CJI London, Day One: Keeping owners and passengers happy
“We want owners to get out of their aircraft and feel happy with the concept of business aviation.”
Those words, from Don Spieth, VanGas Aviation Analytics, summed up the challenge facing business aviation at a time of rapidly rising costs, supply chain blockages, pilot shortages, tighter regulations and environmental protests (at least in Europe). The first day of our CJI London 2024 conference navigated a path through those challenges to predict a more stable global industry that could look forward to continued growth in the year ahead.
Despite the challenges, considerably more owners and charter and fractional clients are choosing to fly on business aircraft than before the pandemic, judging by the keynote opening session. Global business jet flights opened this year 3% below the level achieved last year and 5% below the peak year of 2022, Richard Koe, MD of market intelligence firm WINGX told the conference. But business jet activity was 19% up on 2019, achieving a compound annual growth rate (CAGR) of 4.5%. That compared with a CAGR of 2.5% between 2010 and 2019.
Last year fractional operators were “the big winners”, said Koe. Flexjet showed very strong growth and NetJets significantly expanded its fleet during the year. But flights for smaller charter operators faded during the year. Ultra long-range flights rose compared with the previous year. US airline flights continued to recover but lagged business aviation, achieving just 5% growth on their 2019 level. But commercial airline flights from regional US airports remained well down on previous levels. WINGX predicted “a modest increase” in overall flight activity for business jets this year.
New aircraft deliveries
There was similar good news about new aircraft deliveries from Rolland Vincent, creator/director, JETNET iQ. After an increase of only 2% year-on-year last year – due to supply chain challenges and certification difficulties – he predicted a significant increase this year of 14% in unit deliveries compared with 2023.
Pre-owned business jet deals in 2023 showed a “normalisation”, as buyers became “a little more picky than last year”, said Spieth. But aircraft on engine programmes commanding a 4% to 8% premium depending on their make, model and age. Transactions in the fourth quarter (Q4) of last year were stronger than expected with some spilling over into Q1 this year.
The market for new jet sales is strong, said Lannie O’Bannion, senior vice president, Global Sales and Flight Operations, Textron Aviation. “We are very optimistic about where we headed at Textron Aviation,” said O’Bannion. The manufacturer currently has 20 aircraft in production, he added. The manufacturer’s backlog now extended to between one to two years depending on model.
Equally bullish was Don Dwyer, manager partner, Guardian Jet. Discounting concern about this year’s US election deterring buyers, he acknowledged some impact from the 2012 election year but none in 2016 and 2020. “I just don’t see anything to slow down the train,” he said.
Along with many speakers, Zipporah Marmor, vice president, Aircraft Transactions, ACASS noted a transition from a sellers’ market to one dominated by buyers. “We are now trending towards a buyers’ market again,” she told delegates. During the pandemic sellers commanded the market as buyers rushed to acquire jets – sometimes without booking a pre-purchase inspection. But now buyers are becoming more discriminating about their purchases.
‘Getting a little fed up’
One factor tarnishing owners’ enjoyment of their aircraft was rising costs. Prices have climbed dramatically in the past five years and in line with inflation before that, said Darren Broderick, CEO, Asian Corporate Aviation Management (ACAM). “Before, during and after Covid, we’ve seen dramatic increases in pricing – particularly OEM pricing and supply,” he said. Fuel prices had also risen significantly. “Owners are getting a little fed up. But they have no choice of course.”
Price rises were often driven by supply chain shortages and Broderick did not discount an element of price gouging. “People are selling windshields at five or six times the OEMs’ original price,” he added.
JSSI estimated prices rises of 3% to 5% before Covid but jumping by 9% to 16% after the pandemic. “Owners come with a budget and they want a forecast,” said Fabrice Roger, senior vice president, Business Development, EMEA and APAC at JSSI. “They are ready to pay the right price, but they do not want to be fooled.”
The topic resonated with delegates, as 80% of respondents to our survey judged owners’ costs were rising above inflation. A further 18% agreed costs were rising but in line with inflation. Just 2% of respondents said their costs were not rising because they were locked in with suppliers. Asked to identify the most significant cost rises, more than half (54%) blamed maintenance costs and 27% highlighted labour costs. The costs of ownership were singled out by 12% of delegates and rising operating costs were identified by 8% of respondents.
As if rising costs and lengthening backlogs were not enough to worry about, the risk of cyber-attack to both aircraft transactions and operations, was intensifying warned the US Federal Bureau of Investigation (FBI). Global losses to wire fraud alone in 2022 totalled $10bn, said Kathryn Sherman, cyber-criminal assistant legal attaché, FBI. Losses over the past five years were estimated at $23bn. “I think about cybersecurity every minute of every day. It crosses borders instantaneously and we can’t fight it without partnerships around the world,” she said.
Cyber-crime, via wire fraud, ransomware attacks on essentials such as aircraft log books and other means, was becoming ever more sophisticated. But early declaration of the offence to authorities offered some possibility of recouping losses, said Sherman.
The first day ended with a session focusing on business aviation’s increasingly vocal critics. A total, or near, total ban on private jet flights was demanded by representatives from the pressure groups Possible and Safe Landing and the Green Party. All three objected to private jets based on their allegedly “pointless” carbon emissions and their perceived lack of fairness in providing exclusive travel for “multi-millionaires and billionaires”.
Urging a complete ban on private jets were Alethea Warrington, from the campaign group Possible and Zack Polanski, deputy leader of the Green Party of England Wales. Warrington said: “For fairness, people need to stop flying on private jets because the remaining carbon budget needs to go to people’s annual holiday or to visit family in distant countries around the world.”
Polanski said: “It’s time to call time on the private jet industry.” That was needed both to protect the environment and for reasons of social justice, he added.
Former airline pilot Todd Smith, now campaigning for Safe Landing, also wanted to see an end to private jet flights. But he added: “If you have to take an essential flight for good reason, hopefully love or science, do it but feel guilty.”
Responding on behalf of business aviation, Kurt Edwards, director general, International Business Aviation Council (IBAC) highlighted the sector’s role in linking remote communities, critical mission flights, such as air ambulances, and helping to generate economic growth.
So, were delegates reassured about the prospects for business aviation by conference speakers? A morning poll revealed 69% were fairly optimistic looking ahead over the next two year. A further 22% were very optimistic and 8% were pessimistic.