Captain Vicente Serafim, CEO of Macau Jet International Co., Ltd. tells Business Daily about the shift seen in recent years in demand for private jet services, and the difficulties brought about by lack of infrastructure and government-mandated criteria of infrastructure use by private and business jets with commercial clients – all putting restraints on business growth.
When did your company begin operations?
Macau Jet was set up in 2006 as a jet management company. In 2008, we had the first management aircraft based in Kuala Lumpur and the second one based in Macau. In 2008, we got our certificate from the authority for maintenance and we got our first airplane. In 2010, we got our AOC, an air operator’s certificate.
Was it difficult to obtain the certificate in Macau?
Yes, of course. The standard requires a lot of manpower, resources and technology. The standard is the same. The way to achieve it is a bit difficult because [in Macau] we have an authority that sometimes does not facilitate much. The authority does not offer much help to have things properly done in a way that everyone knows what to do and when to do it.
What has been the major change for your company in the last five years?
Technically, the company has improved a lot by using the latest technology. In terms of business, Macau does not contribute too much with that. The people who came to play in the casinos were high rollers at that time, and they did not use much of the business jet services as they had their own aircraft to come in or the junket operators who engaged them to come here. The junket operators and casinos knew how much it cost to have their own aircraft. When the bad times came, they had to sell their airplanes. Probably, with the new settlement of the mass market, they may realize it is cheaper to use business charter companies.
What is your major source of revenue?
It is from the international business. The international business is for the ones who use private jets as transportation. For example, famous movie stars come to fly on business jets and those are the kinds of people who cannot fly with airlines anymore. Or they have their own private jets. We have around 85 per cent of the revenue from the international traffic of overseas people who come to use our service for business, and the other 15 per cent is from Macau.
Why does Macau only account for 15 per cent of your company’s revenue?
The major Macau economy is from the casinos and everything is related to the casinos. The casinos themselves have their own aircraft. They have money to buy their own aircraft. Also, the junket operators have their own aircraft. So they don’t come to our company because they don’t need it.
But only when their aircraft don’t work, they call us to fix them.
How competitive is the market here?
In terms of competition, Macau has a lot of competition, as Macau is an open sky. Everybody can come here and go. We don’t have any protection. The MSAR government does not protect the local companies in any way. The government does not give them the right to use infrastructure. For example, we don’t have a hangar to put our aircraft in or to fix the aircraft. The government should give the infrastructure to the local businesses in order to be competitive. If I had my infrastructure here, I could give services for people who want to come here.
How do you stay competitive?
What we are doing is what our other competitors can do. We don’t have any benefits at all from being a Macau company and having all the certifications because the Macau government is treating the industry as the open sky. We can only be more competitive if we have regulations just for this type of business by the authority. Secondly, if we can get access to the infrastructure here in order to produce services for those who require services – this is the way we can be more competitive. They have the infrastructure here available. The problem is the criteria for giving the infrastructure to those who are in need of it. If you look into who is using the infrastructure, there is no policy or criteria. The criterion should include being a Macau company and with certifications.
Have you faced any challenges running your business?
The difficulty is lack of infrastructure and the rules for this particular type of aviation. Macau does not have dedicated rules for this type of operation and this makes us not competitive. Another thing is difficulties with the infrastructure. We have a small airport and the airport is to serve local businesses. Of course, we need the people to come here, but mainly we need to have suppliers who are local companies with local capital to do the services. This could also be a joint venture with the well-known companies. The airport should give the infrastructure to the local companies to work with. What we see is the aviation authority and the airport company who don’t have criteria to give access to the infrastructure to the local companies. We end up not having the possibility of having the infrastructure in order to grow.
How have you brought this to the attention of the government?
We have made requests to the government on what we need in different ways. And so far we don’t see anything happening – and that is the problem. Definitely, we have to prepare for the future. There is potential to grow. We are the only business jet company that has every required certificate here, so we are capable of growing technically and commercially. But without infrastructure we cannot grow. We need a hangar to maintain our aircraft but we don’t have one. We need space to put our equipment and we don’t have it. We need a space in the hangar to set up the services we provide to our potential clients who come here with business jets, and we don’t have that.
Do you find it difficult to hire people in Macau?
We have different levels. On the technical level, it is not so difficult. Nevertheless, we cannot compete with the casinos because the casinos are the big companies. They pay well and they can pay much better than we can pay our employees. We only have people who don’t like to work on shifts, so they come here to work for a more relaxed life than working in the casinos. Basically, the government has to control the cost of living here, as we cannot afford to increase the salaries for the employees every year by 2 per cent to 5 per cent.
How do you promote your services?
It is basically the distribution system. Locally, we go from door-to-door as people who want to use this kind of transportation don’t want to be known. Internationally, we are part of the big distribution channel that does the promotional job.
Do festival seasons affect your business?
Locally, yes. But it does not affect the business clients who fly with private jets. Locally, the family people usually use private jets to go outside Macau for holidays.
What is your client base?
Now, it is growing with local clients flying with their families. Instead of going to Hong Kong to pick up an airline, it is better to charter an airline out of Macau. Especially at Chinese New Year or Christmas, we have more local people flying with us. It has been changing, from 15 per cent, now growing to 30 per cent in the family clients, and a very few clients from the casinos. In the past, it was not much, but now it has grown much more because the junket operators don’t have any aircraft as they sold their aircraft two years ago – so they come to us. The VIP is going down so we are flying more, because the junket operators don’t have aircraft anymore. They realized that having an aircraft wastes a lot of money. Potentially, in the future we think we are going to grow.
Are the casino operators direct competitors?
In a certain way, the casino operators are competitors because they are using their own corporate resources to fly commercially with their own clients, which is illegal. But nobody cares about that. If you have a company, you have your own jet. This is like the problem of Uber with the government saying it is illegal. They are private cars, which are not registered, doing commercial services. It is the same thing for a company with their own aircraft. But if you ask your clients to come and pay for the services that you provide and to sit in your aircraft, it is commercial and it is illegal.
Does the government know of these illegal practices?
For sure, the government knows about it and does not do anything because the aircraft are not registered in Macau. They are registered in the U.S. or Hong Kong. We have discussed this with the authority. The authority replied, saying that there is nothing they can do because the aircraft are not registered in Macau and nobody controls that. Those are our direct competitors because they are providing commercial services without being certified and authorized to do it. It is the same case of Uber.
How could the government prevent this?
I doubt the authority will do inspections into this illegal activity because this would have an impact immediately on the casino business. In fact, they are now our competitors because they are doing something that we could do and this could put our business down. Even the junket operators were using their private aircraft to fly their clients. The authority knows because we have discussed this issue with them several times over a long period of time. They don’t do anything and said it is very difficult. This is pushing us to grow quickly and create critical mass. We have to have public demand in order to readjust the means. So that is why we are looking more towards our international market.
Do you think the international market is sustainable?
The commercial market has potential to grow because we have big corporations coming to China. The international market is becoming more or less stable, but it doesn’t allow us to grow fast and the plan is to within five years have three more airplanes. At the beginning, we thought it was a good chance to attract some aircraft to be registered in Macau and it proved exactly wrong. So far, going again to the government is a wall that does not promote properly or have the right tools in the right place in order to convince the aircraft owners that Macau is a good place to stay and to have the aircraft. Over a period of 20 years we are still the only business jet registered in Macau and something is wrong. Macau is a very nice place and we don’t pay taxes compared to Hong Kong. We have one aircraft and one helicopter, both of them are registered in Macau. I think now there are about 22 aircraft in total registered in Macau. But if you go inside the hangars, you don’t see any aircraft registered in Macau inside. Macau has three hangars now, one of them is for the business jets in Macau but inside that hangar, you don’t find one single Macau-registered aircraft. You can go there and see a lot of airplanes that are not registered in Macau, but they belong to somebody in Macau. There is lack of standards here.
Will the expansion plan of the airport have an impact on your business?
We hope so. In my opinion, the expansion of the airport is very late and it should have been done much earlier. It is because when we talk about the expansion, we need to talk about the planning, approving the plan and then we have to start implementing the plan until you are ready to start selling your infrastructure. It will take about ten years. Don’t forget, they have an area they need to reclaim from the sea and this will take at least five years. One thing, we know the Hong Kong – Zhuhai – Macau Bridge will be ready next year. It will definitely have an impact on us and it will be in a good way. The bridge will give the chance to people so if they don’t get a slot operating at the Hong Kong airport, they can come to Macau. It will be one more chance for them to come to Macau not only by ferry or helicopter.
What future plans do you have?
In five years, we will need to have the infrastructure here because the company has all the certifications and capability to provide services. At the same time, we never know, as we [Macau] have only one source of revenue – the casinos. We don’t have other industries here. So it is always risky as you look at the casinos. They buy their own things.