Small fish among big sharks: PrivatAir goes bust
The 266 employees and several major European business partners of PrivatAir will not be in a festive mood this holiday season. The Swiss company announced on December 5, 2018, it has filed for insolvency in Switzerland and Germany due to multiple (unspecified) events that have recently affected its businesses.
“It is with great sadness that PrivatAir SA, Switzerland, announces today that it has filed to commence insolvency proceeding in Switzerland. Likewise its subsidiary PrivatAir GmbH in Germany has also filed for insolvency today,” an official statement from the company on December 5, 2018, reads.
PrivatAir, which was operating for over 40 years, states it was forced to file for insolvency due to “a number of events” that had greatly impacted the companies’ future business forecast and viability. The word “business” here refers to its multiple business ventures and international partnerships.
The company is made up of three key air and ground divisions: Scheduled Services, Business Aviation (encompassing Aircraft Charter, Aircraft Sales and Sourcing, Aircraft Management and Ground Services through PrivatPort, a joint venture FBO with Swissport), as well as PrivatTraining, which provides training for private jet operators and the company’s personnel.
PrvatAir’s main operating bases are in Geneva (Switzerland), where the company is headquartered, and Frankfurt (Germany) - the two countries where it had filed for insolvency. Other sources, however, also indicate the company has, or may have had, operating bases in Copenhagen (Denmark) and Brazzaville (Republic of Congo) where it was active in establishing and assisting the now defunct Congolese national airline ECAir.
What ties PrivatAir with Lufthansa, Swiss, and KLM?
You may not have heard of PrivatAir prior to this news. A charter airline, a business jet operator, an ACMI provider, etc.… what to make of it all? To understand PrivatAir’s business dealings and partnerships, the company should be regarded as an international business aviation group.
Founded in 1977 in Switzerland, PrivatAir saw and seized a market opportunity to work for aviation businesses, not just airlines. Being the go-to carrier for large business groups, the company was able to charge a premium while running (smaller) business jets, as SimpleFlying.com explains.
Over the years, PrivatAir had operated a fleet of Boeing 737s and Airbus A319s between its Swiss and German businesses, wet-leasing these aircraft to other airlines either on ad-hoc contracts or with longer-term agreements to specific destinations, or to facilitate the launch new routes.
The company provided ACMI services for Lufthansa, Swiss, and KLM – its biggest known European customers. It also worked with SAS Scandinavian Airlines, as well as TUI fly Germany, and Eurowings.
PrivatAir entered into agreement with Swiss in 2005, operating an upgraded Boeing Business Jet, the Boeing BBJ2, on the Zürich - New York Newark route, a six days per week service.
In 2005, PrivatAir was also contracted by KLM to provide a six days per week service on the Amsterdam-Houston route, after the Dutch airline replaced its 767-300 fleet in favor of the Boeing Business Jet.
But PrivatAir’s long-standing partner and perhaps its largest customer was Lufthansa. It used to provide the German carrier with long-haul narrow-body aircraft, serving a number of trans-atlantic flights on behalf of the airline since 2002. Having gained JAR – 145 approval from the Germany’s civil aviation authority in 2003, PrivatAir has worked increasingly closely with Lufthansa.
The first was a Boeing Business Jet operated on a wet lease basis on Lufthansa’s Dusseldorf - New York route. A year later, in 2003, PrivatAir added two more 737s to Lufthansa’s fleet flying the jets on a wide range of routes. Most recently, the Swiss company operated three 737-800s on behalf of Lufthansa.
What was PrivatAir’s Achilles’ heel?
Things have not been going that well for PrivatAir far longer than the difficulties experienced by the company “over the past few weeks”, as it notes in its December 5 announcement.
Initially, the services it provided proved to be highly successful commercially with customers requesting additional aircraft to be flown by PrivatAir on their routes.
However, the market has grown significantly since the golden days of the company’s operations, and it might be that it was just not able to keep up with the pace.
One point that draws attention to PrivatAir’s operations are the interesting (and quite luxurious) premium-cabin configurations on its aircraft. For instance, the Boeing BBJ2, flown for Swiss, is an upgrade on the Boeing Business Jet, featuring more cabin space with the capacity to fly up to 50 passengers in luxury (it is based on the 737-800 and 737-900ER series, essentially being a long-haul version of the 737-800). Swiss’ BBJ2 was configured with 56 lie-flat seats in a single business class cabin.
Over the years, the company’s fleet consisted of Airbus A319s and Boeing 737s. Most recently, however, PrivatAir had only been operating two Boeing 737-700s. Both planes, Boeing BBJs, (the BBJ is a 737 commercial airframe with modifications to provide for private jet service) were placed in storage since this October, when Germany’s civil aviation authority revoked PrivatAir’s German license.
It is unknown what will happen to other aircraft that the Swiss company had placed orders for. Back in 2012, PrivatAir ordered five Bombardier CSeries CS100 jets. It also had five A220-100s on order, and options for an additional five with the possibility to fit them with an all-business class configuration, AINonline.com reports.
Too small for the Big Fishes?
Coming back to Lufthansa, the Group eventually had to downgrade the leased aircraft from a business-only cabin to a business/economy class cabin layout until eventually its severed ties with PrivatAir earlier this year.
“In summer 2018 Lufthansa decided to suspend the cooperation for operational and commercial reasons until further notice,” Thomas Jachnow, Spokesman for the Lufthansa Group, told AeroTime.
Privat Air also operated a minor number of flights between Scandinavia and the U.S. on behalf of SAS. That collaboration ended even earlier, in the fall of 2017, as Freja Annamatz, Head of Media Relations at SAS Sweden noted.
So what does PrivatAir’s insolvency mean for Lufthansa? According to Jachnow, this would have no direct operational impact on the carrier, which is “currently reviewing its next steps” in light of the announcement.
Asked whether the carrier will now cancel its Pune - Frankfurt route, Jachnow indicated that Lufthansa will fly to Pune until January 31, 2019 with its own aircraft as an interim solution (interestingly, it is something it has been doing since November 1, 2018, prior to PrivatAir’s announcement).
“The length of the runway in Pune only permits approaches by short-haul aircraft, which is why Lufthansa operates the connection with an Airbus A319; a short refuelling stop in Baku is therefore necessary,” the spokesman said.
The Group’s subsidiary, Lufthansa Consulting, which is PrivatAir’s business partner, declined to comment.
Who will be left behind?
As for PrivatAir’s employees, now left without a job, the news must definitely sour the end of 2018. The company states it directly employs 226 staff across Switzerland, Germany and Portugal.
As for its businesses outside Europe, PrivatAir states it also uses the services of 65 crew members via an external contracting entity for its operation in Saudi Arabia, for the Jeddah – Riyadh business-class-only shuttle on behalf of national carrier Saudia Airlines and Saudia Private Aviation.