Fractional ownership of aircraft is on the rise within Canada's oil and gas sector as energy companies sell off their aviation assets.
Calgary-based analyst Rick Erickson estimates four or five large Canadian oil and gas companies share ownership of 10 to 20 planes, ranging from intercontinental and continental corporate jets to regional planes and turboprops. Five years ago, he adds, there might have been two energy-aviation firms and 10 years ago, there were none.
"It's been a way to reduce the cost (of travel)," says Erickson. "It's also been a wonderful way to, in a sense, hide the aircraft resource. Shareholders are notoriously fickle about the high cost of aviation and corporate jets are often seen as a luxury item."
Just as they farm out oil and gas plays to other companies, energy firms are joint-venturing on aircraft operations.
In the past, many major producers owned planes outright. But most companies now prefer to share ownership or use charters.
Peter Wallis, president and CEO of the Van Horne Institute, a Calgary-based transportation thinktank, observes that more energy companies appear to be sharing aircraft ownership. Looser federal regulations have allowed for increased fractional ownership, he adds.
"It's a rather cost-effective way, just owning a share of an airplane, to be able to have that airplane available to you," says Wallis. "Strategically, it's probably a very astute business move."
Erickson says some companies buy into fractional-ownership plans offered by airplane brokers while others pool their aviation resources. Participants pay a fixed amount over the year in return for a guaranteed number of flight hours.
"Many no longer have direct ownership of the aircraft," he says. "They may have subsidiaries that run (their flight operations). But, typically, what we're seeing - increasingly - is this same sort of condominium-ization of aircraft."
Most major airlines do not fly into and out of remote regions. Senior engineers often have access to corporate jets usually reserved for top brass, because often there are no air services available in a given location.
Private flights can also help companies attract and retain skilled workers.
Energy-firm ownership of planes fell out of favour during the Alberta economy's "mini-recession" in the early 1990s, says Erickson. "Their flight departments, by and large, have closed up. There was a time when Calgary had about 20-25 corporate flight departments. It's now down to about six or seven."
Ben Simard, operation control centre manager for Fort St. John, B.C.-based charter airline North Cariboo Air, which has a large operation at the Calgary airport, says his company has gained from energy firms selling off their aircraft assets.
"It's been pretty good for us, actually," he says. "Some of them have not necessarily sold off all of their aircraft, but have downsized their fleets. Because they have a fleet, when the aircraft break down, we are chartered to cover those flights for them."
Demand for air service has steadily increased - especially in winter - as construction ramps up on Alberta oilsands construction projects and northeastern B.C. activity escalates.
"We have to turn stuff down because we just don't have enough planes to fly them," says Simard.
Charters have also increased, as energy companies use their own planes to fly top executives more often.
"It used to be that you just ran the crew changes and stuff like that," says Simard, who works out of Calgary. "Now, because of the (oilsands) projects that they have in the works, charter companies run legal teams and (personnel) like that around, too. Before, the legal-team guys would just be on the company jets."
In addition to providing charters, North Cariboo and other charter airlines manage planes owned by oil and gas firms. Simard predicts such arrangements will increase in coming years.
"It's becoming more common, really," he says. "If you have a charter company who's looking after the aircraft and the training of the flight crew and everything else, then they can run charters and make more revenue (for the energy company) off the aircraft. It's not just sitting all the time."
David Pryce, vice-president of western operations for the Calgary-based Canadian Association of Petroleum Producers, says oil and gas companies are selling off aviation assets and developing long-term relationships with charter airlines primarily for cost reasons.
He says while shareholder displeasure may have been a factor in the selling off of planes in the past, it isn't anymore.
"Companies have found over time that it's too expensive to maintain (planes)," he says. "There's greater use of commercial (airlines.) We've got the competition amongst the main airlines that is serving the industry reasonably well."
"In some high-volume areas, there may be some corporate (aircraft) that are being used, but the tendency now really is to go to the contract providers to do that sort of work."
Pryce predicts energy demand for private flights will increase as oil and gas activity increases, especially in Alberta and B.C., and producers operate in more remote regions.
"What you might also see is - I won't call it a milk run necessarily - sort of a flight up to hit one or two centres along the way where companies are doing business," he says.
But some large producers, like Petro-Canada, still prefer to own their aircraft.
"We use it to transport our CEO and some (senior) executives to business meetings as required," says company spokeswoman Michelle Harries. "It is not used to transport employees to and from the oilsands. It is a small aircraft."
Petro-Canada does not yet need to move large numbers of employees from more southern points to the oilsands, because construction won't begin on its major project there for a couple of years.
Alan Boras, spokesman for Calgary-based EnCana Corp., says his company prefers to use a combination of major commercial airlines and charters and has never owned a plane.
Boras says executives and employees fly mainly in North America, between project and meeting sites.
But the company's international travel has declined considerably since EnCana stopped operating in Ecuador and the North Sea.
(Monte Stewart can be reached at monte@businessedge.ca)
