Health concerns and lower lead price points through private jet membership programs may help boost business aviation
FBOs (private jet terminals) are seeing business down as much as 95%. The overall flight industry was tracking at 80% below 2019 levels in the first two weeks of April. Surprisingly, many in the industry are bullish about recovery.
During a town hall hosted by Corporate Jet Investor on Wednesday, several private jet charter executives revealed optimistic views.
Jet Aviation’s David Best said his team is seeing interest from new fliers interested in its jet card. Adam Twidell, CEO of PrivateFly, and others equated the current crisis to 9-11. After the terrorist attacks travelers flocked from the airlines to private jets due to safety concerns. This time it will be health worries, they say.
Companies likely to keep their private jets
In a separate webinar, it turns out the editorial team of Aviation Week Network agreed.
“I’m wondering if this might give a little boost to private aviation because you may not want your folks sitting even in first class next to someone who is coughing,” noted Molly, editor-in-chief of the group’s The Weekly of Business Aviation.
William Garvey, editor-in-chief of the division, added, “I have heard speculation from a lot of people this could be very good for business aviation. If you have a choice of going in your Gulfstream, Global or Falcon, versus even a first-class seat on a 777, I think a lot of people would pick private aviation.”
Senior editor Michael Bruno also gave some hope. “So much of the business world is face to face meetings. It’s not just signing a contract…M&A, investments, due diligence, is getting on an airplane and getting out to the other company, meeting their customers. You can’t zoom your way through a deal.”
The journalist believes private jet travel will pick-up before the masses get back on an airplane.
“There will be M&A long before the Michael Brunos of the world thinking about taking a vacation again. Bizav will pick up first,” he said.
Speaking about the airlines, Delta Air Lines CEO Ed Bastian separately said, “We believe that it could be up to three years before we see a sustainable recovery.”
COVID-19 could spur increased private jet travel
Richard Aboulafia, an analyst with the Teal Group, and a guest on the Aviation Week webinar noted, “We’re starting to see the public companies add coronavirus to their lists of threats that they have to list in the federal regulatory filings.”
He believes it could be a positive indication for private aviation providers. “It’s usually boilerplate language, but the fact that they are adding it now means they are thinking about it in all kinds of ways…not just the risk to the revenue streams. It’s a risk to their operations, and a key risk to those operations is the health of the leadership at the company.”
It’s a change from past downturns. Companies under financial pressure typically put their private jets for sale. This time could be different.
“You may not see corporations…get rid of their aircraft because they will see it as safer than putting everybody in a commercial airliner,” Aboulafia said.
He also believes pressures to win will force C-suite brass out on the road. “It’s a competitive world. If I have a slight advantage of unseating a competitor, whether I’m trying to buy a company or compete for a deal, and I think if I’ve got an edge by traveling there, I will take that edge, and on average I’ll profit from that. It’s a competitive world and travel gives you an edge,” he predicted.
Jet Cards offer affordable private jet access
There was a consensus of the experts that jet cards and private aviation membership programs may provide a recovery catalyst. The number of card programs has more than doubled since the Great Recession.
Aboulafia said fractional ownership is out of the reach for many. He sees jet cards as “ways that don’t involve major commitments to get people to experiment with this and maybe find the value.”
While jet card deposits typically start at 25 hours or around $100,000, there are pay-as-you-go programs and others that begin with just $25,000 in funding.
A webinar organized by Aviation International News on April 7, however, highlighted the current instability in the market.
And audience poll asked, “How is the Coronavirus affecting your company’s business?
Over a third (36%) said they were “mostly shut down, essential services via home-based employees.” Another 7% answered, “We are completely shut down.”
Thirty percent (30%) said they are offering “some services with flight operations or in the hangars.”
Still, more than a quarter said they were just as busy or busier than before, pivoting to “other kinds of work.”
Cargo, repatriation charters, and corporate shuttles have filled the gap for some. Still, closed offices and shuttered resorts mean those with access to private aviation have few places to go for now.
The shutdown of JetSuite just over a week ago has impacted approximately 1,000 SuiteKey jet card customers. Their unused balances estimated are estimated at more than $50 million. The Phenom 300 operator did not offer an escrow account but counted Qatar Airways and JetBlue as key investors.