Fast approaching the 40th anniversary of its founding in 1979, German aircraft management and charter specialist MHS Aviation appears to have steadfastly navigated the inevitable ups and downs of the business aviation market. MHS has prospered with a combination of sticking to a few core services in which it can excel, while remaining highly flexible in the face of the extremely varied needs and expectations of its client base. In pursuit of what it characterizes as “healthy” sustainable growth, the company is perfectly willing to try new areas of business and is now looking to expand in the area of wet leasing aircraft as well as in providing private operators with support in complying with Europe’s new Part NCC rules.

Just ahead of this week’s EBACE show the MHS Aviation fleet consisted of 20 aircraft managed under its air operators certificate (AOC), with another five operated on a purely private basis. The most recent addition to the fleet has been a Bombardier Challenger 605, which joined the AOC earlier this month and is set to be joined by its larger Global Express sibling by the end of May. Other recent additions so far this year include an Embraer Phenom 300, a Challenger 300 and a Cessna Citation CJ2+. Last year, MHS became the first German operator of the Gulfstream G650.

According to CEO Steffen Fries, the company commonly is involved at the earliest stages of an aircraft acquisition, helping the prospective buyer to structure every aspect of the deal from arranging financing to settling on a country of registration and on what basis the aircraft will be operated. “Banks generally feel better about our involvement in managing the aircraft,” he said.

One trend MHS has seen of late is a greater willingness on the part of more owners to make their aircraft available for charter, with the exception, generally, of the very largest category of jets. No two management contracts are the same, with MHS willing to adjust these according to owners’ willingness to make their aircraft available for use by third parties. At the extreme end of the spectrum, one owner has instructed Fries’s team to take whatever bookings it can get on the understanding that he will simply be able to use one of the company’s other aircraft in the event of a schedule clash. This owner flies approximately 150 hours each year, and barely half of these are in his own jet.

 “Generally, charter rates and margins have been going down, and at the same time our dollar costs have become more expensive and pilots want higher wages,” Fries told AIN by way of explaining that charter activity is far from being the company’s main profit center, and that its main purpose is to offset costs for owners.

“We don’t charter out aircraft if we don’t see [the chance for] a reasonable rate and a profit,” said Fries, acknowledging that increased supply of available aircraft, and the fact that some charter operators are motivated to keep aircraft flying for almost any income, continues to squeeze margins.

In some cases, MHS’s management contracts specify fixed payments per revenue flight hour for aircraft owners to cover aircraft depreciation and fixed costs. Essentially, MHS takes a risk that it can leverage its expertise and economies of scale to ensure a margin on any given flight.

“If you are a desperate aircraft owner with a lease payment to make to the bank you must make sure that you fly, something like, 30, 40 or 50 hours [of charter] each month,” said Fries. “We don't follow that route because this is a just a spiral to the bottom [in terms of prices]. Today, we’re getting higher hourly rates than we were three years ago.”

According to Fries, there are now around 12,000 jets available for charter worldwide, resulting in more unused hours than was the case a few years ago and a potentially large over-supply of charter capacity. MHS does as much as 80 percent of its charter business with a regular group of direct customers or brokers. “They have to be able to rely on us to make the flights successful, and I see this as a partnership,” he said, indicating that in some cases he has repositioned aircraft even at a cost to MHS to ensure that valued clients get exactly what they need, when they need it.

In response to one of the potentially disruptive charter marketing models, MHS has integrated its fleet availability with Fly Victor’s online membership program via its Rockwell Collins Flight Operations System (FOS) software. “If a customer puts in a charter request in the [Fly Victor] app we see it in FOS two seconds later,” explained Fries. In his view, the complexities and many variables involved in charter operations mean that the process is always going to require some human interaction and discernment and the key to optimizing this is for operators is to have qualified personnel available around the clock to respond to flight requests. “This approach certainly brings a new energy and momentum to the market and it is leading companies to invest in new technology,” he concluded. “What we see is that lead time for charter bookings is dropping dramatically with customers expecting instant availability, making it all far less predictable and requiring even greater flexibility.”

In the spirit of concentrating its resources where they can be most effectively and profitably exploited, MHS opts not to conduct maintenance on its own aircraft. Instead, it prefers to depend on leading Part 145 providers such as Jet Aviation, ExecuJet Aviation and Ruag---even though the first two are also aircraft management/charter competitors.

That said, MHS does offer support to aircraft owners as a Continuing Airworthiness Management Organization to assist in compliance with the CAMO requirements of the European Aviation Safety Agency. Similarly, it has now started offering support with compliance with the new Part NCC rules, which essentially require purely private aircraft operations to be governed by rules that are comparable to those required of commercial operators. “As an aircraft owner you are better [off] handing over the operation for a small fee to us than implementing all the processes and systems just for your aircraft,” said Fries.

MHS also is receiving more requests to provide other operators with aircraft under short-term wet leases, with pilots, maintenance and insurance all included. With no fewer than 110 pilots on its direct payroll, the company is well resourced to provide this service.