CJI Town Hall: ‘Airport issues boost bizav buyers and charters’

Airline cancellations and delays are causing airline passengers to turn to private charters and, in some cases, leading to aircraft purchases, according to speakers at Corporate Jet Investor’s (CJI) Town Hall. But soaring fuel and maintenance costs could cause aircraft to return to the market.

“Flying commercially [in Europe] is horrendous,” Steve Varsano, CEO, The Jet Business said at CJI’s Town Hall, ‘Who is on the front line of market change?’. Varsano said activity levels in buying jets and charter booking has increased in the past few months due to this. “People are going to the airport and just rolling the dice on whether their flight is going to get cancelled,” he said. “There’s not even an expectation that you’re going to go.”

Varsano said that problems with labour shortages, for example at Heathrow Airport, UK, are pushing people into flying privately. “[Heathrow] literally told operators to stop selling tickets and reduce capacity by 25% because they just don’t have the people to work,” he said. “They’re trying to slow down the activity level, which is pushing more people into flying in corporate jets. It is much more expensive than the US, it always has been, but people are still saying, ‘I’ve got to get there’ and are flying privately.”

Joe Moeggenberg, CEO and president, Argus International, said there is also higher demand for charters booked using jet cards, which is causing the price to go up. “A number of the large jet card operators are moving towards a more dynamic pricing model,” he said.

But lack of available aircraft and rising fuel and maintence costs could blight business aviation prospects, both speakers agreed. “If it’s at $12 a gallon at Teterboro, and you have an ultra-long-range airplane, you’re going to spend $1m more to fill your tank up per year,” Varsano said. “I don’t care how rich you or your corporation are, you’re going to be telling your people, ‘you better really need to take that trip’.”

Argus International completed a study of the North American market recently, and found that the industry was “going to run out of lift” if the market continued to grow at the rate it had been, according to Moeggenberg. “There were not enough airplanes to cover all the charter business we were expecting,” he said. “We did this study just as the fuel prices started sky rocketing. A lot of people [at the time] were first-time buyers who had been told by the management companies, ‘hey we can put as much time on your airplane as you want’. That’s not the case anymore.”

He added: “Now we’re starting to see things slow down, and I’m sure some of these new owners that have just joined the market [are going to have] some big disappointments here.”

“I don’t think it’s going to stay at the level we’re at now,” Varsano added, “but I do think that the level we’re used to going at, which is a very steady pace each year, has made a significant jump up and I think we’ll maintain some of that.”

First-time-owners may have “pulled the trigger too quickly” according to Varsano, due to the rising price of fuel and maintenance and inspection costs. Moeggenberg added that this could push those first-time-buyers into selling on their jets. “Once those new owners start to see a downturn in their revenue and get their first bill from their first inspection, those airplanes might be back on the market,” he said. “I think we’re going to see a little bit of slow down here and see things start to balance out again.”

The CJI Town Hall, ‘Who is on the front line of market change?’ took place on Wednesday 13th July. Watch here.