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Is your private jet showing its age?

Oct. 23, 2012, Toronto - Times are tough, even for a business with the most posh of clientele. Just ask Kevin Hoffman.


October 23, 2012
By The Globe and Mail

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.

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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.”