2018 – the business aviation year in preview
However you celebrate the New Year this weekend, it is humbling to know that you are following a tradition stretching back many millennia. Scottish archaeologists have found a lunar calendar dating back 10,000 years to the Mesolithic period (some 5000 years before the wheel was invented). Today’s Gregorian Calendar may only be from 1582, but it owes much to the Julian Calendar of 45 BCE.
This means that for thousands of years your ancestors have: set ridiculously ambitious resolutions that have lasted for a few days (“This year I plan to kill a woolly mammoth every day”); been charged extra to party for one night of the year (Stonehenge was built to help bouncers manage queues); and sat down and made false predictions about the year ahead (get ready).
Following this tradition, this is what will happen in business aviation in the next 12 months:
The real Trump Bump boosts US aircraft demand
The Tax Cuts Act, the biggest change to US tax in 30 years, has been widely welcomed by business aviation. There is a lot of optimism that 100% bonus depreciation on new and used aircraft (replacing five year write-offs), combined with tax cuts for corporations and individuals; and companies bringing profits back to the US will encourage aircraft buyers. This makes sense. In November (before the Act was passed) small business optimism reached a 34 year high according to the US National Federation of Independent Business. This is great news for smaller aircraft sales.
There are just a couple of caveats. First, although multinational companies are positive about the changes in the long-term, many will take a one-off hit when they repatriate profits. This may cause some large corporations to delay purchasing aircraft for a year. Second, it is worth noting that like-kind exchanges have been repealed (although new depreciation rules should off-set this). But, on the whole, the Act is definitely good news for aircraft sales. President Trump, the first president to own a business jet, has delivered for the industry.
The US market will become hotter – but the biggest increase in demand will be from companies that mainly do business domestically. Increased optimism in the US will help lift the rest of the world – starting with Europe.
The number of business aviation flights in 2018 will hit record levels in North America, Europe and Asia. Some of this will be driven by charter (particularly online brokers) and memberships but also by corporates, fractionals and individual owners.
There is a lot of talk about regulating pre-owned aircraft sales – and this was one of the key themes of CJI Miami. In reality, there are no more crooks in business aviation than other markets, but there are concerns that tough markets have increased the number of dodgy deals. The National Aircraft Resale Association, the National Business Aviation (NBAA) and other associations are keen to try and improve standards (NBAA issued a statement in December).
But it is a really complex issue. The yacht industry has registered brokers in states like Florida, but business jet brokers are far more dispersed. The other issue is that many brokers may just be too busy in 2018 closing deals to self-regulate. Things will start to change, but do not expect regulation or licensing in 2018.
At least three large business aviation companies are looking to float in the next 18 months so you can expect a lot of new investors to start looking at the industry. Expect deals to follow.
As generations of students have shown, nothing fixes the mind like a fast approaching deadline. At midnight on Sunday, aircraft that want to fly in the US will have exactly two years to have ADS-B fitted.
OEMs have continued to invest in the cycle but 2018 will see at least one genuinely exciting aircraft launch from an existing manufacturer.
Cryptocurrency prices are now being tracked in the mainstream media. Lots of charter companies will issue press-releases saying that they are now accepting Bitcoin, Etherium and Litecoin in 2018, but the really exciting developments will involve applying blockchain technology to aircraft records and transactions.
You are going to be sceptical, but there are a lot of very smart people working on new products with serious investment behind them. Many business aviation companies are well positioned to take part in this revolution – particularly because they know how to work in one of the world’s most regulated industries.
Thank you so much for reading this email. In 2017 some 1500 people attended one of our events and more than half a million-people read at least one story on our website. It is an honour to be part of such a fantastic market. On behalf of Louisa and the whole Corporate Jet Investor team, I wish you and your families a happy, healthy, prosperous and fun 2018.
I am off to join a gym, learn a language, take up a new hobby, eat more vegetables and get more sleep.