What keeps bankers awake at night?
When all panellists were asked to predict how 2018 will go, they were all highly optimistic about what 2018 holds – a perfect way to sum up the probably the most optimistic Corporate Jet Investor event yet.
“There is no reason for having a year as good as 2017. New models in the market will help, and the market is generally picking up and help strengthen residuals” says Marie-Laure Gassier, BNP Paribas.
“Nothing at all is stopping us underwriting more deals” says Andreas Schild, UniCredit Leasing Aviation.
“We will look at a new customers business plan and evaluate any risks in their portfolio. It is difficult to gauge what is going to happen in the future, but if it does happen, how we manage it is what is important” said Dave Labrozzi, Global Jet Capital, in reply to a question about financing a potential new customer who might be sanctioned by the US.
Beat Kaelin, UBS, says that it generally takes between three and four weeks from offer sheet to completion.
“It is not the time to worry, but it is the time to capitalise on opportunities. Certain aspects of the industry are stabilizing, and there are lots of stimulus, such as new models entering the market. This will undoubtedly encourage the market, which help us as financiers” says Jim Simpson, First Republic Bank.
“We’ve seen improvements in last 18 months in terms of inquires” says Alex Badran, Bank of America Merrill Lynch International.
Getting Older Gracefully
“We have seen customers spend up to 25% of the asset value on compliance” says Daniel Hall, Flight Ascend Consultancy.
“Financiers are now speaking to us to try and understand the potential problems the 2020 ADS-B mandate is creating. There are still parties unaware of the mandate, so everyone involved with an aircraft, from appraisers to brokers need to be communicating and checking that aircraft are compliant” says Hall.
A lot of older aircraft will not go through ADS-B compliance – but they will be used to help support newer aircraft by providing parts for maintenance, according to Brendan Lodge, JSSI.
“It could be a very new aircraft, but it is toast if it has been sitting outside and unused for too long” says Anthony Kioussis, Assest Insight.
“When aircraft sit inactive, rust builds, seals goes bad and hydraulics can stop working. After three months of being grounded you should look at long term preservation of the asset or ideally fly the plane” says Bob Wilke of Avrisk.
Investing in Business Aviation
“Making it easier to pay, change bookings and smoothing the transaction process as a whole will significantly grow the private aviation industry” says Dean Donovan, Columbia Equity Partners.
“The entry barriers in the tech industry are now low. In terms of investing into digital, the last few years have been the right time for BP Ventures to invest into the market” says David Gilmour, BP Ventures.
“The business aviation industry is technologically backwards. Before we invested in Stellar we asked why has this not been done before” Donovan said after being asked about Columbia Equity Parters’ investment in Stellar Labs. “The relative cost of aviation vs driving on a per seat cost; is extraordinarily high. When you take that reduce that cost, it opens up a totally new market. This is what we are trying to help the industry do with Stellar.”
“There is ample opportunity with owner-operators, but there is no question the sharing economy is here and it is here to stay.” says Shawn Vick, Global Jet Capital.
JetSmarter – Disrupting Business Aviation
“JetSmarter was a service that customers did not know they wanted” says Sergey Petrossov, JetSmarter Presient and CEO.
“If you do not incorporate jet-sharing into your business model, there is a chance of your business becoming obsolete” warns Petrossov.
“We’re interested in expanding to Asia and South America but it will be very expensive operating, so we would ideally look for a partner” Petrossov said after being asked about JetSmarter’s expansion plans.
“Satellites are far more sophisticated compared to 10 years ago. But we need to be adding more and more capacity to areas where we expect higher demand, such as the North Atlantic track” says Arno Vanderkraan, Inmarsat.
“We will see data rates go down in the next few months”, James Zanino, Gogo Business Aviation.
“The speed of the connection is what you pay for. It is important to do the maths by thinking about how many people will be on the aircraft at the same time and what they will be using it for to get an understanding of how much bandwidth is needed” says James Hardie, Rockwell Collins.
“Price is of interest, but the service is what really has to be important” says Vanderkraan.
“The key to keeping aircraft internet costs down is planning your entertainment. If you download a movie beforehand it will save you a lot of money” says Zanino. If you don’t want to worry about this, ‘all you can eat’ data plans are available for upwards of $20,000 per month.
Crime and Punishment
“Brokers are usually the weakest links in a transaction, as small brokers use their smartphone for almost everything. All of the information is on a single device, making these brokers an easy target”, says Bruce Marshall, AIC Title Service.
“If you attempt to login with just two of the most common passwords used, there is a have a 60% chance of gaining access to and compromising an aircraft’s internet network” says Michael Skou Christensen, Satcom Direct.
Siegfried Axtmann, FAI Aviation Group, talks about the importance of having an alert system for charter fraud, especially as it can be an incredibly lucrative target. “We need to establish a functioning alert system where operators can communicate with between one another when a wire transfer does not reach the destination account, or when a swift has been faked.”
Brexit means Brexit
“EasyJet has set up an AOC in Austria, in order to protect its EU traffic rights” says Mark Bisset, a sign that even commercial operators are preparing for a hard Brexit. Jeremy Robinson, Watson Farley & Williams, advises operators to prepare now, but to not make any irreversible decisions straight away.
Brexit means Brexit panel @CorpJetInvestor – it is not chaos, it’s complicated. Clyde&Co – long, tortuous path ahead for aviation
— Emerald (@EmeraldMedia) January 30, 2018
“If we aren’t careful, commercial aviation will take over the discussions. We need to step up to make sure business aviation’s voice is heard” says Mark Bisset, Clyde & Co.
“The UK and the business aviation industry in general would like to remain in EASA, but if the UK does, we will likely only be participatory and we will not retain voting rights” says Alan Cunningham, DLA Piper.
MINTS, BRICS and other markets
77% of delegates voted that infrastructure is the most impeding issue for growth in the MINT and the BRIC countries.
Brazil is coming back. It is the beginning of a recovery. Your phone will soon be ringing with deals from Brazilian clients – or brokers representing them,” says David Clark of Integris Aviation Group.
“We are seeing first time sellers in Asia and first time buyers from the US who are willing to consider Asian aircraft. I am willing to educate investors in mature markets on opportunities and happy to do this. It is an exciting time,” says David Dixon of Jetcraft Asia.
“Right now the Russian market is a bit calm, but we are favourably optimistic – especially about new aircraft models coming to the region,” says Ivan Vertennikov of ArcosJet.
“Out of 549 aircraft registered in Middle East and North Africa there are only 20 FBOs for these aircraft. We can see a lot of opportunities for expansion across the region,” said Adel Mardini of Jetex Flight Support. “We believe strongly needs more and more – helped by airport. The growth has not been where we thought it was but it will come – helped by more infrastructure.”
“Currency fluctuations are a big deal in Africa. If you are a South African buyer who looked at an aircraft in December it is 10% cheaper now.”
Are buyers getting the information they really need?
.@GuardianJet ‘s Don Dwyer says essential to have people who really understand pricing involved in transactions .@corpjetinvestor .@bizjetblogger .@guardianjet #cjilive #bizav pic.twitter.com/pD05XyGcyI
— GearUpTv (@GearuptvLizm) January 30, 2018
“Move you clients to the good brokers,” is how he ends.
There are a lot of questions about how much information should be availible. Dwyer says it is not simple: ” I love the idea of transparency, but education is most important. The details about each aircraft are often hidden in the weeds.”
“I am fed up of getting emails from brokers, saying ‘I am looking for a G550,’ we have three on the market – what is wrong with those,” says Dwyer. “We all know why they are doing it.”
“I would love to tell you I am the smart guy in the market, I am not,” says Dwyer. “The smart guys are our researchers who are really in each market.”
“Whether you own one CJ1 or you are Walmart, you need to be doing a fleet plan,” says Dwyer. “It is crazy not to be capital planning.”
We are back after a welcomed coffee break with a session from Guardian Jet‘s Don Dwyer on buyers getting the information they need.
Now it is time for morning coffee hosted by Societe Generale Equipment Finance. We will be back at 11:20 for a session on whether buyers are getting the information they really need.
Depreciation – the only cost that matters
Production rates cuts from OEMs, and a reduction on discounts for models at the end of production can help reduce depreciation rates.
Will we ever come back to the old ‘normal’ rates of depreciation? Duller thinks no. Upcoming avionics compliance requirements and low retirement ratios are keeping depreciation rates high
For the third session of the day, Stefan Duller of AvionMar takes the stage to discuss the single largest cost that aircraft owners face – depreciation.
AvionMar is also launching a new business jet leasing company based in Dublin.
Digitising business aviation
An overwhelming 80% of delegates voted that there are too many investors chasing the biz av digitisation market.
Jonny Nicol (Stratajet) believes that game changing technology is already in play within the industry.
Some 32% of delegates believe that the business aviation industry will be digitised, with 29% thinking it will become digitalized.
Up next, a hot topic – Digitising business aviation. Moderated by Richard Koe of wingxbizav the panel will discuss how new technologies can benefit users and operators, how we can better connect suppliers, and which parts of the industry will be disrupted.
Across the Pond
The biggest message to come from the panel? Anything we can do to increase transparency will end up benefiting the market.
Ford Van Wiese, Citi Private Bank, says a pilot shortage is imminent. The delegates agree, with 85% agreeing that we are seeing a pilot shortage.
“The industry is now crying out for some level of standardisation” says Johnny Foster, OGARAJETS.
Despite a few sore heads after last nights historic public house tour, delegates are ready to hear a panel on the US market moderated by Eddie Gross.
After a great breakfast hosted by
FAI_rentajet, day two of CJI London 2018 is kicking off with a panel on the US market.
Day two of Corporate Jet Investor London 2018 is about to start.