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Sun 2 Mar 2008 04:00 AM

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Empire state

Steve Hartley is surprisingly candid when comparing the Middle East's charter flights market with other regions.

Steve Hartley is surprisingly candid when comparing the Middle East's charter flights market with other regions.

The chief operating officer at Empire Aviation Group recalls a shareholder's "disgust" after chartering a business jet in Europe last year. Having invested in Empire, an asset management company that provides similar offerings, the stakeholder was unimpressed with the poor quality service outside the Middle East.

"Europe's market doesn't compare at all," Hartley says. "I'm not saying that none of the operators over there get it right, but those that do are few and far between.

When you are in the same organisation for 30 years you become a narrow thinker. Your thought process doesn’t change much.

"We are spoilt here and the service levels are extremely high. The locals demand and expect it - if you don't deliver they won't come back to you.

Despite enduring a miserable flight, the shareholder considered it a positive experience. Following his return, he urged Empire's management to capitalise by establishing the company's services in Europe. But with the business launched just last year, the directors have other priorities to address before international expansion.

Nevertheless, Hartley insists opening offices outside this region is a long-term goal. "Europe is an opportunity we are looking at," he says. "The US is another we are thinking about in terms of expansion, although that would initially be a sales office. From an operational point of view, we expect to have a European presence in the next 12 to 18 months.

Expanding the company's presence across the Middle East is also on the agenda, according to Hartley. Empire's directors have held talks with businesses and individuals about launching asset management services beyond the UAE. Potential locations include Oman, Kuwait and Qatar, although there are no concrete plans in place. "Interestingly, we have had approaches from companies and individuals outside the UAE looking to do something in conjunction with ourselves in other Middle Eastern regions," Hartley says.

"We are looking at other regional offices outside the UAE." Hartley admits the regional and international rollout is a long-term strategy, with the directors currently focused on developing the fledgling company. Empire was registered on June 16 after management secured an Air Operator's Certificate within three weeks of applying.

Some three days later, the company sold its first aeroplane during the Paris Air Show, while management signed a deal to distribute Hawker Beechcraft jets across the Middle East. It then sold a further six aircraft at the show, capping a hectic opening month for the founders.

Aside from selling aeroplanes and providing charter services, Empire also maintains clients' private aircraft. "Businessmen that buy planes usually don't have the time and knowledge to look after or crew them," Hartley says. "We crew the plane and manage the maintenance for the client, so he can phone the offices and say ‘I need a flight next Thursday' and off he goes. When he's not using the plane we charter it out, which pays for his standing costs.

Elsewhere, Empire's services include air ambulance, insurance and financing. The latter is a US$100 million fund, which covers clients' aircraft acquisitions.

Meanwhile, the insurance side is available to businessmen with private jets. So far, Empire has provided insurance for five to six aeroplanes since the policy was introduced.

According to Hartley, branching out from just air charter gives Empire the edge over competitors operating in the Middle East. He insists the business is unique, with no other company involved in asset management. "Buying aeroplanes, putting them out to work and hoping the income funds the cost of that acquisition is how some aircraft owners deal with air charter operators," he says.

"But we are slightly different because we don't want to be judge and jury - we want to sell aeroplanes and manage those assets on behalf of the owners. Companies tend to focus on air taxi or charter, with aircraft owners expected to have revenue streams that cover their standing costs when they are not using the plane. We have a charter division but it's a different model to most other organisations. The majority here are just charter operators.

Empire's "unique" business model has helped lure financiers, with Zableel Investments and Dubai International Financial Centre Investments injecting capital last year. Hartley says both companies are keen to establish Empire as a regional, and then international, player within the coming years. The investors' capital has already aided Empire's development, with some 23 employees on board and three planes recently added to its growing fleet.
Among the aircraft, Empire owns a Falcon 900EX and Challenger 605s. It also operates two Hawker 800XPs, the second of which arrived last month. This year, further aircraft deliveries are scheduled, with a Challenger 604, Hawker 850XP, Embraer Legacy 600 and Gulfstream G3 on order. By this summer, the company's management expect to have between 10 and 12 planes in operation, with capacity for a further 18.

The US is a region we are thinking about in terms of expansion. From an operational point of view, we expect to have a European presence in the next 12 to 18 months.

To coincide with fleet expansion, the company's management announced a deal with Emirates-CAE Flight Training at last year's Dubai Airshow. Since the announcement, Emirates-CAE has provided training, using Hawker 800/800XPs, to Empire's pilots. It has also supplied classroom tuition during the same period.

Elsewhere, Hartley and his colleagues plan to relocate from offices in Dubai Airport Free Zone to Al Maktoum International Airport. It's unclear when the company will move, with developers still working on the new Jebel Ali-based hub.

But Hartley is convinced Dubai Civil Aviation's year-end completion date is too optimistic. "Dubai Civil Aviation is talking about the new airport being operational by the end of 2008 but they have completed just one runway to date, which is very frustrating. At this stage, nobody wants to be out there as the lone wolf; you will only see people moving across there in 2010."

While expansion is high on management's agenda, Hartley insists rapid growth could be detrimental to Empire's health. According to the aviation stalwart, securing an AOC for one aircraft is often a long-winded affair. In recent months, a potential business partner has asked whether Hartley and his colleagues can arrange AOCs for several planes. Ideally, the company's management would be equipped to carry out the task, but Hartley admits it's a complex procedure.

"We know the amount of effort it takes to get one aeroplane online let alone an enormous fleet," he says. "We had a business dinner last year with various individuals and one of the questions was how quickly can we register 60 aeroplanes onto AOC.

"They could be registered fairly quickly, but it would be absolutely daunting from an organisational standpoint. Generating the manpower, creating the infrastructure to cope with the flight planning and dispatch would be tough. But that's the expectation: to go from humble beginnings and grow into something that we can all be proud of.

As a seasoned aviation figure, Hartley is used to helping develop growing businesses. Before joining Empire, he worked at aircraft charter and sales business National Airlines Corporation and aircraft manufacturer Hawker Beechcraft. Both roles provided invaluable experience that taught Hartley everything he knows about the industry.

But with several years experience under his belt, he left the company last summer to avoid stagnating. "When you are in the same organisation for 30 years you become a narrow thinker. You become set in your ways and your thought process doesn't change much. Also, the influences around you don't change an awful lot, so you're thinking becomes one dimensional.

Hartley says moving to a region with a strong aviation industry has injected new life into his career. With the Middle East awash with capital, Hartley is confident Empire will generate profits in the coming years. Whether that happens during 2008 or beyond is uncertain, but the company's shareholders anticipate returns on their investments. In the meantime, buying more planes and securing new clients are the immediate goals.

To that end, Empire's directors are continuing talks with regional companies about establishing partnerships. The company is also expected to announce more aircraft acquisitions involving Hawker Beechcraft planes in the coming months. Once satisfied with the company's development and market position, management will turn its attention to expanding across the Middle East before launching internationally.

The region here offers a huge opportunity," Hartley says. "It's a money environment with aviation in its infancy and a new organisation that steps ups to the plate, doing it properly with good offices and world-class service, is going to have a great future.

Hartley adds: "If you look at the UK, it's a small little blip with several thousand aeroplanes. China and the Middle East are growth regions, although China is restricted because the military still controls the airspace. Until that gets sorted you won't see the development there that could take place. But we are looking at expanding in Europe and the US, and potentially other areas after that.

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