Dómhnal Slattery's new venture JetBird aims to emulate Ryanair's success by bringing the "low cost" model to business jet travel in Europe, writes Arthur Beesley in Geneva
Undeterred by the relentless upward creep in oil prices, financier Dómhnal Slattery is placing his biggest bet yet on the expansion of the market for private jet travel.
From 2009, he aims to introduce a "low-cost" air taxi service called JetBird that will guarantee clients a plane to take them anywhere within Europe. Not only that, but he wants to float the business by 2013. "Assuming the business works - the concept of low-cost executive jet travel - we think it will be a compelling proposition for public investors."
To start out on the journey there, Slattery has placed firm orders with Brazilian group Embraer for 50 new-generation Phenom 100 jets and took options on another 50. Total cost: $280 million (€221.55 million).
The objective is to transform executive jet travel in the same way that Ryanair and its rivals changed airline travel.
Slattery's message can be summed up thus: Ryanair doesn't fly executive jets but if it did it would be a bit like JetBird. What is more, he insists this can be done without compromising "on the high standards of convenience, personal attention and luxury that customers are entitled to expect from executive jet travel".
Building such a company from scratch will not be easy. The Phenom jets have not yet flown and JetBird will have to wait until 2008 for regulatory certification for the aircraft. Slattery is not yet 40, but he says he has the capital, financial backing and expertise to take on the dominant air taxi player NetJets and its colossus-like owner Warren Buffett. "We'll be at least 50 per cent lower per hour."
He may not be addicted to aviation, but he is something of a big beast in the money market that surrounds that industry. A former executive at Dr Tony Ryan's Guinness Peat Aviation, Slattery made an early fortune as a co-founder in 1995 of International Aircraft Management Group, which was acquired for a multimillion sum in 2001 by Royal Bank of Scotland.
Known these days as RBS Aviation Capital, the business is now the third-largest commercial aircraft leaser in the world.
Slattery's Dublin-based private investment vehicle Claret Capital, which manages more than €300 million in assets, owns 75 per cent of JetBird. The other 25 per cent is held by its Swiss management team, led by former Swissair vice-president Dr Hans Jörg Hunziker. Paul Geaney, a youthful former head of corporate jet finance at Royal Bank of Scotland, is joining Claret as part of the JetBird initiative.
Claret will put $45 million into the business between now and 2010: $5 million now, $20 million in 2008 and $20 million 2010. The remaining capital will be raised on the long-term debt markets.
Other current investments include a big interest in US and Irish real estate, a stake in the new Channel 6 television station in Dublin and ownership of the Clare People newspaper.
JetBird will be the launch customer for the Phenom 100, a fuel-efficient four-seater "very light jet" with a range of 1,160 nautical miles and "short-field" take-off capacity to use the smallest of runways. The company believes it can provide flights into 800 airports. JetBird also has the right to convert all of its order options to the larger Phenom 300 plane, a model that can carry six passengers to a range of 1,800 nautical miles. The business will be based initially in Geneva and Zürich, though further hubs are planned in Germany, Italy, France and Britain.
Three factors were behind the choice of Switzerland. Slattery says the regulatory regime there is excellent, the area is geographically convenient for all parts of Europe, and its proximity to northern Italy and Germany means it benefits from a "disproportionate" amount of private jet travel. Not only is the area highly affluent, but it is home to dozens of big corporations. Tax was not a consideration, given the low corporate tax regime in Ireland.
"We will provide an attractive alternative for existing executive jet users but also bring the executive jet travel experience to a market for whom it has been too expensive," he says.
Slattery is acutely aware of the disruptive influence of the oil markets. While acknowledging that oil is a risk, he says it was ever thus in aviation and adds that the technology in the planes JetBird will fly will enable it to deliver its pricing commitment.
The "basic business case" is modelled on a market in which oil is priced at $3.20 a gallon or $75 a barrel, close to the record levels reached in recent weeks.
That aside, Slattery says the "really big business challenge" will be to manage demand in the early phase of the service. Four or five planes will be introduced in April 2009, rising to 15 by the end of that year. The company will have to introduce the business and make a splash for its brand but contain the business to guarantee flights "on-demand" for clients at a flat-hourly rate and 15-minute check-in.
If NetJets charges $5,000 an hour, Slattery says JetBird will charge $2,500. Though conscious that rivals may emerge for such business, he aims for first-mover advantage in the market and will be the first to use the Phenom plane in Europe.
The "sweet spot" for the business is his estimation that 85-90 per cent of private flights take an hour-and-a-quarter or less. This lends itself to short turnaround times and frequent flights, a prime factor in the Ryanair model and one that is crucial in the air taxi model.
Slattery hails the Ryanair chief Michael O'Leary as a "genius". Uncertainties abound in aviation and there is a very long way to go to April 2009 but he sees plenty of potential to make his mark.
