Institutional Investor's Alpha Magazine - October 2008 - (Page 33)

Yacht charterers from the US and Britain make up 60 percent of all charters in 2007. The Swiss and the French account for approximately 10 percent of charter clients, and the Russians about 8 percent. The rest of Europe accounts for approximately 15 percent. The remaining 7 percent of the market is shared among clients from all over the world, albeit in limited numbers. Even the Middle East accounts for only about 2 percent of charter clients, although this can be explained partly by the fact that many wealthy Middle Easterners tend to be yacht owners rather than charterers, Monteﬁore explains. Flying in Down Times While yachts are generally for leisure, private jets are often a necessity for high-end business travel. Options for business travelers today include chartered jet services, jet card programs and fractional ownership or full-time ownership of a brand-new aircraft. “Strong order activity appears to indicate a business jet market that is holding up well,” says David Strauss, an analyst at UBS Investment Research. Results of its business jet survey of industry professionals, however, suggest that the market has come off from its peak and is likely to fall further. Despite a downturn in the US, industry professionals see a growing appetite for corporate aircraft in such overseas markets as Russia, Brazil and the Middle East. Dassault Falcon, for example, is ramping up a new service center in São Paulo to meet growing demand for its Falcon ﬂeet in Brazil that is expected to double, to more than 50 airplanes, in the next three years. “Increased international trade, a robust economy and a strong real are the biggest drivers for the growing business aviation market in Brazil,” says John Rosanvallon, Dassault Falcon’s chief executive. Falcon business jets, which burn 20 percent to 40 percent less fuel than all other large cabin airplanes, he says, have also become highly attractive during these difﬁcult times. “The cost of fuel continues to be a big factor in the process of acquiring a business jet.” Dassault Falcon receives orders for its jets from individuals, corporations and private air charter services. Earlier this year, NetJets Europe, a fractional jet ownership company, placed a new order for 20 Falcon 2000LXs, worth approximately $720 million. Fractional owners pay about $417,000 for a one-sixteenth share of a new jet and get up to 50 hours a year of private jet travel. But for less – about $127,000 – one can have 24hour access to a private jet (from the NetJets ﬂeet) by purchasing a Marquis Jet Card, instead. Cardholders get up to 25 hours a year of private travel. Ken Austin, executive vice president at Marquis Jet, says his company now has more than 4,000 card holders, who can “take control of their time and maximize their lives” by avoiding commercial travel options. London Executive Aviation (LEA), one of Europe’s largest private jet charter operators, sees two clear trends emerging in the charter market as the economy slows. At the top end, demand continues to be strong for large cabin private jets among very highnet-worth individuals, whose lifestyles appear unaffected by the economic malaise. In the corporate market, however, many businesses are downsizing to a new generation of small, four-passenger jets in order to conserve travel budgets. “The charter market looks to have come off its recent high, but demand is still well ahead of traditional levels. That suggests that people have really embraced private jet chartering as a time management tool,” says Patrick Margetson-Rushmore, chief executive at LEA. “What stands out in particular is that, rather than stopping ﬂying, businesses are downsizing to smaller, greener jets.” From top to bottom: Dining room of the Maltese Falcon luxury yacht brokered by Camper & Nicholsons; and Falcon 2000LX twin-engine business jet. October 2008 • Alpha Sponsored Report • 3

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2008

Institutional Investor's Alpha Magazine - October 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Process of Evolution The Good Guys: Israel's Champion Interview: Fast Lessons for Hard Times Cover Story: Industry Under Siege The New Hedge Fund Economics Good-Bye, Easy Money Caging the Shorts Strategies: Bottom Fishing Profile: Cult of Personalities Research Center: Alpha Awards: Eye of the Storm Alpha Bytes: Funneling the Chatter Unhedged: Commentary: Attention, Hedge Fund Shoppers

Institutional Investor's Alpha Magazine - October 2008

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