covers all arms of the military, Islamabad spent $100 million to obtain 60 Chinese-made CM-400AKGs, a supersonic anti-ship missile that can be deployed from the Chengdu/Pakistan Aeronautical Complex (PAC) JF-17 fighter.

A mock-up of the missile has frequently appeared on static display with Pakistan Air Force (PAF) JF-17s at Air Show China held every two years in Zhuhai.

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A JF-17 at the Zhuhai static park in 2016 – note CM-400AKG on bottom left.

Greg Waldron

According to the manufacturer, the weapon uses “high [altitude] launching” to achieve “higher aircraft survivability.” AVIC has listed the 0.4m-diameter missile as having a range of between 54-130nm (100-240km), while carrying either a 150kg blast warhead or 200kg penetration warhead.

Meanwhile, work on Pakistan’s Next Generation Fighter Aircraft (NGFA) – named Project Azm – is proceeding, having completed its first cycle of conceptual design.

“The first configuration that was designed based on the challenging performance requirements of PAF will go through three more cycles within the conceptual design using higher fidelity analysis tools and codes,” it says.

The yearbook adds that a sixth airborne early warning & control (AEW&C) aircraft was added at a cost of $95 million. Pakistan defence analysis group Quwa suggests that this is the nation’s sixth Saab 2000 Erieye AEW&C asset.

Another acquisition involved a trio of Saab 2000 aircraft for $9.3 million. In addition to its Saab 2000 Erieyes, Islamabad also operates the type as multi-role platforms.

The two years covered in the yearbook also saw 12 Dassault Mirage III and V fighters overhauled at the PAC’s Mirage Rebuild Factory. In addition, there was significant overhaul work on engine types such as the Pratt & Whitney F100 and Rolls-Royce T56, and the acquisition of five Klimov RD-93 for $22.4 million for the JF-17 fleet.


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