International eXcellence Interviews Niklas Berg of Avinode
Yves de Contades talks to Niklas Berg, CEO of Avinode, the Air Charter Marketplace.
- Where did you grow up?
Gothenburg, Sweden
- How did you start in the industry?
It all started during my final year at Chalmers University of Technology back in 2001. Niclas Wennerholm, Per Marthinsson and I were looking for a business idea for our Masters Thesis. One of our friends Max Liebermann was working at Volvo Aero. Max was following the development of Eclipse Aviation and a new type of very light jet. He suggested that, in the near future, there might be a business opportunity in creating an online marketplace for very light jets. We had no prior aviation experience, but we liked the idea. It didn’t take long, however, for us to realize that we couldn’t build a business case on a new aircraft type that wasn’t yet on the market.
We started doing research on the existing private jet industry. The private jet market was very fragmented and utilisation of private jets was low. On average, an operator had 2.3 aircraft each, and a typical private jet was not flying more than 1.5 hours a day. Over 40% of the flights were repositioning flights with no passengers. It seemed that operators simply did not have an efficient way of marketing empty legs and real-time availability. At the time, it could take almost 24 hours just to get a firm quote. We believed that we could help the industry by providing a web-based Marketplace for buying and selling charter where brokers could search for any trip worldwide and get an instant quote, based on real-time availability of the aircraft.
- How did you start your company?
We built a business plan and designed conceptual screenshots of what the system would look like and how it would work. We showed these to potential clients and asked them to sign a Letter of Intent. The LoI was not binding in any way, but it helped us explain to investors that there was a real customer need. Early on, we found a few ambassadors like North Flying in Denmark and Jet Aviation in Zurich that really believed that this could work. With customers supporting the idea, and a good plan on how it would all come together, we went looking for seed capital. We got a few soft loans from the government. Eventually a media company in Sweden decided to make a small investment. The money was mainly used for software and market development. In Oct 2002, we launched our system with 100 aircraft in the database.
- What were the biggest challenges to overcome?
Reaching a critical mass of operators and brokers.
- How does the air charter business growth look for the next year in the different regions of the world?
The US looks positive after a few years of decline. We can see new aircraft entering the market and we expect a growth of 0.7% in flight activity. The EU market is in a slight decline, with exceptions in certain areas, such as Russia and Turkey. We expect to see flight activity in the EU region remain pretty flat during the next year, with only a marginal 0.1% increase. Latin America looks promising in Avinode, though we are not able to benchmark with any good sources for flight activity. Asia is growing, but is still at very low levels.
- What particular business trends have emerged recently?
We are seeing consolidation as a clear trend globally. There are fewer aircraft operators on the market, but still a similar number of aircraft. That goes for charter brokers as well. We have seen a decrease in the number of companies, but an increase in the number of system users who are brokers.
- What challenges does air charter face over the coming years?
We as an industry need to educate users, companies and governing bodies on private jets as a great tool for business travel. There is a misconception, today, that private jets are only for the rich and famous. The industry needs to market efficiency rather than champagne and glamour, in order to ensure long-term growth.
- What are the most important lessons learnt in developing the business?
Making the right decisions on what not to do, is really hard and really important.
- What is your favourite thing to do when not working?
Play golf, go for a run or just hang out with family and friends.
- What actions do you take to keep a certain quality of life?
Stay in shape, get enough sleep and always expect a positive outcome until the opposite is a fact.
- What are you working on now and what are your plans for the future?
My wife is expecting our first baby in 6 weeks. Making sure I find balance between work and private life, will be critical.
- Recommend a person, product or brand for excellence?
Dropbox (remote file sharing app)
