CJI London 2022
Business aviation is emerging from the shadow of Covid into a new age of soaring demand, from new and returning clients, tempered only by worries about geopolitical instability and inflation. Words: Mike Stones
CJI Asia 2021 Conference Report
High hopes for growth in private jet aviation and concerns about Covid-19 focused attention at Corporate Jet Investor’s Asia 2021 virtual conference.
Shanghai is home to 26.32m people, including Mandarin-speaking staff from the Bermuda Aircraft Registry’s new office in the megacity.
THE PROSPECT OF a new golden age for business aviation – driven by rapidly rising demand from new and returning clients – illuminated Corporate Jet Investor’s London 2022 conference. The sunny outlook was clouded only by worries about geopolitical instability after the Russian invasion of Ukraine and inflation, more than 500 delegates heard.
“We know this is a golden age today,” said Andrew Young general manager AMSTAT. “We also know that it will come to an end. But when things do go south, we will see the sustainability of this industry.”
Bart Demosky, executive vice president and chief financial officer, Bombardier described the rising tide buoying up private jet aviation. Global flight hours had risen by up to 60% in response to new and existing customers, he said. Business aviation’s improved penetration of High and Ultra-High Net Worth Individuals (HNWI and UHNWI) – with assets of $30m or greater – (plus the return of corporate flyers) promised to strengthen demand even more. Last year the people with such assets reached an all-time high of 600,000 individuals – up 10% year-on-year – with 75% growth over the past five years.
The palatial Landmark London attracted over 500 delegates from around the world.
Bart Demosky, from Bombardier, described the “tremendous market” for private jet aviation.
“We are being asked very pointed questions about our policy on environmental and social governance.”
Stephen Friedrich, chief commercial officer, Embraer Executive Jets
“It is a market that has been very under penetrated by our industry over the years, with single digit market penetration. So, there is a tremendous market here for us to tap into,” said Demosky. Growth in this category was forecast to rise by at least 30% during the next five years to reach 100% growth over the decade.
Rollie Vincent, JETNET IQ creator/director summed up the optimism. “Markets [for private jet aviation] are very strong – the best we have seen in a very long time. Pricing is strong: OEMs are struggling with supply chain challenges and the pre-owned market is the tightest we have ever seen.” The percentage of the pre-owned fleet available for sale has now fallen to 3%-3.4% compared with about 10% when the market was in equilibrium and between 18%-19% during the financial crisis of 2008-2009.
Business jet brokers, operators, charter firms, maintenance providers, lawyers and other industry professionals all reported a rising tide of new entrants into private jet aviation. But not all new entrants were well briefed about the full costs of jet ownership – particularly operation and maintenance costs. It was the industry’s role to educate them, agreed speakers.
Oliver Stone, MD of private brokerage and advisory firm, Colibri Aircraft, said: “We have seen a definite surge of interest from first-time people. There are a lot of people in the world who have the cash to buy an airplane. There are far fewer that have the cash flow to actually own one and there is a big difference between those two points.” He reported a 30% increase in pre-owned deals last year compared with the year before and a 50% increase over pre-owned deals in 2019.
TED-style presentations, Q&A sessions and 24 hours of scheduled networking dominated the two-day conference.
US charter requests have soared 100% each year for the past three years: Per Marthinsson, Avinode.
“We know this is a golden age today,” Andrew Young, general manager with AMSTAT, told delegates.
Pointed advice on sustainability: “SAF will have a huge impact,” said Ève Laurier, Bombardier.
The gulf between acquisition and the full cost of ownership was also highlighted by Brad Harris, founder and CEO, Dallas Jet. There is a lot of bad advice being given to first-time aircraft buyers, he said. “There’s cost and there’s price. Price is what it costs to buy and cost is what it takes to maintain and run an aircraft. Those are both big numbers and sometimes buyers don’t know the cost,” he said.
Helping new entrants to understand the true costs of private jet ownership proved a key conference theme. “There are more first-time buyers than ever before and they require a level of education,” said Delray Dobbins, Electronic Sales, Platform Sales and Global Strategy, Pratt & Whitney Canada. Only 10% of buyers going into closing were asking for a statement of account. “That creates potential painful exposure points the day after purchase.”
Simplifying topics for owners was a prime responsibility, said Florent Series, chief commercial officer for Europe and general manager, TAG Aviation. “Our role is key to explaining and helping the buyer enjoy the experience. If not, they will get a bad taste, leave the industry and never come back.”
Rapidly rising interest rates, after years of historic lows, should also be factored into acquisition costs, said Felipe Ribeiro, founder and MD, Invicta Finance. Other soaring costs include fuel prices, which climbed even higher after the Russian invasion of Ukraine, and rising labour and parts costs.
Francisco Zozaya, chief revenue officer JSSI, agreed the importance of discussing major overhaul costs within the life ownership of the aircraft. If the new owner expects regular maintenance bills from the beginning, then it’s an “easier conversation to have later”. Not every aircraft owner should be an aircraft owner. “There are people we should advise not to own an aircraft and to consider charter from a financial standpoint.”
But there is already too much charter demand, particularly on the US market, said Per Marthinsson, co-founder and chief revenue officer 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.”
Sustainability topics were never far from many speakers’ minds. New entrants and returning buyers, particularly in the younger demographic, are increasingly interested in sustainability. Both groups are probing OEMs and others about their policies on Environmental, Social, and Governance (ESG). “This is one of the first questions asked of an OEM,” said Stephen Friedrich, chief commercial officer Embraer Executive Jets. “This is happening to us now. We are asked very pointed questions about ESG.” Typical questions include: where does your factories’ power come from? Are you using sustainable manufacturing methods? What is the policy on upcycling, recycling and renewable resources?
Improving business aviation’s sustainability credentials depended, at least in the short term, mainly on the widespread adoption of Sustainable Aviation Fuel (SAF) with carbon-offsetting schemes contributing. Key problems were the lack of availability and high price, both of which require remedies as the industry moves towards net zero carbon emissions by 2050.
Ève Laurier, vice president Communications, Public Affairs and Marketing, Bombardier, said: “SAF is important for the world. We [business aviation] have a bad rep[utation] – and that’s from a PR person.” While SAF is starting to become better known, much needs to be done to improve its availability, including book-and-claim systems, and lower its price. “SAF will have a huge impact on our industry and that control is in our hands.”
Kennedy Ricci, president of 4AIR, warned there was “no magic bullet”. The solution would be found in a portfolio of measures including electric, hydrogen, SAF and carbon offsetting, he said.
Meanwhile, the difficulties of finding quality pre-owned aircraft, with OEM’s backlog extending to two to three years, also focused speakers’ attention. Last year increasing numbers of aircraft were sold before they even reached the market, according to Pascal Bachmann, senior vice president, Sales Europe, Middle East and Africa, Jetcraft.
The importance of buyers maintaining good relationships with sellers was highlighted by Hamish Harding, founder, Action Aviation. “Certain things can speed up sales – like keeping really good relationships around people and being flexible on PPI [pre-purchase inspection] rectifications.”
Niceness was important. “Two years ago, you could be as procedural as you liked. But now, only the nicest most flexible buyers were successful.”
Corporate Jet Investor’s London 2022 conference took place at the Landmark London between March 7th to March 9th.
Model winner: Steve Page, Pula Aviation Services, collects his Bombardier 7500 jet prize from the manufacturers’ Leo Knaapen and Ève Laurier.
Liquid assets of a different kind focused attention during the CJI Pub Tour.
“There’s no magic bullet to cut private aviation’s carbon emissions.”
Kennedy Ricci, president 4AIR
Microphone in hand, Oliver Stone, MD of Colibri Aircraft, reported a surge in first-time jet buyers last year.
“Now, only the nicest most flexible buyers were successful.”
Hamish Harding, founder, Action Aviation
Irish opportunity: Aoife O’Sullivan, from The Air Law Firm, moderated the session dedicated to exploring Ireland’s ambition to become the next business aviation hub.
Breakfast buddies: Michael Amalfitano, president and CEO of Embraer Executive Jets, and Paul Cardarelli, vice president of Sales, JETNET, fortify for the day ahead.
On a roll, delegates relax over the gaming table.
The Registry of Aruba team making memories.
CJI London 2022: Sponsors
Stonebriar Commercial Finance
AIC Title Service
Bermuda Aircraft Registry
Boeing Business Jets
Global Jet Capital
Gogo Business Aviation
Hahn Air Jet Aviation
Pratt & Whitney
The Registry of Aruba
San Marino Aircraft Registry
Watson Farley & Williams
2-REG Aircraft Registry
The Air Law Firm
Clyde & Co
Insured Aircraft Title Service
McAfee & Taft
American Society of Appraisers
British Business & General Aviation Association
National Aircraft Finance Association
‘Now, a distinct and separate asset class’
Business aviation is emerging from the global pandemic as a “distinct and separate asset class”, according to Ford von Weise, director, head of Global Aircraft Finance & Advisory Services, Private Citi Bank. Over the past two years, Covid-19 has sparked a re-appraisal of private jet aviation by a range of communities including High and Ultra-High Net Worth Individuals (HNWI and UHNWI) and finance providers. Key factors have been positive PR from the pandemic and better access to finance. The pandemic had forced many with the means to fly privately, but who never had, to try private aviation, with its promise of greater Covid security. Slashed airline schedules also encouraged HNWIs to resort to private jet travel because commercial networks were no longer available.
Another factor was better access to finance led by companies such as Global Jet Capital and some banks, said von Weise (pictured). This was in addition to the rising tide of private equity investment and infrastructure funds into aviation infrastructure, charter and operations.
“It [the pandemic] has legitimised this industry,” said Von Weise. “It has moved from being a rich boy toy to its own distinct separate asset class. That’s a big deal.”