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. Last Updated: 07/27/2016

Jet Set Get Service Fit for a Billionaire

For MTJet Aviation fitted this Boeing 767 owned by billionaire Roman Abramovich.
The Swiss company that fitted the plush interior of billionaire Roman Abramovich's Boeing is planning to set up shop in Moscow by the end of the year.

As Russian businessmen increasingly buy their own planes and make use of executive jet services, a new high-end niche is opening up in the aviation industry.

"Our customers want us to be in Russia," said Markus Inaebnit, vice president of strategic planning at Jet Aviation, a Basel-based company that specializes in business aviation services. "The market is very important and demonstrates strong growth."

In the past two years alone, Russians have spent as much as $500 million on private jets. And the number of business flights booked by Russian executives is growing by 40 to 50 percent annually, hitting 15,000 in 2004, according to the Russian Association of Business Aviation.

Last year, Jet Aviation made headlines when it provided the luxurious interior for a new Boeing 767 acquired by Abramovich, the majority shareholder in oil company Sibneft and the owner of Chelsea Football Club. Now, Jet Aviation is looking to offer VIP and executive aircraft services to a wider range of Russian customers.

"The aircraft-handling situation is still poor, there is a lot to do in Russia and it offers a lot of opportunities," Inaebnit said in a telephone interview. "By the end of this year, we will definitely set up an office [in Moscow]. ... We are currently looking for a Russian partner and an airport to operate from. I am sure during the summer a final decision will be made."

Founded in 1967, Jet Aviation manages a fleet of more than 160 aircraft, clocking close to 60,000 hours in global flight operations yearly.

While Russia's client base is growing, Inaebnit said that the market was still 10 years behind that of Western Europe.

Currently, more than a dozen domestic business-jet management firms rub elbows on the market -- but most Russian-owned jets are registered and serviced abroad.

Foreign registration is the only feasible solution for owners of Western business jets, said Leonid Koshelev, board chairman of Jet 2000, a Russian business charter operator.

For one, there are no clear-cut regulations on how to register a private jet. And because of protective tariffs, importing a foreign-made jet would cost 40 percent more than the sticker price.

As a result, Koshelev said, most of the profits from business aviation end up in European pockets. Because foreign registration complicates statistics, various estimates put the number of business jets dedicated to Russia at between 100 and 200.

Sushi on Board

Most state and private corporations have their own small fleets of business jets.

The majority of jets flying for the country's business elite are made by Canada's Bombardier, France's Dassault, Brazil's Embraer and U.S. companies Boeing, Gulfstream and Cessna.

Gazprom CEO Alexei Miller and his deputies fly on two Dassault Falcon 900 jets, clocking up to 70 hours per month, according to Gazpromavia, the gas giant's carrier.

Aluminum magnate Oleg Deripaska flies in a Gulfstream 5, while Boeing 767 owner Abramovich passed on his old Boeing 737 to his wife, Irina. Mikhail Fridman, co-owner of Alfa bank, said recently that he chartered foreign jets for his business trips.

A few dozen domestically made Tupolevs, Yakovlevs and Ilyushins have been refurbished with VIP cabins, but most of them are limited to Russian routes because they fail to meet international noise regulations.

AviaEnergo, which arranges air travel for Unified Energy Systems CEO Anatoly Chubais, said it had two Ilyushin-62s and one spruced-up Tu-134, though the company was considering a foreign jet.

To meet the demands of Russia's jet set, a number of domestic aircraft charter and management firms have sprung up since the early 1990s.

NetJets, U.S. billionaire Warren Buffet's innovative business aviation firm, has also operated on the expanding Russian market since 2003.

"Business aviation has exploded here. We decided we want to be here or we are missing an opportunity," said Robert Dranitzke, communications and business development director at NetJets.

Under the NetJets scheme, customers pay for a share of an aircraft equal to the number of hours they need, in addition to a fixed monthly charge.

The Russian arm of NetJets services about 40 clients, Dranitzke said, with the average Russian client of NetJets clocking about 100 hours per year.

Dranitzke said that Russian clients did not differ much from their European colleagues, though they were perhaps a little bit more demanding.

"It is not just sushi they want -- but [sushi] from such-and-such a restaurant, from so-and-so chef," Dranitzke said.

Back in the U.S.S.R.

Jet Aviation is aiming to squeeze into the market by offering executive charter and aircraft-management and handling services. But the company is not really a newcomer -- during the Soviet era it refurbished a plane for the Communist Party elite.

In those days, only party bosses were allowed to cruise in their own planes -- with perhaps one notable exception.

During the 1960s, Armand Hammer, the American entrepreneur and friend of the Soviet Union, was allowed to fly to Moscow in his own four-engine JetStar.

On his famous visit to the United States in 1959, Soviet leader Nikita Khrushchev showed off his turboprop Tupolev 114. But after taking a flight on a Sikorsky S-58 helicopter with U.S. President Dwight Eisenhower, Khrushchev was so impressed that he bought two choppers for his comrades back home.

These days, President Vladimir Putin flies in a Russian-made Mi-8 helicopter as well as an Ilyushin-96 that was outfitted by a British firm.

With the fall of communism, however, Kremlin rulers lost their grip over private jets. In 1990, Avkom, the country's first provider of business charter aircraft, appeared. Avkom, which started out flying government Yak-40s before moving on to BAe-125s, at first catered only to foreign executives.

Now, more than 90 percent of the company's clients are Russian businessmen and other individuals, said Avkom chief Yury Bakhtin.

And while the company's early customers were limited to spendthrift oilmen and bankers, Bakhtin said, clients now include mid-level managers in a whole range of businesses, such as breweries.

"Imagine you have to go to Tyumen to check out an oil well, then go to Samara to inspect the refinery and then to Novorossiisk to see oil being loaded into tankers," Bakhtin said. "If you chose a scheduled carrier it would take you seven days, as most regional destinations are accessible only through Moscow. In a business jet, it will take you a day or two."

Abramovich Airways

Business charter jets are attractive because often they cost only 30 percent more than a first-class ticket on a scheduled flight, Bakhtin said.

Prices can range from $3,000 per hour on the popular Hawker 800 XP to upward of $12,000 on a Gulfstream 5. Compared to the expense of owning and maintaining a personal jet -- which can cost several million dollars per year -- business charter jets are a relative bargain. A private jet really only makes sense for those who fly more than 400 hours per year, Bakhtin said.

While it is unknown how many hours Abramovich clocks -- his Chelsea soccer club is located 12 time zones away from Chukotka, where he is governor -- that expense is not really an issue for Russia's richest man, whom Forbes magazine estimated to be worth $13.3 billion.

Jet Aviation made a splash in Russia last year when it refitted a brand-new Boeing 767 for the Siberian oilman.

Abramovich's 767 includes a kitchen and an area for the crew in the front of the plane, followed by a lounge, a room for security guards, two offices, a cabin for 36 passengers and a two-level bedroom, said a source familiar with its interior.

The jet is also fitted with two missile-deflecting systems, a luxury more often installed on top government officials' jets and a few commercial planes in Israel.

The contract for Abramovich was followed by more orders from Russian customers to refurbish jets, said Jet Aviation's Inaebnit, without revealing any names.

"In our line of work, you have to be more discreet; it is not a football club," he said.