Jay Mesinger

J. Mesinger plots clients' path towards fractional ownership

October 25, 2001:

The acts of terrorism which brought America to its knees on September 11 have by now been well documented. Two months on, both domestic and foreign airlines are struggling to exist in a climate of economic uncertainty and public trepidation. GBJ’s team of reporters spoke to operators, brokers and FBOs alike to see how the business aviation industry in the US was coping with the knock-on effects.

The first impact of the events affected every aviation company in the US. Aircraft were grounded and businesses began to lose money. When the green light was given for services to recommence, general aviation was very much at the centre of the action.

Testifying before the house aviation subcommittee on September 25, NBAA president Jack Olcott emphasised the role of business aviation in restoring the nation’s economy. He said: “Our role in facilitating the transportation needs of businesses throughout the country and around the world is critical to the economy. Following the attack on the World Trade Center, business aviation provided the federal emergency management agency with access to hundreds of airplanes and helicopters to assist with rescue operations.”

With regard to the security concerns related to the September 11 events, he said general aviation should be divided into two separate entities when thinking about new regulatory measures. He said: “We believe the security systems and procedures that are appropriate for the Part 121 (airlines) and Part 135 (on-demand charter) communities are not appropriate for the Part 91 (private business aviation) community.

“The security issue really comes down to the case of the ‘known’ crew and passengers (business aviation operations under part 91) and ‘unknown’ crew and passengers (commercial operations conducted under Parts 121 and 135).”

While NBAA then went back to the drawing board to develop recommendations which address the security concerns of the GA community, on October 4 a bill was introduced to provide economic relief to general aviation small businesses. The measure, entitled The General Aviation Small Business Relief Act of 2001, authorises the Small Business Administration to provide grants to small businesses which have incurred losses directly related to the federal ground stop after the September 11 attacks.

Said Olcott: “For some NBAA member companies in the service sector, economic damage related to the September 11 attacks and subsequent shutdown of air service has been significant and non-recoverable. For example, losses at some FBOs have reached $100,000 per month on fuel sales alone, while smaller management companies are facing possible bankruptcy.

“Representative Bill Schuster and the co-sponsors of this bill recognise the important economic role of general aviation in returning America to prosperity. This action will provide the necessary funds to keep the doors of America’s small aviation businesses open.”

GAMA (General Aviation Manufacturers Association) president Ed Bolen added: “Much has been made of of economic losses the nation’s commercial airlines suffered as a result of the attacks but general aviation companies have suffered as well. Many of these companies are too small to have significant cash reserves, are not publicly traded and do not have access to capital markets. They have been denied access to airspace for weeks – not days. This bill is an important step towards restoring this critical industry.”

Charterers witness surge in enquiries

Is has been suggested, not only on US shores but across the world, that general aviation would see an immediate upturn in business after the events of September 11. Breck Daniel of Dallas operator, Regal Aviation, told GBJ: “When we were allowed to start flying again, after the initial grounding, there was a surge in charter business. Of course, we attribute that to the fact that people were stranded and trying to get back home as quickly as possible. For about five days, we were very busy and just about all our airplanes were in the air.”

After that, however, Breck says business trickled off pretty quickly, particularly for the larger business aircraft. He said: “Gulfstream charters have been very slow. The smaller aircraft like the Lears and the Hawkers have stayed busy but have not been up to the normal number of flight hours that we normally see.

“That said, over the last two weeks the phone calls have been climbing rapidly. A lot of people are calling

to find out what it’s going to cost them to charter, to lease or even to buy an airplane.”

Those enquiring, says Daniel, have been a mixture of business professionals and private individuals. “At first it was just businessmen,” he said “but now we’re taking enquiries from personal travellers.”

Asked how charter prices compare with those of airline travel, Daniel said: “We have found that – and I’ll use business travel as an example – if you call last minute for business or first class tickets on a major airline, and you have say six executives, you can just about charter for the same rate.

And of course you can add to that the advantages of time-saving and safety.”

With regard to security, Daniel says Regal Aviation has always made it a priority to keep a secure and private ramp. He said: “The airport which we’re on and the ones to which we travel, have instigated some extra security measures. We have locked down all the doors and gates at our facility here at Love Field in Dallas; no one gets on to the ramp or into the building unless we know exactly who they are.”

While some airlines across the US now have a plain clothes sky marshall onboard every flight, Brett believes general aviation does not have the need for this sort of measure yet. He said: “I don’t think we’re at that point yet. We have informed our flight crew that they have every discretion at their mercy – if they’ve got passengers who they’re concerned about, they can take whatever measures need to be taken to ensure the safety of the passengers and aircraft.

“Most of the people we’re carrying right now are customers who we have done business with and the people who are riding with them are their associates. So to a certain extent, we rely on the people who have arranged for the trip to know who’s flying with them.”

In terms of fuel, prices seems to be stable at the moment. Said Daniel: “The fuel suppliers are telling us that they have a large quantity of fuel on-hand and that barring anything tragic, they don’t see a big uprush in fuel prices coming.”

Regal Aviation has just opened the first phase of its new FBO at Dallas. So far, roughly half the total facility has been opened with a lobby, pilot centre, maintenance area and large hangar all in operation. Once the full FBO is open in March 2002, the company will be able to boast 80,000 square feet of office and hangar space, and 150,000 square feet of ramp space.

Daniel concluded: “Right now, business is not up to where we’d like it to be but we think it will be in the next few months. It’s very unfortunate that it took an event like this to turn around the charter business but all of these large operators like ourselves are saying the same thing – we’re expecting an upturn in business.”

Similarly to Regal Aviation, New York-based Air Charters took more calls than it might normally expect after the terrorist attacks, although this has since tailed off. Said president Susan Bopp: “We’ve had a few calls from people we haven’t done business with before but it’s pretty much been business as usual. The calls are from business people trying to find out what it would really cost to send their people on business aircraft.”

In which case, how do the prices compare with the airline industry? Bopp quipped: “If you packed eight first class passengers into our Lear 25, you might come close to something. It’s really just the convenience of time – you can get done in one day what might have taken two or three. The price is never going to be the selling point, in my opinion.”

Asked whether security has now been increased at the airports which Air Charters uses, Bopp said: “Security here at Teterboro has been very much stepped up. Previously, across the board, there was very little done in terms of checking charter clients.

“Now they’re scanning baggage here at Teterboro and they’ve been checking at a lot of the airports we frequent.”

In terms of their own charter clientele, Bopp added: “Most of our clients are people who’ve been flying with us for a while. We’ve stayed away from flights for people who’ve just popped up out of the blue, people who there’s no tracing for.

“Right now, we’re demanding two IDs off everybody who gets on the plane.”

According to North American Air Charter’s Jonathan Ross, there are two schools of thought concerning the popularity of business aviation since September 11: what people are saying and what’s actually happening. He explained: “Everyone’s telling me we’re having this huge rush for charter and I don’t see it. What I do see is a lot of interest but not much movement. My personal feeling is that the financial status has taken over and has had a profound effect upon people not flying.”

North American operates a GIV and a Citation 501, neither of which have picked up much work in recent weeks. Ross said: “The Citation has had some work but not the work we’d expect; the GIV, which principally flies to europe, has not been a great deal more active than it was prior to September 11.”

With 20 years experience in the general aviation arena, operating business aircraft as a chief pilot, Ross says there is no need to panic at this stage. He said: “I see that what flying I don’t get now, I’m going to get later. I think we’re going to have a rush in the coming months, when the economic dust has settled. There’s so much economic uncertainty at the moment, people are simply postponing their trips.

Where North American Air Charter may pick up business right now, admits Ross, is where the airlines are unable to accommodate people’s demands.

He said: “I had a quote on a Gulfstream for a trip from here to Basel and then from Basel to Sydney. Anyone can tell you what area I need to traverse to do that and I thought to myself, I’m obviously getting a request for this quote because the airlines can’t do it and because of complications such as insurance.”

Asked how safe GA actually is, Ross said: “I think it’s safe because I don’t think airplanes are the big target right now. The new target, I believe, will be a bus or a public assembly of people.

“I think business airplanes are safe – we know everyone who’s getting onboard. That said, I don’t think we’re going to be immune to some regulatory changes. Perhaps it’s been a little lax in that regard, so I think we’ll see a tightening-up.”

Talking of regulations, Ross says that recent events may impact heavily on fractional ownership operators. He said: “We’re on this big trend towards fractional ownership and I wonder what will happen to the new set of rules they're talking about – 91k.

“I believe that there are security issues that aren’t adequately addressed in Part 135 and I think that Part 91k is a loosely-run 135, so I think that they’re going to need to address all of those issues as well. The public isn’t going to want a lot of private owners running a multi-aircraft operation without all of the regulatory requirements.

“Obviously this is a biased opinion because it affects what we do here but I think it’s important now we have other folks like United Airlines entering the business.”

Market remains slow

Rick Engles can also lay testament to the fact that enquiries have risen but deals are few and far between. The Vance and Engles president told GBJ: “Business has continued to be flat, quite honestly, although we’ve certainly had a spike of calls from people who felt this was the time for them to buy their own airplane. When they heard how much it might cost, they thought again.


“I think what’s going to happen is we’ll see an evolution, another turn of the wheel. These people who have shown an interest in buying will start with charter, then move into fractional ownership and finally into full ownership. It probably takes six years for someone to go through that process.”

In order that this process gets off the ground, Engles is keen not to greet first time callers with a cold ‘no’. He said: “We try to keep them in our sphere. We have a couple of charter operators who we do work with. For example, in Chicago we have DB Aviation and in Prague, we have Czech Aerospace.

“Where possible, we make sure they have that lead and go after it. It’s not something where you plant the seed and then come back in thirty days and there’s a big corn stock. You just have to give them good advice and hope they come back.”

Supposedly, potential business aviation clients have been emerging since September 11 because they have the impression that it is safer than the airlines. Said Engles: “I think people will use the airlines again but I think corporate aviation has always been safer. The main reason is because you know who is on your airplane.”

That said, general aviation is clearly a profession which has always relied on trust. Surely that can’t continue? Said Engles: “I think that’s one of the processes that will change. We’re going to see it from operators, but to a greater extent, we’ll see more regulations from the FAA. It’s going to be more difficult for charter users than it has been in the past.

“I admit that we’ve been remiss, industrywide. We’ve allowed a tremendous number of people who, if they wanted to, could get hold of an airplane and make trouble.

“We may eventually see sky marshals or staff members or customs guys at every FBO and

when a pilot comes in, he’ll want to see his licence, he’ll want to know where he’ s going and when he’s coming back. The freedom we had in the past will be gone, the pay-off will be more security.”

The reason there are few buyers for corporate aircraft right now, said Engles. is quite simple. He said: “Before a buyer spends US$10,000, he wants to know what the new rules are. If he isn’t going to be able to use that expensive asset quite the way he wanted to, the way his colleagues may have been able to do it in the past, he’s going to delay buying it.

“So there’s going to be a waiting period and it is going to be difficult for those brokers who want to put deals together. Deals will be few and far between, I think, until well into the first quarter of next year.”

And what will tempt buyers to re-enter the market? Said Engles: “The prices will continue to come down and at some point, they will come down where they will tickle demand.

“The price of the airplanes is going to come down but the infrastructure around operating the airplane is going to make the whole price more expensive.

“I think that will be one of the driving factors in the equation of what will bring buyers to the table. Buyers see one of the ways that they’re going to be able to put an entire package together is to drive down some of the costs. They know they’re not going to be able to drive down the security aspect of it, the infrastructure requirements will go up, so one of the variables of getting into the process is by making the price of the airplane come down.”

Jack Prewitt and Associates, a Texas-based broker firm, has been left relatively unaffected by the disaster. Sales executive Sylvester Stroot explained: “I don’t think there was much of an impact on what we were doing. The market was fairly slow before the event, and still is. The market has not worsened, in fact it may have even got better.”

When asked whether passengers viewed private jets as a more secure option, Stroot replied: “I think so. We’ve had several companies call us who don’t even have an aircraft, and are now considering purchasing one. They may have been doing their business on airlines, charter or fractional jets, and now they want their own aircraft to control their own destiny. When you fly via these modes you have no control over the security, who’s flying the aircraft or who’s on it.”

Despite concerns over economic instability, Stroot said: “Prices have remained about the same, and I don’t think economic motives have stopped people buying. There have also been a few sellers take their aircraft off the market, who I think have decided to keep what they have for now [and wait until the situation has settled].” Regarding the future of the market, he added: “Unfortunately I think the market will remain in a similar position

for a while. But the situation will have to improve, as certain people need to travel and continue moving around. Consequently I think there will be a significant increase in sales, round about the second quarter of next year.”

According to the company, phones have been ringing a little more often than usual. Challengers and Gulfstreams have remained among the more popular aircraft, with custom mainly coming from public corporations. Stroot confirmed that local competitors were in a similar situation, but none were facing significant problems or bankruptcy.

Meanwhile, Jay Mesinger, ceo of J. Mesinger Corporate Jet Sales Inc., said: “There are several competing fears. Firstly, there has been an immediate and continued group of phone calls from prospective buyers, prompted by the fear and aggravation of travelling on commercial airlines. There is then a greater fear that the economy is going to weaken further, because no matter how frustrated or fearful certain groups are, their pocket books will not allow them to travel any other way.

“Thirdly, there is a group of people who believe that due to the airline situation there will be a great deal of activity in the corporate market. They wrongly assume that they will be able to raise their prices, which is stupid because truthfully there really has not been much activity in the market,” said Mesinger. The company has experienced a great deal of talk and activity, but explained that activity was a long way from actual sales.

The company generally deals with more expensive corporate jets, appealing to major corporations. Mesinger said: “Fortunately many of our customers can still afford to buy. Whereas in the past it has only been upper management flying, it has now dropped to include middle management also.

“This has created a need for greater capacity, which means certain clients have been buying more aircraft.” Enquiries have mainly concerned smaller or very large aircraft, with private individuals tending towards aircraft such as the smaller Citations. Mesinger agreed: “There have been a higher number of first-time buyers calling, but when they begin to understand the financial implications, the reality of the cost outweighs the fear. So although there have been a number of enquiries, they don’t go very far.”

Prices had been falling in the market prior to September 11, but many brokers felt that these had levelled out and were preparing for an upturn. “Since September 11 there hasn’t been a catastrophic change, but equally there’s no

feeling that things are about to improve. At present there is so much indecision and uncertainty, regarding for example a sustained conflict, that people no longer believe that the market will pick up within the next three to six months,” confirmed Mesinger.

The company maintains that no sellers have taken their aircraft off the market since the tragedy, which it believes is a function of a greater fear - the economy. “If a company has made an economic decision that owning an aircraft is no longer prudent, then that decision will not have changed,” said Mesinger.

“I do believe that the business jet market is one of the first to be hit by economic instability and one of the last to respond positively. That doesn’t mean to say that there aren’t buyers, but they are behaving more cautiously. The last time this happened was in 1991, and then it took four or five years for the

market place to respond to the economic strengthening. Post September 11, there are three shoes that have yet to drop: Militarily, economically and emotionally.”

After 27 years in business this particular company is well aware of the cyclical nature of the market, and along with other more established companies has a solid financial and client base to draw from. “The younger, weaker companies will find it very difficult to survive when they don’t have the opportunity to make a sale,” warned Mesinger.

FBOs realise the need for change

After watching the terrifying images of New York on September 11 over and over again, it became clear that aviation would never be the same again. One corporate flight department told GBJ that, as confused reports of the terrorism spread on that fateful Tuesday, they were sure the aircraft involved would be private jets, because these would be more accessible to terrorists.

America’s FBOs were closed down along with every other airport for several days after the attack, to both Part 91 and Part 135 operations. We contacted three, Ranger, Jet Source and TAC Air, across the US to find out how the attacks had affected their security, business and outlook.

Greg Bolles, business develop-ment manager at Jet Source, reports that the Californian FBO and charterer saw a “large increase” in business shortly after. “We were grounded from the Tuesday, when US airspace was shut down for general and corporate aviation. Part 135 operations were authorised to fly on the afternoon of Thursday 13th. For two weeks following that, aeroplanes were flying all over the country from here. Since then it’s slowed a little, but we are experiencing a higher level than this time last year.

Of the company’s in-house charter operations, he said: “We were able to dispatch all of our available aeroplanes to pick up customers and move people. The majority of additional passengers in the days and weeks after the attacks were people stranded because of chaos within the airlines.

“The biggest factor holding us back was crew duty times. If we could have flown the aeroplanes 24 hours a day we would have been able to do that, however we couldn’t reposition crews because the airlines just weren’t available for us.”

We asked Bolles if passengers passing through the FBO were nervous about flying: “There was some reluctance, however that was resolved when they realised they were the only ones on the aeroplane, so the risk of any type of situation was completely in their hands. I think the anxiety came from people still in shock over what did happen. People were just anxious to get home,” he said.

Business aviation is now being seen as a safer option for this reason, confirmed Bolles, and it is to this attitude he attributes the current heightened business. “Also, some of the spin-offs are that people who have flown with us are now considering purchasing aircraft. They absolutely see a need and demand for their own aircraft, where it’s justified.” Apparently the fractionals at Palomar Airport have seen a boom in sales.

“I think we have seen a trend back towards the normal. A big factor in the US is the economy. A lot of people are sitting tight now rather than travelling. They are more likely to do business where they don’t need to travel, for the short-term. However, I do think that overall the interest in corporate jets and charter will increase.”

In terms of security, things clearly have to change at FBOs, where passengers and employees had easy access to jet aircraft and the emphasis has been on speed and service rather than anti-terrorism precautions.

“We have made adjustments to security, and we are keeping the details confidential,” said Bolles. He did add, however: “We have a policy in place whereby we are authorised to search at our discretion. This was put in place on the September 12. We reviewed our security: We were happy with our measures, however we reviewed them to make sure there were no openings that we might oversee.

“In terms of business, things are largely back to normal. You don’t want to capitalise on a tragedy, we have done no promotions since the events, and we have looked at some ways to help out the people of New York. I think we will see that memories are short and people will go back to their basic line of business,” he contended. “Overall, the way we travel, in the US and internationally, will never be the same again.”

Kip Simanek talked to us from TAC Air in Nebraska. The FBO chain has, he said, instituted a lengthy review of security at all of its nine locations. He did not go into many specifics of this 32-point plan, but told GBJ that the main thrust of the initiative has to do with “recognition of the crews and their passengers and baggage, and not letting any vehicles onto the ramp unless they are escorted right to the aircraft.

“We are issuing parking permits to car parks up by the facility, even permits for the cars of people who are out of town so we know that the cars belong there. We have looked into checking pilots’ licences.

“If we have transient aircraft, and the crews are going to call for services after they are at their hotels, for example issue fuelling orders, we are issuing verbal codes to them, so when we get the call from them we can confirm it is actually them who wants the stuff done,” said Simanek.

“Most executive and celebrity clients understand exactly what has to be done”.

“We are not authorised to let anyone through our gate, they must be checked by an airport authority. We’ve got airport police and airport authority personnel, actually even some of the airport fire department have been utilised in security.”

We asked him how executive and celebrity clients have responded to the new measures: “Most of them understand exactly what has to be done. We have had some people say, ‘what are you doing to improve security?’

“As the events get further in the past, I think it might tend to get annoying for them: I hope that does happen because it will mean that everything is going like it should.”

Finally, we raised the subject of bodyguards: Celebrity clients often bring their own security, who, GBJ suspects, in the past carried weapons onto flights. We asked Simanek if TAC Air Nebraska would stop the carrying of weapons on business flights: “I have no knowledge of that, that is up to the airport security staff,” he said.

“The first couple of days [after the attacks] everyone was only concerned and hesitant to fly. The issue, at least in our company, was the state of the country, not the status of the FBO,” said Kip Bonar, president of Ranger Aviation at Kissimmee in Florida. However, it seems, the inevitable fallout of the attacks has been a move away from commercial air travel:

“We have seen a definite increase in corporate and fractional operations. My understanding is that most businesses which have been sitting on the fence as to whether to continue with airline service or to step into charter or fractional ownership, have moved into corporate operations.

“We have conducted several joint security meetings with both airport officials and law enforcement, and have initiated new procedures on the field that the other FBOs, I am assuming, are following,” he said.

These measures include checking employees’ backgrounds, visitor checks, and confronting people before allowing them onto the ramp. There is no longer access to anywhere on the FBO or airfield other than the main lobby without being stopped and checked.

“It helps that the sheriff’s department hangar and helicopter operations, that are operational 24-hours-a-day, are within 100 yards or so,” said Bonar.

“Typically in the past FBOs have been wide open for people employed in private businesses to have fairly easy access to areas on general aviation fields. There has never really been a big concern other than theft or vandalism, so there have been lights and fences, but now there are security personnel on duty even during the day.

“There is also additional security for the clients, and policies and practices that we have established and advised to all of our corporate customers including the large fractionals. They are in complete agreement of the new measures,” said Bonar.

“We have initiated these procedures as part of our future standard practice, they are not transient. I don’t think these attacks will ever become a memory. You can ask anyone what happened at Pearl Harbour and they will know. I think it has been dramatic enough to stay in the the general concern and cause continued vigilance,” he added.


Article : by Global Business Jet, October 2001
Included quotes from J. Mesinger