Private jet execs are trying to figure out where the puck is going

A leading business aviation analyst told media attending the National Business Aviation Association’s annual conference, which concluded yesterday in Las Vegas, that the private jet industry needs to follow the advice of hockey great Wayne Gretzky. The Great One counsels us to skate to where the puck is going, not where it is. In that case, the question is, where is the puck headed?

Former Bombardier and Flexjet executive Rolland Vincent, who publishes the quarterly JetNet IQ reports based on a survey of around 500 business jet owners and corporate flight departments, summarized where the puck is seemingly stuck against the boards.

The private jet penalty box

“Everything in our industry has gotten more expensive,” Vincent told a press conference.

That includes labor, whether pilots, maintenance techs, or FBO staff.

Parts are more expensive, too.

That’s assuming you can get all the parts you need, emphasis on all.

It’s not a given, and the fact is, there are still issues with second—and third-level suppliers of this or that, both of which are needed to fly the airplane.

In terms of supply chain recovery, Vincent said, “It ain’t there.”

That’s one reason OEMs maintain record-level backlogs – currently around $51 billion.

The fact that manufacturers have been hamstrung in ramping up their production to whittle down the backlog is “not necessarily good.”

“We want customers to get what they ordered,” Vincent said.

Optimism is at lows not seen since the start of Covid.

“Uncertainty is the number one word we see,” Vincent says.

Business aviation remains a lightning rod for anti-wealth protestors who cloak their rants around cries to ban private jets.

They also want to ban first and business-class seating, cruise ships, and luxury hotels.

Vincent says politics, global tensions, and regulatory uncertainty are shading what should be higher levels of optimism.

READ: Why private aviation’s supply chain and labor crisis isn’t going away

Private jet love

Despite it all, the good news is you want to fly privately.

It’s not for some superficial reasons, either.

Private flyers see the value of flying privately.

Nearly 90% of Jet NetIQ respondents (89.6%) agreed, “Without business aviation, our company or organization would be less successful and less profitable.”

Nearly two-thirds (64.1%) strongly agreed.

Despite the ad nauseam reports about the decrease in charter flights and a “rebalancing” of the preowned market, “Demand is solid. We’re not in a demand-weakened world,” Vincent says.

Vincent was not alone among the bulls.

A Honeywell survey of private jet operators found 90% of respondents expect to fly more or about the same in 2025 than in 2024.

Five-year purchase plans for new business jets are comparable to last year’s survey; they represent 18% of the current fleet.

According to an Airbus Corporate Jets survey, 82% of U.S.-based business aviation financiers expect access to financing to increase between now and 2027.

In her recap of meetings with OEMs here, Jefferies analyst Sheila Kahyaoglu wrote, “Most participants at the event noted that demand has come off the recent highs seen coming out of the pandemic, but there are no signs it should normalize back to 2019 levels. In the short term, the U.S. presidential election is providing a bit of an overhang as potential customers delay buying decisions until there is more clarity on the outcome and ensuing policy around aviation regulation. Backlogs broadly remain near record highs.”

Q3 closed deals of preowned private jets by International Aircraft Dealers Association members were up sequentially to 373 from 364.

Year-over-year, they were up 15.1%.

Year-to-date, the IADA dealers closed 993 deals, up from 868 in 2023.

READ: The top 10 reasons for choosing private jets over airline flights

Room for negotiation

The positive sales numbers don’t mean there isn’t more haggling.

The number of used private aircraft for sale where the seller lowered the asking price increased. It was up from 122 to 174 quarter-to-quarter in Q3.

That’s nearly triple from Q3 in 2023.

Price continues to be the top reason programmatic customers – users of fractional ownership, jet cards, and memberships – say they are considering switching providers, according to a subscriber survey of Private Jet Card Comparisons’ members conducted between mid-July and the middle of last month.

In fact, the percentage of people who cited increased prices as a reason to switch increased from 55.3% in 2023 to 64.5% this year.

At the same time, the percentage of subscribers who said they negotiated free hours surged to 45.2% from 25.6% in 2023 and 18.4% in 2022.

Our subscribers who could negotiate flight credits increased likewise over the past three years from 12.6% to 21.0% to 29.3%.

Negotiated rate lock extensions were up from 2.0% in 2022 to 20.6% this year.

Where is the puck headed?

 Future demand – at least in the consumer market – remains strong.

Separate research summing up over 800 Decider Custom Analysis requests from subscribers of Private Jet Card Comparisons who were in the purchasing mode between September 2023 and August 2024 projected they would fly 42.7 hours in the following 12 months.

That’s consistent with the 42.4 hours they expected to fly the previous year.

All of the above leads me to believe the data showing sagging charter demand is less about direct consumer demand and more about which channel demand is coming through.

During the demand surge of 2021 and 2022, the big fractional operators and fleet operator membership programs that offered guaranteed availability bought vast amounts of off-fleet charter flights to satisfy contractual obligations.

As an example, in the first half of 2021, despite one of the industry’s largest private aircraft charter fleets, Wheels Up’s guaranteed rate programs – GRPs as they are called, where a jet card or fractional flight provider buys capacity from an operator – went from near zero to one-third of its off-fleet activity.

Operators without guaranteed programmatic offerings they needed to fulfill could essentially name their price, knowing when a jet card or fractional flight provider called, they were between the proverbial rock and a hard place.

Guaranteed flight providers regularly paid operators as much as twice what they received from their customers when the off-fleet flight was to cover a mechanical to the aircraft that was initially scheduled or a pilot tested positive for Covid and couldn’t fly.

More private jets

There’s no longer a shortage of private jets.

The big fractional operators have taken delivery of more aircraft.

The M&A of 2018 through 2022 meant that Wheels Up and Vista Global, whose members aren’t committed to five-year contracts, now have too many aircraft that aren’t suitable for their needs.

Back then, even when the fractional and jet card operators had airplanes, they sometimes had no pilots.

In some cases, they couldn’t hire enough pilots as the big airlines replaced Covid retirees.

In other instances, the pilots they hired were waiting for training slots.

That’s no longer the case. They’ve hired – and trained enough pilots.

Flying from fractional share customers has normalized.

Demand was so strong in 2021 and 2022 that fractional providers stopped offering traditional interim leases when a new customer signed up for a share purchase.

Those leases enabled you to immediately take off and fly as if your tail had already been delivered.

Many future fractional customers booked ad hoc charter flights at the time.

Others bought jet cards to satiate their needs until their aircraft arrived.

That’s another reason the phone isn’t ringing off the hook.

Those fractional customers, in large part, are now flying in their five-year contracts.

Subscribers using jet cards dropped to 67.6% this year from 79.5% in 2021.

Over the same period, fractional ownership increased from 4.9% to 22.8%.

Sure, fractional owners may need supplemental lift, but they do not buy new jet cards as regularly—even though they are still flying.

95.4% of subscribers who started during or since Covid are still flying privately.

Only 10.5% of subscribers flying privately before Covid are now flying less.

ARGUS Traqpak numbers through June of 2024 back up this thesis.

Fractional departures increased from 274,504 in last year’s first six months to 308,043 in 2024.

Part 135 flying—on-demand charter, jet cards, and off-fleet charter—declined from 644,906 segments to 610,530.

Put another way; fractional operators saw a year-over-year increase of 33,539 segments.

Charter segments decreased by 34,736 segments.

Add charter and fractional together, and segments were down from 919,410 to 918,573, or 0.0009%.

Inside baseball

Business aviation, the proper industry term for flying private jets, is a tough business.

Those jet card and fractional providers that offer guaranteed availability, fixed or capped hourly rates, and guaranteed recovery at the initially booked price are taking a risk that they lose money on at least some of your flights, mainly when they must outsource recovery flights.

Right now, charter operators are in a tight spot.

The decrease in charter demand has restarted the traditional race to the bottom in pricing.

The same race kept prices flat for the decade between the 2008 financial crisis and the Covid-19 demand surge.

Remember when jet card prices stayed flat year after year?

During the Covid surge, the guaranteed fixed and capped rate flight providers – jet card brokers and hybrids like Wheels Up and VistaJet – were squeezed as they struggled to buy flights lower than those contracted rates.

It’s why Vista’s XO ditched its guaranteed fixed-rate Elite Access jet card.

However, that could quickly shift.

In addition to their well-known retail business, Wheels Up and Vista Global operators (Mountain Aviation, TMC Jets, Red Wing, XO Jet, Jet Edge, etc.) did large wholesale business before that Covid surge.

During the surge, those fleets were essentially unavailable on the wholesale market.

More recently, they have again become a significant source of lift for jet card and on-demand charter brokers.

Now, as they rationalize their fleets—Vista is getting rid of its U.S. light jet fleet and Citation X supermids; Wheels Up announced it is replacing its aging light, mid, and super-mid fleet over the next three years—those brokers may need to find new sources of jets for their guaranteed programs.

Over the next year, that could again shift the pendulum on who has the upper hand.

While there is still M&A activity with private jet operators, MROs are the hot spot, per JetNetIQ.

More than a quarter of respondents (27.4%) said that is where they would invest if they had $500 million. That’s up 40% in the past two years.

FBOs are up, too, from 7.5% to 12.4%.

Risky business

Aviation—private or scheduled airlines—has always been a tough business.

History shows that despite consistently attracting investors, profits are inconsistent.

One only needs to look at the financials of publicly traded private jet flight providers to see that top-line pressures combined with increased costs make running an unscheduled private jet airline an extremely difficult business.

GrandView Aviation sold for around $250 million in 2022. With the same fleet, Wheels Up is buying it for $105 million, it was announced this week.

While the scheduled airlines have been able to find ancillary profit centers such as computer reservation systems and affinity credit cards, private flight providers have yet to figure out extra ways to make money from their customers, at least at scale.

Not even the top of the food chain is immune.

In reporting its first-half earnings, Berkshire Hathaway noted that revenues from aviation services—NetJets, Executive Jet Management, and Flight Safety and their related businesses—increased 10.4% in the second quarter and 9.5% in the first six months, year over year.

However, earnings from Warren Buffett’s aviation companies declined.

They were down 8.0% in the second quarter.

In H1 2024, they were down 9.1% year-over-year.

The profit squeeze was “attributable to increased maintenance, personnel and fuel costs, as well as higher depreciation expense.”

Berkshire Hathaway has yet to publish its Q3 numbers.

Wheels Up, which dropped the biggest news during the show with significant announcements, will release its earnings on Nov. 7^th.

The good news is that the percentage of Private Jet Card Comparisons’ subscribers who are considering changing providers dropped.

It is down from 52.2% last year to 43.3% this year.

Fractional providers have a hold on customers for five-year increments.

Jet card sellers are only as good as the next 25 hours.

It’s expensive to find new jet card buyers.

What’s next?

If you are flying privately – or considering it – you are in a good position.

It is a solid buyer’s market.

Yes, it is more expensive.

Hourly rates since 2019 have risen 25.3% per our quarterly jet card rate analysis.

Of course, that’s before you negotiate.

At least for now, we think the new normal is around an 8% discount off published rates.

It means a bit more work as a buyer.

On the other hand, be kind to your providers. While you are spending a lot of money, so are they! It also takes a lot of work to ensure your flight comes off without a hitch.

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