New customer for business aircraft, often choosing smaller jets, and the prospects for next year were the twin themes of the first day of Corporate Jet Investor’s Americas 2020 online conference.
A new breed of High Net Worth Individuals and Ultra High Net Worth Individuals is emerging to re-energise business jet sales, Michael Amalfitano, President and CEO, Embraer Executive Jets, told more than 500 delegates in his keynote address.
“This is leading to much stronger than usual first-time buyer activity,” he said. “Before [Covid-19] first-time buyers used to represent 10% to 15% of business jet deliveries. Now it’s approaching 50% in some classes – especially entry level jet categories.” A clear trend was buyers’ interest in smaller aircraft. “We have also seen the pre-owned customers active and this market is heating up, particularly for smaller class aircraft – at least for now.”
Hamish Harding, Action Aviation chairman, also highlighted the trend towards new customers. “Most of our buyers are new buyers – the corporates aren’t buying at the moment – but there are exceptions. Only 10% of the people who could buy private jets have private jets,” he said. Harding confirmed buyers’ interest in smaller jets worldwide, if not in the Middle East. “People do want a private jet, so they don’t have to travel with other people. The concept of buying a smaller jet, just to be on your own, becomes possible and that trend is driving the current light jet market.”
‘People do want a private jet’
Garett Jerde, founder and MD, JetHQ, was equally upbeat about the prospects for new entrants revitalising private aviation. “I don’t think we have even scratched the surface. There’s so many people that can afford private aviation and now they’re coming out,” said Jerde. He also detected interest in smaller-sized aircraft. “Everybody thinks of G550 or a G650 or a Global 5000, but you can start a lot smaller to serve your purposes.” New entrants could buy a 400XP for $1.5m, he added.
Joseph Carfagna Jr, President and CEO, Leading Edge Aviation Solutions, agreed buyers were focusing on small aircraft. “This upturn [in 2020] is different because it’s driven by smaller aircraft,” said Carfagna. “The first-time buyers back when the market was hot in 2007 were buying big airplanes, as their first airplanes. This is a different segment that seems to be stepping in because of necessity because they don’t want to fly on airlines. It’s not wretched excess, which is what we had in 2007.”
‘It’s not wretched excess’
Brian Proctor, founder, President and CEO, Mente Group, guides his customers towards considering price rather than aircraft size. “Instead of looking at a segment we should be looking at a price point. The market will continue to be strong at $20m and below for the foreseeable future. At that price point you can buy everything except for a Sovereign, a 650, a 7500. There are a lot of airplanes that you can buy at $20m and below.”
Retaining new clients was the focus of interest for Andrew Collins, Sentient Jet President and CEO and lead executive, OneSky. “The first wave of new entrants has somewhat subsided,” he said. “So in order for us to breakout further into this addressable market space, we are going to have to retain those clients.” He noted a trend towards lower level executives now flying privately.
Concern about the fate of 100% bonus depreciation on aircraft sales also focused speakers’ attention. Clay Healey, AIC Title Service CEO, worried a new administration in the White House was likely to change the structure of taxation and probably remove the 100% depreciation from aircraft buyers, which was “very beneficial” for buyers, OEMs and used aircraft dealers.
Carfagna thought 100% bonus depreciation would survive next year if the Republicans held the Senate. “If Republicans keep the Senate on January 5th, there will be no change and people will keep buying aircraft into 2021.”