CJI London Day Two: New clients make their mark but not corporates (yet)

An influx of new customers continuing to boost the prospects for the private jet market, partially offsetting the absence of corporate flyers, and the impact of charter industry consolidation were key themes yesterday, on the second day of Corporate Jet Investor’s London 2021 online conference.

New clients first made their mark in the second quarter (Q2) of last year, according to Adam Twidell, PrivateFly CEO. “Things flipped on their head in Q2 [2020]. 67% [of business] was to new customers in Q2 last year. That’s a complete reversal of what normally happens.” And the trend continued.

“Our model appealed to a much wider range of customers than we thought previously. We have to give them something to return for,” said Twidell. PrivateFly, now part of industry monolith Directional Aviation, offers membership and jet card programmes in addition to on-demand charter.

New clients were likely to remain with private aviation for some time, said Karl Mills, TAG Aviation, director of Sales UK. And slashed airline schedules were not the only reason. “I understand that block-hour bookings and jet cards are much more popular,” he said. “So, we will definitely see new clients again because they are locked into contracts.”

‘Spend their dollars in private aviation’

Across the Atlantic, Andy Priester, CEO and President of Priester Aviation, was one of many business leaders to highlight the contribution of first-time clients. “Our 2020 client acquisition rate was 270% above 2019,” said Priester. “That was an indication of how many new customers we had. These were folks who had not flown before and, seeing the value proposition, decided to spend their dollars in private aviation.”

While the influx of new clients was indisputable, there was another side to the story, said Kevin MacNaughton, Air Partner MD – Charter. “New business has genuinely gone up. But the other side is that the business flyer and the existing flyer have not flown the same volume of flights.” Neither did he expect corporate clients to make a quick return. “We are not depending on corporates. Corporates will be further down the track – maybe in Q4.”

Similar caution was voiced by Mills of Tag Aviation. “I don’t think we can rely on corporate travel this summer. All are reviewing their corporate travel bookings in September, not June.” Also, regardless of the vaccines release, the authorities will have to analyse the data before relaxing border controls. “The shackles [on travel] won’t be released until that data are analysed,” said Mills. “I hope we will see an increase in business this summer. But it’s not going to be a ballistic summer for that reason.” He also reported the widespread deferral of luxury travel bookings from this October or November to 2022.

Back at the lower cost end of the charter, Robert Fisch, Luxaviation President Aviation Services hailed the launch of the new charter flight business Flyer. Launched yesterday, the service would “bridge the gap between commercial travel and business aviation”, said Fisch, who is also the company’s MD. Flyer operates a fleet of four new Beechcraft King Air 250 and 260 aircraft based in Belgium. “We were seeking to find a solution for travellers who were concerned about safety and for making business aviation more accessible,” he said. “Flyer combines the accessibility of scheduled airlines with the flexibility of private aviation.”

Consolidation in the air charter market was highlighted by Ford von Weise, Citi Private Bank, director, head Global Aircraft Finance & Advisory Services. “The industry is changing more now than we have seen in the past 15 to 20 years,” he said, after Wheels Up revealed plans to merge with Aspirational Consumer Lifestyle, to give the company an enterprise value of $2.091bn.

‘The end of the Mom and Pop small company era’

“This could be a landscape change, signalling the end of the ‘Mom and Pop’ small company era in the industry,” said von Weise, who moderated the forum ‘Across the pond – what’s happening in the US?’

Determined to find the business opportunities created by growing consolidation was Fabian Bello, Journey Aviation CEO. “We started as a boutique operator and grew by word-of-mouth and by asking: ‘What do you need? We will provide the service’”. There will always be a place for organisations like this, he continued. “The way to make it work for them [very large operators] is to stick to A, B and C and people [customers] either adapt to that, or it is not a good fit for them. In those scenarios, there are opportunities for people like us because we can adapt and change and offer something they are not offering.”

Bello concluded: “We have an opportunity to make it, even if we don’t have 100 or 200 airplanes.”

Priester, of family business Priester Aviation said: “Two things are happening – a roll up strategy and a roll up consequence.” The very large companies were making a clear play for both technology and supply. The “roll up consequence” for the two-, three-, four- and five-plane operator, post pandemic would be to assess their place in the industry.

Managing the complexities of regulatory compliance and the additional costs that followed would be increasingly challenging. “For a small operator to do that and win from a pricing standpoint continues to get more difficult,” said Priester. “Rolling up companies creates this cauldron of possible transactions.”

And then, there was Brexit and its impact on the global private jet market. But perhaps we will leave that tangled topic until another day.