Whether you’re an industry service provider or a service user, how can consolidation work to your advantage, asks Patrick Margetson-Rushmore, Chief Executive, LEA. Here are some pointers…
Last year, London Executive Aviation (LEA) became part of the Luxaviation Group, the second-largest corporate aircraft operator globally. Why do companies do this, and how does it benefit business – both for the corporations and for their customers?
Industry consolidation is increasingly common throughout Europe – informally, through alliances, and more formally through mergers and acquisitions. Business Aviation companies, from operators and brokers to FBOs and maintenance organizations are opting to combine talents with erstwhile competitors and this trend towards consolidation is only set to continue.
Despite their differing approaches, the various proponents of consolidation in Europe see the same benefits in bringing businesses together. Most obviously, economies of scale offer significant potential cost-savings in areas such as fuel, FBO fees, insurance and pilot training – some of which can be passed on to the customer.
When operators work together, there’s also chance to achieve better fleet utilization and to access the aircraft of partner companies cost-effectively. As an example, since becoming part of the Luxaviation Group, LEA’s customers now benefit from access to a combined fleet of more than 250 business aircraft worldwide, meaning increased aircraft availability and a broader range of aircraft types.
For the operator, there is also the opportunity to pool expertise with peers who have faced similar challenges, whether in operations, regulatory compliance or marketing.
Getting it Right…
While the potential benefits of consolidation are attractive, there are some significant attendant risks which anyone entering a partnership should consider. The greatest danger when combining two or more companies is when their leaders do not share the same vision: it can quickly become frustrating and self-defeating if partners are pulling in opposite directions.
At the very least, decision-making can become painfully slow and put the companies at a competitive disadvantage.
The Business Aviation industry flourishes because it offers highly personalized services, so relationships – with aircraft owners, charter customers, brokers, FBOs and others – are fundamentally important to the industry’s stability and growth.
Larger organizations need some processes to become more structured and standardized, but consolidation must be done in a way that safeguards relationships, individual insights and the personal touch. Otherwise, the hoped-for advantages of scale may quickly evaporate.
Another vital success factor from a combined enterprise is that it remains financially stable. It is tempting for entrepreneurs to put a high price on their businesses, but partners need to be realistic in their pricing if consolidation is to work.
To seek a short-term personal gain, rather than create an even more prosperous long-term partnership, is to underestimate the nature of the business opportunity.
So, will Europe’s new Business Aviation groupings succeed? EBAA’s CEO Fabio Gamba (among others) believes their success is important, and sees the market as still being too fragmented. Personally speaking, my experiences to date with my new colleagues make me optimistic.
Integration processes will always have their obstacles; you must be realistic with your expectations and prepare for many new lessons to be learned, from both parties.
By way of conclusion, and specifically for those readers who may be considering whether to collaborate or merge with others, I make the following recommendations:
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