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Business Air News Bulletin
Business Air News Bulletin
The monthly news publication for aviation professionals.

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Stunted recovery in US business aviation could lead to consolidations
Flattened in April, business aviation was up to 67 per cent of usual in June, and by Independence Day in early July, flights were in touch with 2019 levels. Now it is a more mixed picture, according to WingX's Richard Koe.
Richard Koe has been studying the North American market with interest throughout the course of the coronavirus.
Read this story in our September 2020 printed issue.

According to WingX Advance MD Richard Koe, the US business aviation market came into 2020 on the back of the most successful year of aircraft shipments in a decade, with deliveries of business jets, turboprops and piston aircraft up almost 10 per cent on 2018. “With the US economy extending its record growth streak, the stock market at all-time highs, and an unprecedented range of aircraft coming off the production line, the US industry looked in fairly good shape,” he says. “The predictable cloud on the horizon was the political strife around presidential elections, and alarm bells for the world economy were increasing, global trade burdened with escalations in protectionism and geopolitical rivalry with China. Yet nothing could have prepared market analysts for the devastating effects on economic growth catalysed by coronavirus, with the global travel industry in the eye of the storm, and seemingly no shelter for business aviation either.”

Sure enough, the business aviation sector has taken a huge beating since the pandemic materialised in March. New orders, pre-owned transactions and aircraft deliveries were initially frozen, and the slow thaw has seen at least 30 per cent drop in volumes. Business aviation activity fell to just 3,000 movements a day in April, with Shelter in Place restrictions shutting down all but emergency travel. And yet the industry has proven to be quite resilient, certainly in contrast to commercial aviation. Flattened in April, business aviation bounced back to 50 per cent of normal activity in May, was up to 67 per cent of usual in June, and by Independence Day in early July, business aviation flights were in touch with 2019 levels. In the meantime, commercial aviation capacity was almost all grounded from the get-go, schedules at barely 20 per cent of normal through early summer.

“The reality-check for bizav came in mid-July, as the pandemic, which had focused its fury on the East Coast, broke out across the Sunbelt States, with the easing of lockdown measures then swiftly reversed in California, Texas and Florida,” Koe continues. “By mid-summer, initially buoyant business aviation activity in Florida was in retreat, and the West Coast was stuck at around 80 per cent of usual flight activity. The hard-hit New York and New Jersey regions saw demand stagnate at some 40 per cent below usual. The only places to see robust demand since then are the ‘getaway’ States, with Colorado, Montana, Wyoming, Idaho all seeing record visitors flying in by business jet. The ‘escape to the hills’ mentality was no doubt encouraged by the increasing threats of social disorder and crime in many major US cities.”

With such a rollercoaster, business jet operators have had to improvise to survive. In contrast to Europe, they have at last been able to avail themselves of the federal funds provided through the CARES Act. Some operators have still had little choice but to park capacity and furlough crews, whilst others with more liquidity at hand have aggressively marketed their fully operational status. JetSuite swiftly filed for bankruptcy, but Jet Linx emerged as the second largest management company in the US with its acquisition of Meridian. Their expansion may be a harbinger of accelerated consolidation. In May, NetJets claimed to have had their most successful month in signing up new members at the height of the pandemic in May. FlexJet’s fleet has been consistently busier than in 2019 throughout the summer, and its mothership, Directional Aviation launched another brokerage arm, FXAIR, in August.

“The relative resilience of business aviation may stand out as an anomaly in an otherwise devastated travel sector, but there do seem to be logical explanations,” Koe explains. “The more easily controlled hygienic management of flying private is of course a major factor, to which business jet operators have cottoned on, promoting the rigour with which their cabin environments are monitored and cleaned. The private terminal also provides a bubble of protection, far-flung from the image of a congested scheduled airport concourse. Possibly more important is the versatility of an on-demand travel option, in contrast to the scheduled itinerary, thinned out as airlines have had to ground their fleets, and arbitrarily cancelled as governments have imposed quarantines.

“The jury is still out as to whether these factors might be sufficiently important to shift scheduled airline passengers into private aircraft. Business jet utilisation, and especially aircraft ownership, has never come close to penetrating its addressable market, that is, the very wealthy population who would in theory be capable of paying the ticket price. So there is untapped market out there. That said, chartering an aircraft is going to remain several multiples pricier to flying scheduled. It may still make sense if only a charter can provide the direct connectivity from origin to destination, whether for a family holiday or a business trip. But a significant part of executive travel may simply be ‘zoomed’ for the foreseeable future. Then again, the typical business jet traveller has usually had a more compelling reason to make the trip than your average road warrior; Zoom may not suffice.

“Now that we are into September, we can see the rubber hit the road over this conjecture. The summer holidays are done, and if flight activity is going to pick up on its tepid late summer run, business travellers are needed– after all, the industry is known as business aviation for good reason. The Labor Day weekend did not give much cause for optimism. Business jet and turboprop activity within the US was 20 per cent down on last year’s holiday, and once again the only hot destinations were the great escapes; flights to Salt Lake City were up 23 per cent, and flights to the Bahamas more than doubled. But the key markets, across California, Texas, Florida, were all double-digit down, and flights out of New Jersey were diminished by 40 per cent.”

On top of everything else, US businesses now face the added uncertainty of the oncoming presidential elections. The contest has never been so bitterly partisan, and as the rioting continues to flare across the country, the run-up to November and almost certainly its aftermath looks very unsettling for corporate America. Add in the dawdling oil price, which has historically correlated to weaker order for large cabin aircraft, and the industry’s leading OEMs have much to worry about. ”The stock market is meanwhile defying gravity but as the economy derails and unemployment claims exceed 60 million, it’s unlikely that corporate profits will survive the ride, and the business aviation industry is bound to feel that headwind,” concludes Koe.

Other News
Business jet activity is down but transatlantic flights are up
February 13, 2024
The year has got off to a relatively slow start, but transatlantic flights and US domestic fractional flights are seeing very strong activity, not forgetting business jet traffic generated by the Las Vegas Super Bowl.