Times are tough, even for a business with the most posh of clientele. Just ask Kevin Hoffman.
Six years ago, his Montreal-based consulting firm, Aerospace Concepts, was flying high, working with buyers of top-of-the-line Bombardier Global Expresses – sleek, new private jets.
Not only were customers shelling out upward of $50-million (U.S.) for the jets, they could easily put in another $10-million to customize the interiors in ways befitting Fortune 500 CEOs, heads of state and international celebrities. They would hire Mr. Hoffman to shepherd them through the completion process, from the time they signed the order to when the jet was delivered.
At one point, Mr. Hoffman, an aerospace engineer who had previously worked at Bombardier developing and selling the Global jet, had 35 employees and he was managing 23 planes in various stages of completion, most of them Globals.
Then the credit crisis hit and the bottom fell out of the upscale market. Buyers cancelled or deferred orders. Many prospective customers decided they didn't need to trade in their four-year-old Global Express for new planes, choosing instead to hold on for a few more years. Demand from Asian buyers for new planes – one of the industry's few bright spots – didn't translate into new business for Aerospace Concepts.
As a result, Mr. Hoffman's business dwindled substantially. In fact, he's down to just one employee: himself. "It's been three tough years," said the 52-year-old Alberta native and father of seven.
Don't be fooled by the high-end trappings and billionaire clientele. Austerity can bite in the private-jet trade too, particularly for small businesses that, like Mr. Hoffman's, make a living in the industry. As a result, Mr. Hoffman is doing what any tenacious entrepreneur should do when the clients stop spending: he's following the money, and tailoring his service to provide what jet owners can afford.
That has led him to a new American base – Avon, Conn. – and a new strategy. Rather than working with buyers of new jets, he's now pitching his services to owners of pre-owned jets to refurbish and upgrade their planes.
"A 10-year-old Global Express is not exactly ready for the trash heap," Mr. Hoffman said. "It's still an extremely valuable product."
A typical private jet logs just 400 to 500 hours a year and has thousands of hours of service life to go by the time it hits the 10-year mark. At that point, every jet has to undergo an exhaustive "8C" inspection by flight authorities, which requires a complete dismantling of the cabin, overhaul of the landing gear and inspection of the structure and systems. That can keep a plane out of service for six to eight weeks.
While the jet is being torn apart, Mr. Hoffman suggests the owners put it back together with the latest advances in avionics, in-flight entertainment and updated designs and fabrics. In many cases, the original planes still come with VHS players, whereas passengers on new planes can upload movies from Netflix on the KU satellite band and communicate wirelessly with their iPads.
Mr. Hoffman is offering three upgrade packages to owners of pre-existing jets: a $250,000 to $500,000 "silver" upgrade that is little more than a reupholstering of the cabinet furniture and sidewalls; a "gold" package costing up to $3-million that includes new cabinetry and woods and could include a new floor plan for the cabin; and the full $8-million "platinum," which adds the latest avionics and certifications, as well as the most sophisticated cabin management system. "When you have a $10-million [interior upgrade] that's a megaproject," he said.
It's a major outlay, but a deal, Mr. Hoffman maintains, considering a 10-year-old Global sells for just $20-million, or $37-million less than the list price for a new one. "It's almost like a brand-new airplane" at much less cost, he said.
Others in the business agree with Mr. Hoffman's approach.
"We've always found in lean times people turn to refurbishment rather than purchasing" new planes, said John Gillespie, CEO of Flying Colours Corp., a jet completions centre in Peterborough, Ont. "It's a good long-term play. It's not recession-proof, but it's the next best thing."
To get the business up and running, Mr. Hoffman has been working to line up a completion centre and firm up contracts with suppliers (all of the completion work will be outsourced, and he plans to keep overhead and staffing to a minimum). With his new location, he'll be closer to key markets in the Eastern Seaboard and Savannah, Ga.-based Gulfstream, Bombardier's major competitor. He hopes to have everything tied up and ready to go for his official launch at the National Business Aviation Association convention at the end of October in Orlando.
"I have good relationships within the industry, so I'm getting good support," he said.
He's been taking on consulting gigs to pay the bills and is gradually moving his family down, and he is keen to launch the next leg of his career. Appropriately, he's calling his new upgrade offering "Janus," named after the Roman god of transitions and beginnings.
"This is a transition period, for sure," he said. "I hope to get this going rather quickly."
Refurbish or buy?
Kevin Hoffman's Aerospace Concepts is in the business of giving old Bombardier Global Express private jets a new look. Of course, if you're fussy about owning old toys, you can always plunk down for a brand new state-of-the-art long-range Global 8000, although, at a list price of $66.3-million (U.S.), it will cost a fair bit more than refurbishing a 10-year-old Global – and the wait will be longer. Here's a look at some of the specs of the Global 8000:
Passenger capacity: Eight to 19 (depending on configuration).
Range (at Mach 0.85): 7,900 nautical miles (14,631 km) – enough to get from New York to Hong Kong non-stop.
Maximum operating altitude: 51,000 feet.
Cabin length, width and height: 50.6 feet, 8.2 feet, 6.25 feet.
Engines: GE Passport Propulsion System with 16,500 pounds of thrust.
Earliest delivery date if ordered today: 2019.