Doug Gollan from Forbes – Reports
The multi-private jet-owning singer Taylor Swift asks via song, “Are we out of the woods yet? Are we in the clear yet?” The melody was bouncing in my head as I made my way to Geneva for the European Business Aviation Conference & Exhibition late last month. That’s where the industry came face-to-face with a variety of its biggest challenges, from emissions to supply chains, charter technology and the financial viability of two of its largest players.
The American superstar repeats the questions several dozen times in the ditty “Out of the Woods.” While she sings it on stage during a recent concert, the website of a college kid tracks her aircraft flying empty for about six minutes from where it was parked, conveniently providing the media with her CO2 output.
That generates a mass of stories about why she is making those six-minute flights, even though she wasn’t in the airplane. The reason was certainly not that she wanted to pay more money to park her jet at a remote location.
Anyway, she boards her jet and heads to the next city, where tens of thousands of her fans hop in their cars and clog the roadways to pack stadiums and see her excellent shows. Can’t we just watch her on Zoom from our basements and hers?
Luckily, she wasn’t touring in Switzerland when climate protesters briefly interrupted the conference. They apparently damaged a couple of $50 million private jets that were on display. Their antics briefly closed the airport. Seven airline flights were diverted, thus spewing additional emissions.
Measuring Private Jet CO2 Emissions And Impact
For the record, all aviation is responsible for about 2% of global CO2 emissions totals. Business aviation’s carbon contribution to the worldwide total is around 0.04%.
The opposers focus on emissions per passenger. If they looked at economic contribution per arrival, which is around $80,000, they would find a single private jet brings about as much, if not more, money to the local economy as one from Ryanair.
Pascal Bachmann of preowned aircraft broker Jetcraft points out that the typical four or five passengers aboard a private aircraft have considerably less impact on the infrastructure in the places they visit than the masses.
He told a panel on the state of the industry that he looks forward to selling his first battery-powered airplane. It will likely enter service in business aviation, which is a test ground for many efficiencies that work their way up to the airlines. The industry needs to better tell its story, the broker said.
Can Taylor Swift Fans Solve Global Warming?
It turns out Ms. Swift and her masses of fans could play an important role in saving the planet.
According to Alisdair Whyte, the editor of Corporate Jet Investor, who was moderating an EBACE panel, there is a shortage of used cooking oil. It’s a main source of Sustainable Aviation Fuel, known as SAF, which could cut carbon emissions by up to 80%. He asked his audience to do their part by eschewing healthy living and consuming more fried foods.
If each Swifty joined in, we could be in the clear regarding climate. There was, in fact, a full Sustainability Summit during the show, and sustainability was a major discussion point at the OEM press briefings Monday, with a lunch that included the CEOs of the major business jet manufacturers.
Interestingly, the organizer of another bizav conference said that when her event was disrupted by protesters, they were invited to participate in a discussion with industry executives. The protestors declined.
It’s not going away. “We can laugh slightly at the protest … We have to take this seriously,” cautioned Oliver King, CEO of charter flight platform Avinode. “We need to be carbon neutral as quickly as possible.”
The industry is stuck in the middle, he said, noting, “We as an industry are not going to win any arguments outside.”
Chained Up Supplies
When it comes to supply chains, like the game of whack-a-mole, as you take care of one nuisance, another pops its head. In the end, the time you spend whacking slows down the process of completing whatever you were supposed to have done.
Customers, who pay a lot of money, like the protestors, are not that interested in explanations.
There are now tires and chips. Transparencies and missing components here and there are still slowing the works. So is the FAA in terms of certifying new aircraft.
Gulfstream president Mark Burns said the regulators are still “not fully back in the office.” He believes improvement in the supply chain could be six to nine months in the future.
Dassault president Eric Trappier said, “It’s worse than last year.”
When asked if supply chain issues for the operator were better than a year ago, Elit’Avia CEO Nicholas Houseman told the audience, “I would like to say yes, but it’s no. It’s a real challenge. But as the operator, you always take the blame. As an operator, if the aircraft didn’t return to service, it’s the operator that didn’t get the parts in time or couldn’t schedule the labor.”
“I think that’s going to continue for two reasons,” he added. “There’s still a shortage of technicians and we struggle to get pilots. Getting anyone to fill a role is hard, and then parts, you put pressure on the OEMs, and they struggle.”
Sizable maintenance, repair and overhauls (MROs) “are not working on weekends because they don’t have the staff,” Bachman said.
King noted, “We see the schedules of operators who were running very high utilization rates in 2021 and into 2022, having to pull back aircraft for maintenance, not always planned maintenance.”
In some ways, it seemed like a rerun of last year. Is the light at the end of the tunnel the proverbial oncoming train?
New Fractional Private Jet Options
The big news – NetJets’ agreement to buy up to 250 Embraer Praetor 500s – came before the conference started. Perhaps executives of the Brazilian OEM didn’t want to answer questions if there will be any left for anyone else?
There are some new fractional options in the wings.
Gulfstream’s G280, which will gain its first fractional fleet operator when the 2021 start-up Volato takes delivery of its first of the super-midsize jets next year, was on display.
Dassault is returning to the fractional market, where NetJets has been winding down the last of its Falcon 2000 fleet in Europe. While Trappier declined to specify the model or customer, he said there are active discussions he expects to conclude with an order.
Airbus Corporate Jets expects to achieve its first-ever order with the segment. Its President Benoit Defforge hinted it could end up with one of the major players, saying the ACJ TwoTwenty is complimentary to the ultra-long-haul offerings from both Bombardier and Gulfstream. “Some people want a Ferrari. Some people want a Rolls Royce, and some people want both,” he said during an industry lunch.
The next announcement, however, is likely to be from Textron Aviation. It introduced the Ascend, the flat-cabin floor follow-up to its popular XLS midsize aircraft. Fly Alliance has an order for the predecessor.
Private Jet Demand 2023
While it’s easy to get caught up in the trees and miss the forest in terms of assessing where the industry is with demand—lower than last year, higher than in 2019—Houseman gave a solid overview of the current charter market.
“The pricing is starting to come down,” he noted. As to how it plays out for operators, last year “we had so much demand we could pick the best trip. Now we are back to let’s just fill the schedule.”
King added, “If I look back 12 months, the biggest issue was a lot of brokers had to step into the market and secure dedicated lift, so you had a lot of aircraft that were out of the general charter pool being protected for customer demand they did not want to let down … I think you’ve seen a much more normal dynamic return now. As an industry, it’s almost amazing to think the challenge the pandemic presented both in terms of running an operation and the supply chain issues that came along with that. The miracle is operators did such a good job holding up the fleet and presenting a product to the market.”
The Digital Charter Revolution Is Delayed
If you are waiting for the on-demand charter market to be Uberized and offer Expedia-like booking services, be prepared to bring a healthy amount of patience.
Instant booking apps, for now, are limited to operators selling their own fleets and a couple of brokers that try to guess pricing so they don’t undercharge.
Avinode’s King, a former British Airways executive, believes the industry will get there eventually.
He points out that the broker and operator market is fragmented. The cost of technology—at least in the two decades we have heard promises of Google Flights-like services just around the corner—was a barrier for small providers.
In another session, a panel of brokers and operators said it’s unlikely the industry can even agree on a standard charter contract as they have in yachting industry. There was some optimism that there could be a standard format, which would make it easier for consumers to compare cancelation terms and ancillary charges that can be in the thousands of dollars.
I try to visit on-demand brokers when I have a chance, just to see how the sausage is made. When I visit operators, my first ask is to spend a bit of time at their wholesale desks to see the quote requests come in. It’s fun to watch the mobile phones ring and light up with text messages, an affirmation that the system, far from being digitized in the way many press releases would have you believe, very much relies on AT&T and WhatsApp.
The conference left me believing more than ever that, like in the broader luxury travel segment, the personal touch of competent brokers will remain the best solution in the on-demand market, particularly for consumers who aren’t experts in the more than a hundred aircraft types offered in the market, their various configurations and capabilities.
After all, the place where travel advisors excel is with the same UHNWs who fly privately.
VistaJet And Wheels Up
Another cloud hanging over EBACE was the financial state of Wheels Up, the third-largest U.S. flight provider, and the Financial Times’ expose on Vista Global, the most worldwide private jet charter company.
Together they represent over $4 billion in annual revenues and more than $2 billion in prepaid jet card sales.
While Wheels Up has serious work to do cutting its losses, which are both on the EBITDA and net basis, most of the discussions I had painted an optimistic outlook for Thomas Flohr’s group.
He offers a unique charter product that is used extensively by brokers and is a reliable option.
The fact is, for most of VistaJet’s flyers, the deposits they have—which can be broken into quarterly payments—may seem like a lot of money to us mere mortals, but they represent almost pocket change. They take a risk of getting stiffed at some point (VistaJet has been around for nearly two decades) in exchange for being able to book and cancel intercontinental charter flights between Asia, North America, Europe, the Middle East and Africa, interchangeably on as little as 48 hours’ notice without having to buy their own $75 million aircrafts.
Whether it’s a sustainable business model is open to debate, but for now, it fills a need in the market, and from that perspective there was confidence that demand for the product will continue.
What’s Next For Private Aviation?
It looks like calls by ministers in Austria, Belgium and Holland to ban or curb private jets were temporarily derailed. A couple days ago, EU Transport Commissioner Adina Vălean reportedly said she doesn’t intend to propose new measures aimed at business jets, although it’s clear that won’t deter the anti-aviation contingent.
To answer Ms. Swift, Geneva confirmed private aviation is still deep in the forest. In her song, “The monsters turned out to be just trees.”
For the industry, it remains in some type of post-Covid holding pattern.