On a sunny November afternoon in Abu Dhabi, Royal Jet’s CEO, Rob di Castri, is courting journalists with canapés and showing off his company’s new Boeing Business Jets (BBJ).
“We cater to a very very exclusive clientele,” explains di Castri. “People who fly on this type of aircraft have probably flown on private jets for a long time whether they be royals or ministers or heads of state. So they’ve seen the same thing over and over again. But this is totally different, and why I think it will be very successful.”
With Edese Doret-designed interiors, a bedroom, three cabin classes that feature flat-lying seats, and the first airplane of its kind to stream live TV and Netflix on board, the experience is one of swimming in luxury that only 34 well-heeled are privy to at a time. An award winning service–decorated by this publication and many others–is a standard part of the package.
The aircraft is the seventh BBJ in Royal Jet’s fleet. One more on order will bring the company’s tally to eight and make it the largest operator of the aircraft in the world. But the deliveries might be the last for a while; Royal Jet is also using the occasion to herald another transition.
In each year of its operation since 2007, Royal Jet has posted a profit. The last two, however, have been harder to come by. Two years ago, the company announced it would pursue an ambitious $700 million expansion plan to bring its fleet tally to 20 aircraft by 2020. But di Castri, who was appointed CEO in September says the ‘build and they will come’ model isn’t going to cut it anymore, at least not in this market. The market has changed, he says. “We don’t just want to go buy aircraft and hope that we have the market for
Unlike Royal Jet’s two previous chiefs who respectively came from marketing or were pilots, di Castri is a man of numbers. Prior to spending 10 years as head of strategy and effective deputy CEO at Saudi Arabian budget carrier Fly Nas, di Castri, who is a chartered accountant by education, served as Atlantic Aviation’s chief financial officer in Nigeria.
"One of the main reasons the shareholders and board [at Royal Jet] brought me in is because of that finance background.”
That background, of working in oil-dependent countries with a mind comfortable around numbers and strategy, helps him find value in complicated situations he says. “I wouldn’t say my background is rare, but most CEO’s do tend to come from a business role or from marketing. But one of the main reasons the shareholders and board [at Royal Jet] brought me in is because of that finance background. I’ve spent 10 years in the Middle East, and the fact that I’ve done strategy and been involved in building Fly Nas, I think that helps.”
Private aviation is a complicated market to navigate at the moment. Driven by oil, the market has slumped. Manufacturers from Bombardier to Embraer are cutting back on staff amid low sales, with the latter telling Bloomberg, “There is no recovery in sight.” The forecast might be much gloomier for a turbulent global market, but as the general manager of Saffran Nacelles told Aviation Business about the market for private aviation MRO services in the region, “the Middle East just isn’t where the centre of gravity is at.” Further evidence for that comes from Honeywell which predicts 9,450 private planes worth $280 billion will be delivered over the next 10 years; but the global fleet replacement rate is at 23 percent, trumping the Middle East’s 18 percent.
“There’s definitely a contraction in the size of the pie and an increase in the number of competitors, which means increased competition but smaller demand.” says di Castri. “We have to be very smart right now or we’re not going to get the utilization we need. I have seen that all around the world: customers want to spend less, so your pricing has to be attractive and competitive, while your costs are inline and your operations efficient.”
"You have to be smart about the mix of your fleet, size of your fleet, and even the mix of newer and older aircraft. You have to have what customers want.”
Tasked with bringing in the bucks to arguably the Middle East’s most high-end flying experience, Di Castri is looking at boosting efficiency, improving services and diversifying the revenue base.
Utilisation is the key to profitability at the moment, he says. Operators need to record at least 60 hours of flight per month on their aircraft otherwise it becomes impossible to break even “And I think there are a lot of operators out there who aren’t achieving that.” Too many aircraft will only add to the problem if there isn’t enough business to spread across them and keep utilisation up. “You have to be smart about the mix of your fleet, size of your fleet, and even the mix of newer and older aircraft. You have to have what customers want.”
A change in plans doesn’t mean the operator has abandoned them, says Di Castri. “The company has spent nearly $250 million acquiring new aircraft and we still have a target of 20 aircrafts by 2020. I’ve said the same thing to the others [in the company] that we may still get there. But if we want to do it, we’ll do it the smart way.”
"There’s definitely a contraction in the size of the pie and an increase in the number of competitors, which means increased competition but smaller demand.”
Meanwhile, another new dynamic is beginning to impact the market: that of commercial carriers investing in premium services. Etihad’s first class Residence suites, for instance, now offers passengers an entire suite as well as a host of other services including chefs, nannies, and stylists, on board. Emirates and Qatar Airways are also upping the ante with onboard showers and bar facilities, encroaching a level of exclusivity that was reserved only for the most privileged of fliers.
But Di Castri is confident the trend isn’t cause for alarm just yet. “They still exist on another level of the customer pyramid, I would say. There is a large customer base for that kind of experience. But those customers don’t mind scheduled airlines, and having to go through the commercial terminal.”
Flying private, in contrast is a distinct experience from flying on commercial airlines, he says, bringing the conversation full circle to the experience on the BBJ. “You get to your aircraft from a private terminal, 15 minutes before you’re ready to go. You don’t have to worry about being on schedule, you just walk on board and get whisked away. It’s still a very different product.”
By Shayan Shakeel