A Good Landing Despite the TurbulenceFri, 12/01/2017 - 09:25
Despite a bumpy take-off at the beginning of the year, 2017 is shaping up as a success for the aviation sector. That is good news for Mexican executive aviation and logistic services company AeroRent, which expects a healthy landing itself after a tumultuous year.
IATA expects demand for passenger services in Latin America to grow by 7.5 percent in 2017. But variations in the aviation market and rising fuel prices have made it difficult for small companies in Mexico to harness this growth. AeroRent faced these issues at the beginning of the year. “January was hard for us,” says Rene Barquet, the company’s Director General and CEO. “We rarely have an airplane parked longer than a week, but from Jan. 1-23 all our planes remained grounded.” Lower than usual demand for that time of year was followed by a recovery, but only during July and August. The market bounced back in September. To address the issue and spur demand, AeroRent hiked its advertising outlay, followed up on clients and, on occasion, reduced its prices to motivate clients to fly, Barquet says.
AeroRent offers a variety of transportation services, including chartering, aircraft brokerage and helicopter tours, but executive transportation is its main activity. Barquet identifies government workers and company executives as the company’s most common clients. “We specialize in transporting clients to several destinations around the country in a single or a few days, which is what executive customers generally want when they are on a business trip,” says Barquet. However, the company also offers charter services for families traveling together or for groups visiting conventions or congresses. “We have experience in the charter segment and have flown for various companies,” he says. “For instance, for Corona we flew a group of VIPs to Cancun for the Corona Sunsets Festival.” He finds, however, that demand in the charter segment – especially for moving groups to conventions – has fallen a bit.
Barquet expects AeroRent to close 2017 well as the company’s situation has improved alongside overall growth in demand. There are, however, several obstacles. “Among the challenges is airlines cutting their prices at the expense of profits,” he says. “This harms the market because nobody wins.” The main issue with this practice is that customers start asking for impossible prices and every player loses. Another market issue bearing down on airlines’ performance are increases in international fuel prices. IATA considers this is a key hurdle on a global scale that is heavily hitting local airlines. According to Barquet, “AeroRent has found it hard to compete on aircraft fuel tariffs.”
AeroRent is implementing a number of strategies to grapple with these issues and continue growing. First, Barquet says the company provides a more personal service that meets the requirements of today’s customers, who want to be treated well, have quality catering onboard and expect punctuality. Delivering these elements can help overcome pricing concerns. “We compete with a fair price and provide a better service,” he says. “This is the only way to compete without being disloyal to other players in the sector.”
Second, the company is increasing its advertising to reach potential foreign customers as a way to diversify its client base. “Executives of large companies usually are unaware that there are jets for lease,” says Barquet. “AeroRent is increasing its international advertising to reach more foreign clients because, although 40 percent of the company’s flights are international, we only have Mexican customers.”
Its third line of action is to expand into new market niches. “We are interested in entering the market of commonly-owned aircrafts,” says Barquet. “This model consists of selling memberships for a predetermined amount of flight time. Customers acquire a number of flight hours per year for five to 10 years. Companies such as Fly Across have had sensational results from this activity.”
Before AeroRent can adopt this model, Barquet says the company needs to grow, standardize and modernize its fleet, a part of which is co-owned and partially administered by other companies, although the airline has some aircrafts of its own. The company has 10 airplanes and two helicopters, including a Gulfstream III, Learjet 25, 35 and 60, Hawker 700 and 800, and a Boeing 737 that is administered by Global Air.