The group purchasing organisation disrupting the industry
AVIAÂ, the latest ‘disruptor’ to join the business aviation fray twisting as the membership models at the operators themselves.
A growing number of commercial models epitomise the rise of ‘the disruptor’ within business aviation. Victor, Wheels Up, and Surf Air, have enabled easy, more affordable access to private charter. Membership models are becoming the norm for an increasing number of passengers. The latest ‘disruptor’ to join the fray is equally innovative and brings a twist as the membership model is directed at the operators themselves.
AVIAÂ is an international group purchasing organisation (GPO), pioneering the use of predictive analytics to deliver the benefits of group purchasing to the industry. The Anglo/American company, which has it UK headquarters at London Oxford Airport, and two US offices in Irvine, California and Park City, Utah, aims to reduce purchasing costs across the supply chain for aircraft owners, private individuals and operators.
It is the brainchild of Hangar8 founder Dustin Dryden and GPO expert Jim Hall who, as CEO Gillian Hayes explains, developed the concept. They were discussing the challenges of procurement and the amount of work involved. Hangar8 with a large fleet had extensive experience but Jim, who had owned planes throughout his career, said he’d never had the buying power. A light bulb went on as they asked the question “how can small operators achieve that buying power?” Subsequent research showed there was an opportunity for a business that offered group buying across the full supply chain, and so AVIAÂ came to be.
Aviaa’s collective buying power
Since then the growing team has set out to streamline the procurement process by using the ‘collective’ buying power of its members to secure the best rates for key operational items such as fuel, training, insurance, maintenance, among others.
An annual membership fee, starting at U.S.$2500 per aircraft, the fee depends on aircraft size, incentivises members to use the AVIAÂ experts for procurement needs. “We promise to return the full membership fee if we don’t save that amount for the member during the year so we are also incentivised to make sure we save the owners money,” explains Hayes. Since launch in January more than 100 tails have joined the community and current indicators suggest that each will save the fee, and more. “Some members use us for everything, others pick and choose specific services and goods provided by our growing portfolio of preferred suppliers.”
If a member has an existing affiliation with an AVIAÂ supplier they will immediately benefit from the group rate. This brings extra value to the member and ensures they continue to conduct business with the same supplier, but under the AVIAÂ umbrella. “Suppliers are happy to reimburse the amount to AVIAÂ rates. The wider market we bring them has more value than having to discount to an existing client, and our forward-thinking suppliers understand this. Transparency is part of the deal, as a community we want to create a level playing field.”
Broadening the market
As well as helping members the GPO model also rewards preferred suppliers. “Suppliers have been receptive as what we bring is not just about a commodity it’s about value. We can help suppliers deliver their value message, raise their profile, and broaden their market. AVIAÂ is as much about creating an interactive community as it is about procurement.
“The benefits of being part of the community go both ways,” she explains, “suppliers build new markets that they would not normally target, and we offer a platform to sell spare capacity. Training is a good example of this, if a company has space on a course they let us know and we can tell our members.”
Through analysing and understanding its member network, AVIAÂ collects historic and forecast spend data. Enhanced forecasting provides better insight into the way AVIAÂ members operate. “We analyse and establish pain points and look for areas where members can be doing better,” clarifies Hayes. Shared data helps suppliers sell to those with an apparent need, or to create commercial packages in response to developing market trends. This also helps them reduce customer acquisition costs. “Ultimately the data belongs to the customer and they can share what they want. The more they share the more we are able to help them, and our suppliers.”
The community is predominantly made up of US and European members with a 70% bias to the North American market. The business is also seeing sign-ups from the Middle East, with interest from Asia and South America growing. “We just received a request from an Indonesian operator wanting a one-stop-shop for procurement. It is an obvious win for new companies as well as existing fleets.” The supplier portfolio is also expanding. At EBACE it announced it had ratified deals with UVair, the fuel division of Universal Weather and Aviation, Inc. and business aviation connectivity, software and hardware provider Satcom Direct (SD), to deliver savings for its members. It is currently researching ground handling, hotel, catering, rental car solutions. International growth is inevitable but Hayes is at pains to explain AVIAÂ will continue to focus on its core markets until it has developed the right infrastructure to support other geographic areas.
Aggregate a fragmented market
Looking to the future AVIAÂ aims to continue aggregating a fragmented market, intelligently interpret data analytics, and build a worldwide community with similar goals. Hayes concludes: “We had a vision of a community working together and people are getting it. We know for sure we can service the market well, and can stand behind our membership fee guarantee.”