CJI London 2022: As it happened
For the first time in just over two years Corporate Jet Investor London is back. With expert speakers from across the industry and over 500 delegates in-person, we will be addressing the key topics and issues facing business aviation right now.
Any questions or queries please contact one of our Editors/reporters:
Mike Stones (MS) – [email protected]
Yves Le Marquand (YLM) – [email protected]
Conor Feasey (CF) – [email protected]
Business aviation 2022 – the OEM perspective
In our opening session Bart Demosky, executive vice president, Bombardier said the firm has been focusing on the aftermarket. The Canadian business jet maker had an estimated 38% market share last year and is predicting growth to a 50% share by 2025.
“Aftermarket MRO service is still very fragmented. I think it’s natural for the OEMS to take on more of that business. On any given day we are servicing 250 aircraft from our 5000-strong fleet,” Demosky told CJI London.
Is this the golden age of business aviation?
There has been significant growth in the part 91 and part 135 markets. Business aviation, as a whole, was 7% busier in 2021 over 2019. This year activity is up 20% on 2019, whereas by comparison airline activity remains 30% down on 2019.
Las year, small and midsize fleets were up 11% on 2019 levels. Large arisct movements did not recover but so far in 2022 they are up 20%. Ultra long range jets are flying 28% more than they were in 2019, according to Richard Koe, founder, WingX.
The cabin experience – evolved
By 2025 30bn devices worldwide will be reporting to networks, this is likely to cause more and more spectrum and latency issues.
Spectrum crunches are not uncommon occurrences in private aviation too. One solution to this according to Spectrum Network’s Jay Mcgrath. LiFi from a speed perspective is around 100x faster and in terms of bandwidth it’s over 1000x wider than standard wifi, said McGrath.
Both connectivity services operate on very similar usage protocols. “Whilst both LiFi and WiFi can coexist together in an aircraft,” said McGrath.
Also, LiFi has no RF signature whatsoever, meaning it’s physically impossible to tap into the network unless you are in the room with the LiFi. “Its super-secure technology,” added McGrath.
Managing pre-owned supply and demand
Are buyers overpaying for aircraft? Oliver Stone, managing director, Colibri Aircraft believes they are.
“Yes, but how do we judge that? Pricing is always a benchmark, but what do you judge it against? Historically, airplanes only appreciate for temporary periods of time,” said Stone.
“There are very limited examples of appreciation in the last 30 years. We are probably in the third instance of that right now.” The dot com bubble being another of those instances.
Tim Barber, Aircraft Sales & Acquisition EMEA & Asia, Duncan Aviation, said:“The speed in which people are putting offers on the table is a real game-changer at present.” One aircraft recently marketed received over 300 enquiries and was sold within one week of coming to market.
Can business aviation become sustainable?
Firstly, perception is everything, according to Ford von Weise, director, head of Global Aircraft Finance and Advisory Services, Citi Bank. “[The perception] is becoming more and more mainstream in some of the liberal media that business aviation is ‘fat cats in the sky’.”
Secondly, client expectations. As the purchasers of planes skew younger the are expecting us to address climate change fundamentally, said von Weise.
“[And] If we don’t address our perception problem, look what’s happening in Canada – a 10% luxury tax on luxury assets including aircraft,” added von Weise.
Charter 2022
There is too much demand in charter right now, according to Per Marthinsson, chief revenue officer and co-founder, Avinode. “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,” added Marthinsson.
Demand adds pressure. It’s not just about delivering service, said Bernhard Fragner, CEO GlobeAir. “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 inflation, lack of crew, fuel prices, increased maintenance costs are amongst the issues facing the charter market today. Fuel prices alone are up 25% in some areas.
The cost of maintenance is proving to be significant as older aircraft are being increasingly introduced to the sector. Mike McCready, senior vice president, Operations and Business Development, ARGUS International, said: “People just want to get in a take their trip, the aircraft in charter aged an average of 2 years in 2021.”
Setting market standards to speed up sales
Pre-purchase inspections seem to be getting slower and harder to secure, according to Hamish Harding, founder, Action Aviation. “It’s a huge problem finding slots at all, as well as keeping them focused on your aircraft when you do.”
For example, most of the maintenance facilities in the US are running at 100% or more over capacity. Whilst not all aircraft require a PPI, a buyer has to undertake an APU and a FOD borescope as a minimum.
On the subject of standardised paperwork for transactions, Johnny Foster, President and CEO, OGARAJETS, agreed with Keri Dowling, president, Air Law Office that the ideas and processes used in aircraft transactions are already “standardised” – even if the paperwork isn’t.
Aircraft registration 2022
With the Russian invasion of Ukraine as a backdrop to aircraft registration, speed and unpredictability are the watchwords at the moment – making it increasingly difficult to remain operationally organised.
“Compliance at this stage has been the major part of what our sanctions watch has been about,” said Liam Byrne, director of Business Development, Bermuda Aircraft Registry. “It is a challenge for businesses to work though that complexity.” Byrne said Bermuda is working very closely with our leasing companies to ensure they are prepared for repossessions and termination of leases .
As a side note, dual aircraft registrations are soon to be offered by the Russian government, which is a direct contravention of the 1944 Chicago Convention (Convention on international civil aviation).
Ireland: The next business aviation hub
The Irish Aviation Authority is beginning the process to enable it to facilitate group operations for groups with multiple Air Operators Certificates (AOC) – which means those firms can use pilots from other AOCs held outside of Ireland.
“Something we think is potentially attractive to the business aviation community,” said Diarmuid Ó Conghaile, CEO & Aviation Regulator, IAA.
Ó Conghaile added: “Talking about the leasing sector in general, it is still very dynamic and growing all the time. I don’t see why this wouldn’t happen in the business aviation community as well.”
Ireland has a level one security clearance from the FAA. It also has pre-clearance facilities in Dublin and Shannon airport.
Living up to customer expectations
Living up to customer expectations is becoming increasingly difficult for some. The key trends flyers are looking for , are “comfort and space,” said Chadi Saade, Airbus Corporate Jets.
“The space is really key and we are lucky to have the space that our customers require. Another trend is, people don’t want to compromise anymore. People want to live their lives like there is no tomorrow,” said Saade.
Another trend is creating a sustainable future. Saade said: “Every dollar that is invested in airbus is aligned with this vision [to make a sustainable, possibly hydrogen-fuelled aircraft by 2035].”
There is a lot of bad advice being given to first-time aircraft buyers, according to Brad Harris, founder and CEO, Dallas Jet.
“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,” said Harris.
On the future of business aviation, Steve Varsano, managing director, The Jet Business, said: “Long-term I agree this industry is here to say and it will infinitely grow as it constantly improves itself. But I do think there is hiccup or bump thats coming as soon as the media decides to tell us it’s going to come. There are plenty of things in the undercurrent so I’m not so confident for the next four to six quarters.”
Business aviation: The next challenge
The EBAA’s chief operating officer, Robert Baltus provided the association’s latest advice on how to deal with Russian aircraft and passport holders.
A key point is based around control. The term “control” goes well beyond who is the AOC holder and does not relate to the ownership and operational control rules, according to Baltus.
On fractionals, as long as there is a minority share in the aircraft you can still use it to fly non-Russians in Europe.
“Designing the perfect maintenance programme”
“When it comes to simplifying programmes, everyone in the industry has told us the simple thing is offer one comprehensive solution. That means you have preventative, scheduled and unscheduled maintenance all covered,” said Megha Bhatia, vice president, Sales & Marketing, Rolls Royce.
This means clients have no surprises in terms of faults with the aircraft, no surprises from a cost perspective and when it comes to selling the aircraft the programme also helps in terms of residual value, according to Bhatia.
Sustainable Aviation Fuel (SAF) for the future
“I feel good that I’m taking a plane fuelled with SAF, but the more I ask questions I realise thats not the whole story here,” said Eve Laurier, vice president, Communications, Marketing and Public Affairs, Bombardier.
“The big picture is SAF is important but there’s an OEM in Montreal which flies aircraft up to 5000 times for the tests alone using SAF that comes from the other end of the world,” added Laurier. SAF is produced in a limited number of locations globally and is often transported thousands of miles for delivery.
“It’s about keeping low carbon, low carbon,” added Tim Obitts, president and CEO, NATA.
Changes to US transactions
Against the backdrop of the Aircraft Guaranty Corporation investigation, David Hernandez, shareholder, Vedder Price, said: “Going forward I think we do what we should have done forever. Ask the proper questions, was it exported properly?, Were the requirements complied with?” Essentially, did you comply with US law?
“The one that will get Europeans in trouble is the BIS sanctions” says Hernandez. He warns industry stakeholders to “do your homework” on who they do business with in light of the Russian invasion. The BIS sanctions could get business’ in trouble as Russian companies will struggle to get parts without the US and will look to the EU and the UK for supply.
Bruce Marshall, executive vice president & general counsel, added: “You cannot be selective with KYC, you must check everybody. The government will act strongly upon any errors, that’s what we see from the Aircraft Guaranty Corp. [investigation].”
The state of business aviation
If you can fly private it makes sense to believes Freestream Aircraft founder, Alireza Ittihadieh.
“The schizophrenic behaviour the press created over Covid, I have friends, not clients, who will not travel. They will drive 8 hours instead of coming into contact with aviation. It has changed people’s psychology, so if you can afford to fly private you will,” said Ittihadieh.
Speaking about the lack of inventory in the industry at present, Ittihadieh said: “The problem is if there is no inventory there is no trade. But the good thing about the market is there is always airplanes coming onto the market. I think if you can get a cycle of about 6-9 months supply it can work.”
Stopping illegal charter in a charter boom
According to Glen Hogben, CEO, Air Charter Association, charter operators are often not the culprits of illegal charter it is more likely to be corporate parties that break the rules.
Informing the public, without scaring them off, is imperative in combatting illegal charter. Robert Baltus, COO, EBAA said: “Educating the public would be the holy grail”. Stopping illegal charter is a matter of educating buyers and regulators alike to ensure everyone has the same narrative.
Having a clear dialogue between regulators is key to improving relations. Never one to mince his words, David Kendrick, head of Airline Licensing & Consumer Issues, CAA said: “You may have the best regulations in the world, but if you don’t have the intelligence to carry it out, its no good to anyone.”
The connected aircraft
“When covid hit initially at the forefront of everybody’s mind was how do we get through this?” said Michael Skou Christensen, vice president, Satcom Direct. “I think business aviation showed its resilience and recovered very fast.”
One of the key trends that Satcom Direct saw before the pandemic hit centred around the increase in first time buyers and new business aircraft owners. “They are often younger and have a willingness to drive technological advancements which has sped up that evolution in the aircraft,” said Christensen.
Can the US boom continue?
Costs have been steadily rising over the course of this ‘boom’ in the US, with most of it being pushed onto the consumer.
Fabian Bello, CEO, Journey Aviation said: “Charter prices are going to continue to go up, but we are in a good place as an industry. We have been able to bring prices up to where they should have been [pre-covid]. Now people are happier and that’s very important.”
Giving his prediction for the next 12 months, Andy Priester, chairman and CEO, Priester Aviation said: “The demand structure is going to continue to wind up getting stressed. Our January and February of 2022 saw part 91 flights increase 72% year-over-year. Everyone who has been out on the sideline for the past year or so are now flying again.”
“At the end of the day for all us it’s a good challenge to have,” added Priester.
Financing when values are rising
The US market continues to be strong, whereas northern Asia has been slower. Before Covid that part of the world was an emerging market, now however we look to southeastern Asia and Europe said Robert Gates, head of sales, International, Global Jet Capital.
The last two years has seen business aviation begin to emerge as its own asset class believes Ford von Weise, director, head of Global Aircraft Finance & Advisory Services, Private Citi Bank. The pandemic has actually been fantastic for the business aviation industry, he added.
