CJI Americas 2020 LIVE BLOG: November 17th
Welcome to CJI Americas 2020!
While we are unable to meet face to face in 2020, CJI Americas 2020 Virtual will bring the industry together online.
With a focus on the changing business aviation landscape in the US, it will look at the growth strategies of some of the biggest US operators and have an in-depth look at the Brazilian and Mexican markets as well. To know more about the sessions, find our agenda here.
Over 450 senior level operators, brokers, OEMs, financiers, flight support companies, charter arrangers, expert advisers, appraisers, and many others active in business jet transactions will speak about the latest developments and connect with others across the industry.
You can follow a minute-to-minute coverage of the sessions from 17th November here:
Bringing the excitement back to aviation
Business aviation, in particular brokerage, has faired well in comparison to the rest of the aviation sector said Hamish Harding. In fact, the Action Aviation Founder would go so far as to as “we have been very lucky” to have weathered the storm so far.
“Business aviation is so much better off than the airline industry and various other industries, and broking happens to be a boom industry in an otherwise quite concerning world,” said Harding.
Meanwhile, fellow panelist, former NASA astronaut, and three-time space walker Terry Virts highlighted the importance of manual flying for pilots in order to maintain skill standards.
“I think it’s important to give pilots some manual flying at times, especially for training and if you’re going to practice stalls, but also to get you used to looking out of the window, seeing the runway and manoeuvring. I think that’s a skill that many pilots lose.”
A combination of automotive and aerospace industries
The future of air mobility – whether urban or advanced – will lie in the combination of the automotive and aerospace industries, says Yesh Premkumar, senior manager, Global Partnerships Urban Air Mobility, Hyundai Motor Group.
“We are going to have to use both to win. And I say that as someone who has been on both sides. Safety and certification from the aviation side are going to be required and innovation from the automotive industry. We just never had the need to combine the two industries before.”
Kirsten Bartok Touw, founder and managing partner, AirFinance, said she is worried about the aircraft OEMs ability to adapt to new technology. As far as the future of advanced air mobility investments, she said:
“We are focussed on cargo and drone delivery, autonomy AI and data mining. We have been focused on the systems that create the airspace and manage it. Also the vehicles which are going to fly, the infrastructure and how they’re going to communicate with each other technologically.
“We do need to see some near term successes and some ability to allow us to recycle the capital that has already gone into the industry and to encourage more venture capital investors to commit in the industry to help fund these the plethora of new start-ups that are out there.”
Can we relax about tax – what can we expect in 2021?
Nel Stubbs warns that an eye must be kept on changes to legislation which may now become more frequent going into 2021. The Vice President of Conklin & de Decker said that states are going to become increasingly aggressive.
In 2019 and 2020 there were over 12 states that made significant tax law changes according to Stubbs.
How tech can help operators
Progress in this field is leading to the digitisation of the cockpit and flight operations through the use of technology according to Thomas Sterling, director, Technology Services and Operations at Rockwell Collins.
“Every company is transitioning into a technology company of some sort and I think technology really is the key to creating a smoother flight experience. We’re seeing everything from connectivity services, access to data, automation, and actionable insights within our applications. What we really think it’s leading to is a digitisation of the cockpit and flight operations through technology within our industry.”
Selling Aircraft in 2021
Garett Jerde, Founder and Managing Director, JetHQ thinks that we haven’t begun to tap the pool of new clientele entering business aviation post-Covid.
“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 of the woodwork. They’re looking at it and they’re saying I can afford this because everybody thinks of G550 or a G650 or a Global 5000, I mean you can start a lot smaller to serve your purposes. I think those clients are going to continue to come out [of the woodwork].
“Then going back to the safety and social concerns, you can buy a 400XP for $1.5m, the charter companies are selling charter like its going out of style, and then you throw bonus depreciation on it and its really, really affordable for somebody where their safety is no longer a concern in terms of travel.”
The connected aircraft
Private jet owners and operators are looking for reliability and a seamless connectivity on aircraft wherever they are and whenever they fly, said Ray Villar, director, Market Development of Inmarsat Aviation.
“Customers will rely on the advice that they get from the aircraft manufacturer. So, it is key that they and the whole ecosystem understands how these systems work to the best advantage of the user,” said Villar. “They want to know: ‘is it going to give me the same user experience wherever I am?’”
James Person, senior director Global Business Development for Business and VVIP Aviation for Viasat said flexibility in pricing was important. “For our global Ku band solution, operators can start below $300,000 which includes hardware and labour to install. For the Ka band it is below $400,000. We have plans that start at $49.95 for service. And for Part-135 operators we have hourly plans as well.”
Matt Halsey, senior advisor, Business Aviation Product Management for Intelsat said: “The future is going to be about software defined satellites and networks and even terminals. We are not there yet but we will be able to track aircraft and terminals will no longer be on a proprietary network.”
Villar added: “The industry is looking towards supersonic jets as a new frontier. We are working on it at this point.”
Harnessing data: The power of a connected ecosystem
Alexandre Gagnon, Pratt & Whitney Canada’s Senior Director of business development and governmental affairs used to managed financial portfolio’s before he entered the aviation business. Drawing on his past experience, Gagnon sees similarities in how our industry is now harnessing data with the way banks did in the early 00’s.
“So now we have access to more and more data, high frequency data. We are now trying to play with that data and create what is expected on the market — [for example] on-demand transparency.
“So with a bit of perspective, data is not only going to influence the way we do our jobs, but also how we think and how we support our customers and [in Pratt and Whitney’s case] the engine behind that customer. Also, to identify, create and develop new solutions to create a new relationship with customer the asset and the whole ecosystem,” said Gagnon.
Getting it done when the world is closed
Technology is playing a key role in facilitating aircraft transactions during the age of Covid-19, according to Clay Healey, AIC Title Service, CEO. “If we are going to keep the market open in this new world, we have to accept that technology is the only thing that is going to be able to keep us moving. Without digital signatories and digital notaries, without being able to get things done through the computer, I can’t see how it would work.”
AIC Title Service had always introduced innovative technology, he said. Recently the company added an app for its transactional staff to use on their mobile phone, whereas in the past they had to use a computer.
While business is currently brisk, Healey predicted conditions could become much more difficult next year. “For three months, it was really tough but business has come back really strong. We have been extremely busy for the past three months. For the end of the year ,we are going to be pretty rapid – transactions are way up. We are getting numbers we’ve never hit before.”
But next year could be a “pretty trying time,” he told delegates. Healey feared the impact of additional lockdowns due to Covid-19, which were likely to slow the economy. Also, a new administration in the White House was likely to change the structure of taxation and probably remove the 100% deduction from aircraft buyers, which was “very beneficial” for buyers, OEMs and used aircraft dealers.
“Hopefully, the vaccines that are coming along will spread us out around the country,” he said.
– Mike Stones
Clay Healey, AIC Title Service CEO
Are aircraft deals too adversarial?
70% of delegates polled at CJI Americas said aircraft deals are too adversarial.
“We are looking for those who want to get a deal done, who we know are good listeners and responsive. It is really the past relationships which lets us know who is ethical and open.” said Suzanne Meiners-Levy, Advocate Consulting Legal Group.
Meiners-Levy also said it was important to remember that both sides of a deal are usually trying to accomplish a single aim. One way to do this might be to have a “clearing house for all the information”, said Janine Iannarelli, founder and President, Par Avion Ltd.
“The broker becomes the project manager in the transaction. The objective is whoever has hired you is the party that you represent and there are times that you have to be adamant about the way things will progress,” she said. This also means being the “bad guy” sometimes.
Owner of Aviation Tax Consultants, Daniel Cheung said aviation specialists are more like cardiologists and less like general physicians. And it is especially important to convey the right information. “In this day and age with all the first-time buyers, there is a lot of misinformation from buddies and country club members. You don’t really want to sugarcoat it, because nobody wins at that.”
Sentient Jet – What a difference a year makes
After the initial post-Covid boom new entrants are in decline according to Sentient Jet’s Andrew Collins, but he is witnessing another trend of more lower level executives now flying privately.
The President and CEO of Sentient Jet, said: “We are actually seeing it. Where you saw this first wave of new entrants, which has somewhat subsided, so in order for us to really breakout further in this addressable market space we are going to have to retain those clients. So a lot of folks talk about this big bang that happened [of new entrants]. You are starting to see the evolution [of new entrants] ebb over towards corporate America.”
Looking towards OneSky, the firm is working out a strategy on entering into the international market. It is going to be an exciting 2021 and 2022, where technology plays an increasing role, noted Collins.
Evolving business aviation trends – leading the way
A new breed of High Net Worth Individuals and Ultra High Net Worth Individuals is emerging to re-energise business jet sales, according to Michael Amalfitano. Embraer Jets, President and CEO. “This is leading to a much stronger than usual first-time buyer activity,” he told more than 500 delegates in his keynote address.
“Before 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,” he said. “We have also seen the pre-owned customers active and this market is heating up. This is for smaller class aircraft – at least for now.”
Michael Amalfitano, Embraer Jets, President and CEO.
What’s next for Latin America – Brazil
Brazil has the third largest Jet-A fixed wing business aircraft market in the world. The US has the largest market with over 11,000 aircraft, second is Mexico with about 850 whilst Brazil has around 750.
The Brazilian fleet is relatively old compared with the US, as Covid-19 has left many aircraft on the ground for significant periods. That could that mean the phasing out of a significant proportion of these older aircraft models.
Alexandre Marroquim, CEO, Good Winds Insurance Broker thinks the trend of flying older aircraft will continue to a point. “I think we will keep this fleet here for a while. But the problem is when you talk about the insurance side it’s tough and challenging to get full coverage for these aircraft, especially in Brazil.
“We are also at a tough moment because some insurers are no longer operating in Brazil or have moved out of the aviation segment. So, there is a lack of them. [Right now] It is challenging anyway, but when you talk aircraft 25 years of age and older it is very difficult to get insurance for these aircraft.”
North of the border – Canada
The differences between the Canadian and US business jet markets can be seen clearly in the light of Covid-19. Looking at the difference in flying patterns between the two nations Emlyn David, CEO, Skyservice said: “More so than the composition of jet ownership I think the flying patterns are the biggest difference between Canada and the US.
I think the number in the US is at 90% domestic for business jet travel whereas in Canada 70% originates going to or coming from across the border. That is very noticeable during Covid where you see FBO activities in the US coming back to near normal, whereas in Canada that’s not the case. So that’s the big difference.”
Aviation medicine in a time of Covid-19
The Covid-19 vaccine and herd immunity as ways to control the virus are a long way off, says Dr Simon May, MD, Flightcare Global. Mass distribution of the vaccine can be expected late in 2021.
The best ways for the industry to restart private and commercial aviation are if governments allow passengers to travel between regions more freely and increased passenger confidence.
The risk is even lower in a business aviation setting, where there is “natural social distancing” at FBOs and onboard aircraft. “Risk is pretty low for crew. They are probably more likely to catch the virus when they are going about their normal lives,” said May.
And now that there has been a breakthrough with the vaccine, there is reason to be more optimistic than before.
He believes that leisure and private aviation are likely to lead the recovery. A combination of testing, mask wearing, social distancing and advanced contact tracing will reduce the need for quarantine in the meantime.
The view from Wall Street
Investor sentiment for commercial aviation has been extremely bullish for the past seven to eight years, says Nick Fazioli, MD, Jefferies LLC, Aerospace & Defense Division.
Before the pandemic, the biggest issues affecting the growth of commercial aviation were the global pilot shortage and fuel, he said. Now, the lack of visibility due to Covid-19 has had a deep impact on airlines and the service supply chain.
“But no one saw a pandemic-driven recession coming, and it has really turned the tables on people’s view of commercial versus business aviation,” said Fazioli.
Despite a breakthrough with the vaccine, Fazioli says the demand for air travel in a post-Covid world is unpredictable. “If travel goes away because of Zoom, that is a massive impact on the business model for the airlines.
“On the other hand, this kind of disruption has investor more intrigued about the value proposition for private travel. The fact that you can move individuals and businesses in a more secure way is really resonating.”
It is more now more prudent than before to ask business travels to go private. “The sentiment is positive, but the supply of deal opportunities is still low,” he said.
Europe-US deals harder than ever
Aoife O’Sullivan, lawyer and partner, The Air Law Firm, told delegates: “You have to adapt. All of the tried and tested routes don’t necessarily work anymore. We had a transaction recently where the seller took the aircraft to Guernsey and they flew a PC-12 down to pick the pilots up to avoid them being quarantined for too long and the aircraft was basically left for the buyer to come and pick up.”
Last year, the whole team involved in the transaction would be there for closing – now that’s not possible. The time pressure has increased too, O’Sullivan said her record for a closing call now was four minutes.
Another challenge presented by Covid-19 is the difficulty in flying in designated airworthiness representatives (DAR) to aircraft locations. Oliver Stone, MD and founder, Colibri Aircraft, told delegates: “As a general rule of thumb a good DAR is as valuable to a deal as just about anybody else. A difficult DAR can upend everything at the closing.
“Good ones are in very high demand with a lot of aircraft to see. If you were to say come to my quarantined country to look at my one aircraft — they won’t. Why would they risk the rest of their business? So, it is a big issue right now especially towards year end.”
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