How long will the good times last?
The activity we are seeing across the business aviation industry right now poses a few million dollar questions, one of which is how sticky is this? That is, to what extent will the people trying private aviation, or using it more, as a response to the pandemic, stick around when the pandemic ends?
The other is how sustainable is this activity in terms of strain on the industry and its supply chains? Records are being broken and set across the board and the fourth quarter has only just begun.
VistaJet’s US president, Leona Qi told Corporate Jet Investor (CJI): “We have broken records in many metrics, for example in North America over the third quarter [Q3] compared to pre pandemic levels in 2019, our number of flights were up over 43%.
Globally, VistaJet’s number of flights were up about 35% year-on-year (YoY) in Q3 2021 compared to the same period in 2020. And compared to 2019 the numbers are up 19%.
Looking to North America, with the busiest time of year traditionally for US operators and brokers on the way, Qi said: “North America accounted for 22% of VistaJet’s flying in Q3, the number of flights were up 44% YoY. And in the first half of the year, in the US, we tripled our customer numbers.”
These numbers were not something anyone expected after the onset of the pandemic, said QI. “I’ll be honest, I think last year Q2 2020, everyone in aviation and hospitality in general were worried if activity would ever come back given travel restrictions. And had you asked me then [would I have predicted this growth to pick up so rapidly and remain consistent] for North American in particular? We were able to do domestic flights and as borders opened internationally we were in a position to fly our customers.”
Yet activity did come back. VistaJet has experienced a 300% increase in new customers over the past year. And about 70% of enquires for its subscription model are coming from new market entrants, said Qi.
According to 46 International Aircraft Dealers Association (IADA) brokers, first time buyers have made up one third of all their aircraft transactions so far in 2021.
Pre-owned transactions are highly unlikely to even near the record-setting 520 transactions closed in December 2020. A pre-pandemic number of around 300 can be forecasted if activity remains at current range, said Brian Foley, founder, Brian Foley Associates.
He told CJI: “The buyer is being impacted by a lack of choice on the pre-owned market, with some percentage already having been driven to new aircraft.”
If there was sufficient inventory available for purchase, Foley estimates December 2021 transactions would be somewhere in the middle of 300 and 520.
On the operational side, Richard Koe, MD, WINGX, says the Part 135 and 91K market is booming in the US. Florida this month has seen more than a 50% increase in charter and fractional activity, whilst South Carolina is up more than 70%.
Koe said: “The challenge which is clearly emerging is capacity constraint; the leading charter and fractional operators in October 2021 are flying at annualised rates of over 1,000 hours a year, which may not be sustainable. With seasonal demand peaking in the next month in the US, it will prove very challenging to maintain service levels.”
For Richard Aboulafia, Teal Group, vice president, Analysis, whether the new entrants to business aviation will stick around post-pandemic is unclear. He told CJI: “Since it’s the fractional, charter and other non-owning segments that are seeing the uptick, the answer to this question is far from clear.
“I suspect some will stick with private aviation, and maybe even buy an aircraft, but until the pandemic truly ends, we just have no way of knowing.”
What is clearer is the unprecedented strain the industry finds itself under. In terms of demand for assets and services, supply chains are under immense strain. Qi said: “There’s definitely a supply chain shortage across aviation and I think across many sectors in our economy.”
However, Qi stressed the need for preparedness to cope with the situation. “When things took a downturn in Q2 2020, we made a decision and kept our entire staff globally because we wanted to ensure that when our customers were ready to get back to flying, so were we. From member service, from catering, from sales, from our fleet and crew, we kept everyone.”
Qi continued: “What we also did was put in orders for new aircraft too, so we have 10 new Challenger 350s coming. By year end we will have six Global 7500s in our fleet as well. So, yes we feel the impact, but we have always been ready for it.”
Aboulafia cannot remember strain like this in his time in the industry. While it is a question of supply and demand balance, he said there shouldn’t be a breaking point because sensible people will raise their prices. “Then again, you can’t account for irrational behaviour … just look at commercial aviation!”