CJI London 2022: Day one, Welcome to the new golden age (maybe)


A golden age for business aviation – driven by new entrants, particularly from high- and ultra-high net worth communities – illuminated the first day of Corporate Jet Investor’s London 2022 conference yesterday. The sunny outlook was marred only by worries about geopolitical instability, after the Russian invasion of Ukraine.

The conference began with the launch of the Business Aviation Crisis Appeal for Ukraine. Bart Demosky, Bombardier’s executive vice president and chief financial officer told more than 500 delegates: “It’s very early in this tragedy and we don’t know what the outcome is going to be. Until [the impact becomes clear], it is important we stay focused on our business, the humanitarian side of things and do what we can to support the people of Ukraine.”

Demosky added: “We feel it is important to do our part and Bombardier and the J. Armand Bombardier Foundation have jointly pledged to donate $150,000 to the Canadian Red Cross.”  The OEM has suspended all activities with Russian clients, including all forms of technical assistance and has pledged to adhere to all international laws and sanctions.

Bombardier is also deploying a risk mitigation strategy to strengthen the resilience of its supply chain. Measures included: the early detection of supply chain challenges, adding multiple sources for key imports and co-locating with key suppliers to “remove roadblocks before they occur”.

Demosky told fleet operators reporting “a record environment” with demand stronger than it ever before. Global flight hours had risen by up to 60% in response to new and existing customers. Business aviation’s improved penetration of high- and ultra-high net worth individuals (HNWI and UHNWI  with assets of $30m or greater) plus the return of corporate flyers promised to strengthen demand even more. Last year the number of people with such assets reached an all-time high of 600,000 individuals – up 10% year-on-year – with 75% growth over the past five years.

“It is a market that has been very under penetrated by our market over the years, with single digit market penetration. So, there is a tremendous market here for us to tap into,” said Demosky. Growth in this wealth category was forecast to rise by at least another 30% over the next five years to reach 100% growth over the decade.

Richard Koe, MD of WINGX confirmed there had been significant growth in Part 91 and Part 135 markets. Business aviation was 7% busier last year compared with 2019. This year activity is up 20% on 2019, but airline activity remains 30% down on 2019 levels.

The OEM’s continuing backlog and the scarcity of pre-owned aircraft continue to frustrate the purchases. Manufacturers’ now have an industry-wide 18-month backlog, as Covid-19 forced OEMs to purge over production, according to Bombardier.

Speakers on the panel titled Is this the golden age of business aviation? agreed with the proposition – notwithstanding global economic shocks. Rollie Vincent, JETNET IQ creator/director summed up the optimism. “Markets [for private jet aviation] are very strong – the best we have seen in a very long time. Pricing is strong: OEMs are struggling with supply chain challenges and the pre-owned market is the tightest we have ever seen.” The percentage of the pre-owned fleet available for sale has now fallen to 3%-3.4% compared with about 10% when the market was in equilibrium and between 18%-19% during the financial crisis of 2008-2009.

Oliver Stone, MD of private brokerage and advisory firm, Colibri Aircraft, reported a 30% increase in pre-owned deals last year compared with the year before and a 50% increase over pre-owned deals in 2019. “We have seen a definite surge of interest from first-time people,” he said. “There are a lot of people in the world who have the cash to buy an airplane. There are far fewer that have the cash flow to actually own one and there is a big difference between those two points.”

The difference was also highlighted by Brad Harris, founder and CEO, Dallas Jet. There is a lot of bad advice being given to first-time aircraft buyers, he said. “There’s cost and there’s price. Price is what it costs to buy and cost is what it takes to maintain and run and aircraft. Those are both big numbers and sometimes buyers don’t know the cost,” he said.

Last year increasing numbers of aircraft were sold before they even reached the market, according to Pascal Bachmann, Jetcraft senior vice president, Sales Europe, Middle East and Africa (EMEA).

The importance of buyers maintaining good relationships with sellers was highlighted by Hamish Harding, founder, Action Aviation. “Certain things can speed up sales – like keeping really good relationships around people and being flexible on PPI [pre-purchase inspection] rectifications.” Niceness was important. “Two years ago, you could be as procedural as you liked. But now only the nicest most flexible buyers were successful.”

There was optimism about the future of business aviation from Steve Varsano, The Jet Business founder – albeit tempered by fears about oil prices and inflation. “Long-term I agree this industry is here to stay and it will infinitely grow as it constantly improves itself. But I do think there is hiccups or bumps … There are plenty of things in the undercurrent so I’m not so confident for the next four to six quarters.”

Turning to charter, Per Marthinsson, Avinode co-founder and chief revenue officer said there is too much demand in the US market. “Those coming into the market are not getting the same service they were a couple of years ago, they are paying a lot more, it’s also very hard to find suitable aircraft. Usage is too high. Request levels in the US are up 100% year-over-year for the past three years.”

Demand adds pressure and it’s not just about delivering service, said Bernhard Fragner, GlobeAir CEO. “You have to maintain the aircraft. We are also seeing supply chains stretched. I don’t see this as recovering in 2022 or 2023, probably not until 2024, so this adds further pressure.” Combatting taxes, double digit inflation, lack of crew, fuel prices, up 25% in some areas, maintenance costs are challenging the charter market.

The compelling need to improve the public’s perception of business aviation was highlighted by Ford von Weise, Citi Bank, director and head of Global Aircraft Finance and Advisory Services. The dangers of failing to act to promote industry efforts to popularise Sustainable Aviation Fuel (SAF) and carbon offsetting schemes were revealed by luxury taxation in Canada.“If we don’t address our perception problem, look what’s happening in Canada – a 10% luxury tax on luxury assets including aircraft,” said von Weise.

Kennedy Ricci, president of 4AIR, warned there was “no magic bullet”. The solution would be found in a portfolio of measures including electric, hydrogen, SAF and carbon offsetting, he said.

The last words go to Andrew Young, AMSTAT general manager, who said business aviation would show its resiliency even after the current boom times end. “We know this is a golden age today. We also know that it will come to an end. But when things do go south, we will see the sustainability of this industry,” he said.