CJI Americas Day Two: Private aviation ‘has a nice long runway ahead’

Mike Stones

NetJets and private aviation can look forward to “a nice long runway ahead”, as new customers join the industry prompted by continuing health concerns, reduced airline schedules and growing familiarity with the convenience of its services. That was the upbeat assessment from the company’s Patrick Gallagher, President, Sales and Marketing on the second day of Corporate Jet Investor’s Americas 2020 online conference.

“We will continue to see an influx of new customers coming into this space driven by commercial airline schedule reductions and some persistent health concerns post Covid,” Gallagher told delegates. “So, we think we have a nice long runway of an increase in new business.”

A key reason for optimism was that private aviation has failed to keep pace with wealth creation in the US and worldwide since the Great Recession of 2008. Covid-19 had compelled many of the newly-wealthy to re-evaluate the benefits of private aviation. “So many people who have joined us in the past few months have said: ‘I wish I had done this sooner’. That’s a reason for optimism for all of us. Those people will stick in the industry because we know how addictive the product is that we all sell.”

NetJets, the world’s largest operator of business jets and fourth largest airline, is currently operating at more than 80% of pre-pandemic levels. “We have seen an uptick in leisure travel. Coming into this, it was split 60/40, leisure to business travel. Today, we’re operating at probably 85% of pre-pandemic levels overall, with business travel having not returned at all. That shows what a large increase there has been in the amount of leisure travel.” It also indicated the potential for growth when corporate business returned. “We are already seeing people who bought cards in the spring, then flew 25 hours or more and are now graduating to shares. That’s always been our business model.”

‘Split 60/40, leisure to business’

Reflecting renewed confidence, NetJets’ plans to receive 10 new aircraft between now and the end of the year, which will bring its annual total to 31. That’s about half the planned number forecast in January but still probably more than the rest of the industry combined, said Gallagher. “Our forecast for the next year is 40 airplanes and we see that continuing throughout the next 10 years. So, that’s 40 airplanes or more [a year] over the next 10 years,” he added.

The prospect of a vast addressable market also excited Kenny Dichter, founder and CEO, Wheels Up. “We have roughly 100,000 to 200,000 people who are considered hard private flyers in the Americas,” said Dichter. “But the addressable market laid out by McKinsey [in a presentation earlier this year] is that there are 1.5m people who can afford to do it. That’s without adding sharing, social [flying] and by-the-seat, which adds another 10m who can afford to fly privately.”

Growing demand for charter and fractional programmes is a good sign for future investment in business aviation, according to Chad Anderson, Jetcraft President. “The numbers that we are seeing and hearing now is absolutely the seed that plants and becomes a bigger airplane or a whole airplane down the road.” It is a valuable opportunity for new clients to realise the real benefits of business aviation.

‘Not ready to step into a $56m aircraft’

Gregory Ryan, senior sales director, GE Aviation, joined the throng of voices over the two days of the conference predicting an influx of new clients selecting small business aircraft as their first purchase. “Over the next 12 months you are going to see a demographic shift concerning those are who are first-time buyers or moving up from fractional ownership or jet cards. And they are going to need folks like Mente Group or Global Jet Capital to steer them not only to the right aircraft, but also the right amount that they need to invest into that structure.” Smaller entry level aircraft will see the fastest growth because “new buyers are not yet ready to step into a $56m aircraft”. But mid, super-mid and large cabin aircraft would become popular as border restrictions lifted.

Joe DiLallo, senior account executive Business Aircraft Finance, TCF Bank, confirmed interest from new buyers. “We have two deals closing in the next two weeks. Both are for new owners – one for a mid-size and one for a super mid.”

Returning to Gallagher’s “nice long runway” for business aviation, panelists on the Sustainable Aviation Fuel (SAF) forum hoped the business jets using the runway would be powered by sustainable fuel. Mark Masluch, Bombardier Aviation director of public affairs and communications, said: “The rubber is hitting the road on uptake. This year has been a turning point. The industry is starting to see the fruits of labour over the past three years.”

Neville Fernandes, manager, renewable fuels for SAF producer Neste, was optimistic about the opportunity to scale up production. “It was only eight years ago that the first barrel of renewable diesel came into California,” he said. “We can easily replace 20% of the 4bn gallon market with sustainable aviation fuel and it could take only eight years.”

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