There’s a range of evidence to consider. Most recently, reports last month that Wheels Up laid off more than 10% of its pilots blaming staffing imbalance. Also, the much-reported pause in commercial airline hiring is understood to have played a role. But how much does this reflect Wheels Up’s individual situation and what, if any light, does its cast on the availability of commercial pilots in general?

“Wheels Up has reduced its fleet size and primary service area, which would indeed make them overstaffed,” Brian Foley, founder and principal of consultancy Brian Foley Associates (BRiFO) tells CJI. “Flight revenues have also decreased suggesting fewer flight hours flown.”

Reduction in US charter

It’s likely to have been exacerbated by the continuous reduction in US charter utilisation, which the recent ARGUS report estimates to have fallen by 5.3% year-on-year, he adds.

So, taken together, the latest evidence could suggest aviation – both business and commercial – is seeing significant improvement in the availability of pilots to fly its aircraft. Foley puts it like this: “This, [slowdown in charter] combined with airline and freight carrier pilot hiring pauses, slowdowns and furloughs suggests a plateau in the pilot shortage and more available cockpit crew members.”

Bearing that in mind, can we conclude continuing reports about the impending shortage of pilots are overstated? Business aviation, unlike the airlines, has a distinct advantage when it comes to pilot recruitment, according to Foley. The sector requires fewer than 1,500 hours experience which, in turn, provides a more ready supply of pilot candidates than the stream available to the United, American Airlines, Delta and the like, he adds. 

This unlocks another significant point. “Our industry’s problem is more about pilot retention after attaining 1,500 hours and going to the airlines,” says Foley. “With airlines slowing hiring, this should become less of a problem in the near term.”

Unexpected silver lining

One unexpected silver lining to the supply chain cloud plaguing aviation is a beneficial impact on the supply of pilots. Boeing’s and Airbus’s inability to deliver new airliners in quantity will also have a positive impact on pilot availability, thinks Foley of BRiFO. 

It is a point picked up by Mike Stengel, principal of consultancy AeroDynamic Advisory. “There is still a shortage of pilots in the medium term due to unfavourable demographics,” he says. “But airlines are getting some temporary relief because they can’t get new airplanes fast enough, which has thus slowed down their hiring plans compared to the frenzy we saw in 2022 and 2023.”

The key word here for Stengel is “temporary”. Whatever the short-term challenges, the long-term direction of travel is clear. “As production rates increase at Airbus and Boeing, and Boeing also sorts through its own issues, we expect pilot hiring at major US airlines to accelerate again which will create ripple effects throughout the industry,” he argues. “This eventually translates into higher attrition at regional airlines and the business and general aviation segment that Wheels Up plays in since major airlines are often viewed as career destinations.” 

We did ask Wheels Up for comment but were told the organisation was unable to offer a view due to the media quiet period ahead of its second-quarter financial results expected on August 12th, 2024. In May, the company posted first-quarter 2024 financial results with total revenue down 44% year-over-year to $197m. (The fall was mainly driven by its exit from the aircraft management and aircraft sales businesses, as well as reduced membership and flight revenue).

11,000 airline pilots certified

Meanwhile, in March the Air Line Pilots Association (ALPA) highlighted FAA research revealing the US continues to certificate more airline pilots each month than in the years before the global pandemic. For example, more than 11,000 airline pilots were certified in the 12 months to March alone.

“Despite continued data to the contrary, corporate special interests continue to push the narrative that the United States lacks enough pilots,” the association said on its website. “ALPA has long maintained that while there were some pilot training backlogs coming out of Covid, the system is working and still producing record numbers of pilots. Passenger demand continues to be strong, and while mainline airline hiring has stabilised, resulting in a reduction of new pilots being hired, flight schools continue to have record enrolment.”

Urging against FAA legislative and organisational changes, Jason Ambrosi, president, ALPA wrote: “The system is working as intended, we’re producing more than enough pilots, and we’re experiencing the safest period in US aviation history, thanks in large part to the highly trained pilots on every flight. However, all stakeholders have an obligation to remain vigilant and play an active role in the operations of the most complex aviation system on the planet.”

So, it seems for now, at least, fears about an acute shortage of business aviation pilots and their airline colleagues may be misplaced. (Read the CAE Aviation Talent Forecast here).

*Planes need pilots – for now and the foreseeable future. No one disputes the tremendous progress being made with autonomously piloted aircraft. But do you fancy leaving the ground in one any time soon?

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This is an industry-wide campaign launched at NBAA-BACE in Las Vegas to promote business aviation’s mission to achieve net zero carbon emissions, its leadership on sustainability targets and wider contributions to society.

Think of it as a re-imagined No Plane No Gain initiative – but with many more founding members and a broader remit. The old campaign by NBAA and General Aviation Manufacturers Association (GAMA) sought to explain business aviation’s contribution to the economy and society. Now Climbing. Fast. delivers a new-century perspective on the old, old question: how can we help people better understand the sector’s full contribution.

Launching the campaign at the show, Ed Bolen, president and CEO, NBAA put the proposition neatly: “No Plane No Gain, has been around for a very long time. It is the foundation on which Climbing. Fast. will build,” he said. “It’s not just about the industry’s commitment to net zero contributions but it’s about who we are.”

Business aviation has long provided economic and employment opportunities, helped business of all sizes, connected communities, especially during and after Covid, and provided humanitarian aid in addition to setting and delivering measurable sustainability targets, said Bolen. “Our new, branded Climbing. Fast. initiative will take this message to policy-makers, opinion leaders and other key audiences, informing perceptions about the industry’s sustainability record and value.”

Pete Bunce, president and CEO, GAMA linked business aviation’s contribution to the economy with its role as a technology incubator for the wider aviation industry and its achievement in leading safety and sustainability standards.

“Our industry supports over 1.2 million total jobs and over $247bn in total economic output in the United States,” said Bunce. “When you look at our industry, Climbing. Fast. truly describes the work we have been doing to foster aviation’s sustainability and technology, advance safety, strengthen economic growth and provide valuable services to communities.”

For private aviation incubator, think fuel-saving winglets, global positioning systems, advanced composite materials. On sustainability, think the efficiency of modern engines, which deliver 30% improved fuel efficiency compared with previous generations of business aircraft. Think the white heat of new aircraft technology – electric aircraft, hybrid-electric and, eventually, hydrogen-powered aircraft. Then there’s Sustainable Aviation Fuel (SAF), which although growing from a tiny base, can cut carbon emissions by up to 100%.

But does the public care? Ill-formed criticism of business aviation has often travelled halfway around the world before the truth has got its boots on (to quote that master wordsmith Sir Winston Churchill).

The Climbing. Fast. organisers have an answer. It urges the industry and particularly its supporters to, as Bolen said, “engage” with schools, policy-makers, opinion-formers and the public to put those message across. The campaign should have an army of ambassadors including Aircraft Owners and Pilots Association (AOPA), Experimental Aircraft Association (EAA), Helicopter Association International (HAI), International Aircraft Dealers Association (IADA), International Business Aviation Council (IBAC), National Air Transportation Association (NATA) and National Aircraft Finance Association (NAFA).

 This army of acronyms has numerous weapons of choice to win the battle for hearts and minds: digital advertising, multi-platform social media presence and a targeted media relations programme.

Brian Foley, founder of Brian Foley Associates (BRiFO) understands the pressure for action but has a doubt. “Our industry associations’ charter is to look after the interests of their constituents,” he told Corporate Jet Investor. “Lately the hot button topic has been bizav sustainability, which although only accounting for 0.04% of annual greenhouse emissions, gets outsized attention from activists due to getting them more press coverage than say, spray painting a bus.” Activists know that targeting business aviation won’t result in the same large public backlash such as blocking a motorway or freeway.

Faced with growing criticism, Climbing. Fast. provides a modern answer. “Our industry lobbyists have developed a campaign to provide an alibi to future criticism,” says Foley. 

And now for the doubt. “While I’m not sure who’ll still be around to check on the progress in 2050, we’ll at least have these talking points to hold us over until then,” he adds. 

Meanwhile, let’s hope that powerful advocates within the acronym army can accomplish what business aviation has often struggled to get: recognition from government and civil society for its many achievements. Engagement is the word. Here’s to being around in 2050 to judge the progress made.

Pictured are private jets on parade at the NBAA-BACE 2023 static display at Henderson Executive Airport.

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Whilst two business days since listing does not constitute a trend, the continued decline of SAM’s share price is “a disappointing start to say the least,” according to industry analyst Brian Foley.

A reference price of $20.00 per share of common stock had been established by the NYSE for the expected listing of SAM’s common stock. The day after listing it closed at $2.45 per share.

According to the investor prospectus, on an adjusted EBITDA basis, SAM lost roughly $30m in 2021, $28m in 2022 and $9.5m the first quarter of this year, for a total of over $65m in the last couple of years. “At the end of the first quarter, liabilities exceeded assets resulting in around a $20m working capital deficit. We’ve recently seen this movie elsewhere in the private air travel industry, which has caused considerable consternation amongst stakeholders,” said Foley, founder, Brian Foley Associates. 

SAM has plans to operate regional service using a fleet of hybrid-electric and all-electric Cessna Caravans. To do so it is working on supplemental type certificates for the Caravan conversions with firms including AeroTec, TAI and magniX. The day before it listed, SAM merged with Southern Airways Express, an operator with a significant fleet of Cessna Caravans which mainly serves airports with FAA Essential Air Service contracts.

Surf Air also revealed it wants to order up to 150 extra Caravans from Textron. The firm also plans to help smaller operators electrify their fleets by arranging aircraft financing and access to in-house operating software.

“I’ve always been a bit concerned by the split personality of the company, claiming to be both an electric aviation as well as a travel company,” said Foley. “For any company, particularly one of Surf Air’s small scale, it would be a full-time job to be good at just one of these pursuits and only dilutes the resources available to either.”

“Going public is not always the panacea envisioned by small companies, as compliance costs alone can add $1-2m in additional yearly expenses,” Foley added.

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Roger Marszalek, director, Market Strategy and Product Marketing, Civil Aviation, CAE

CJI: How worried are you about the shortfall in aviation recruitment?

Roger Marszalek (RM): The industry has a big challenge ahead to meet the demand for aviation personnel. To meet the demand, industry stakeholders will have to work together, everyone from operators and regulators to training providers and educational institutions to attract, train, and retain talent.

The industry must embrace new solutions, technology and partners, including those from outside the aviation industry. For example, we must find ways to attract digital natives who spend most of their time browsing and interacting online to reach and appeal to Generation Z and open their minds to the possibilities and benefits of a career in aviation.

CJI: What’s more concerning the lack of pilots, technicians or cabin crew?

RM: Too few of either of the groups is a challenge, since pilots, technicians and cabin crew play an essential regulatory role in the safe operation of the air transport system. There are even other professions (i.e., ATC workers, OCC employees, instructors) that are not captured in our report that play a critical role in the air travel ecosystem.

Our forecast showed that each group presents a unique challenge for recruitment:

• Pilot demand is always unique due to its longer training pathway.
• Cabin crew demand shows the highest number of personnel needed.
• Aircraft maintenance technician demand shows the highest rate of personnel retiring.

CJI: What remedies are you deploying to remedy the challenge?

RM

• CAE has partnered with several airlines around the world, including easyJet, Jazz and Spirit, to provide ab-initio training and job opportunities upon successful completion of training.
• We champion initiatives like the CAE Women in Flight program to encourage more women to become pilots, working with various airlines, including easyJet and Air Canada, to provide various scholarship for their training.
• CAE continually invests in the development of high-tech solutions to make training more efficient while enhancing safety. We have deployed online learning tools, improved scheduling, and curriculums, and built a worldwide network of training centres to make the training process more efficient and effective.
• Introduction of Competency Based Training and Assessment to ensure pilots are “mission ready”.
• Products like CAE Rise and CAE Pelesys to improve training management and efficiency.
• CAE Parc Aviation: resourcing services help airlines and operators find the talent they need to allow them to respond to market opportunities quickly.
• Expanding our global footprint to meet demand:

New business aviation training centres:

• CAE Las Vegas (inaugurated in March 2023)
• CAE Savannah (scheduled to begin operation in late 2023)
• CAE Vienna (Scheduled to open in 2024)

New commercial aviation training centres:

CAE Athens (partnership with AEGEAN, set to open in 2024)

CAE Sydney (partnership with Qantas, set to open in 2024)

• CAE’s global civil aviation training network includes:
• 300+ full flight simulators
• 170+ aircraft
• 50+ training locations

CJI: To what extent do commercial airlines see bizav as a recruitment pool?

RM: Commercial pilot demand is up due to the strong recovery in travel post-covid and significant airline expansions planned over the next decade. There are more commercial aircraft in service (31k), and the fleet is expected to grow significantly (39% increase over ten years). The business jet fleet is smaller (22k) and is growing at a slower rate (18% increase over ten years). Regional airlines have parked aircraft due to lack of crew to fly them. Several airline executives have commented on the need for more pilots. Based on these market dynamics, commercial airlines will explore any possible avenue to recruit aviation talent.  

Jeannie Thorne, vice president, Human Resources, Elevate 

CJI: How worried are you about the shortfall in aviation recruitment?

Jeannie Thorne (JT): While recruitment of talent is always a challenge in any industry, Elevate Aviation Group has enjoyed a great deal of success of late.  As such, we have the opportunity to reinvest in our team members, offering opportunities for advancement and career development while also enjoying the stability of a company founded over 20 years ago.  Of late, we are finding that our unique client-centric focus offers a compelling reason to join our team.

CJI: What’s more concerning the lack of pilots or technicians?

JT: As the catchphrase goes, it really does take a village.  Ours is a service-centric industry, where safety and reliability are equally vital to success.  Both pilots and technicians are areas to focus on, as are all of the professional disciplines necessary to deliver a truly world class experience

CJI: To what extent do commercial airlines see bizav as a recruitment pool?
JT: Elevate Aviation is a unique company, deeply experienced in both transport category transportation and executive jet solutions.  Many of our team, including our holding company’s President Randy McKinney, started their careers at commercial airlines.  The management experience and sophistication of these executives is truly extraordinary.  I suppose we see the commercial airline industry as a recruitment pool for executive aviation as much as the other way around.

Brian Foley, founder, Brian Foley Associates

Perhaps the pilot shortage has been discussed for so long in our industry that it has just become a given that it exists, even if it doesn’t.    

There hasn’t been a lot of pilot job hopping, suggesting there’s not unlimited opportunities due to some shortage.   In speaking to flight departments I have not heard of a systemic lack of candidates.  More recently with some of the mega-fleet charter operators experiencing financial challenges, the potential pool has grown even larger

If there’s any pilot constraint it lies with training capacity which is indeed a real issue.   I’ve heard that some classes require the actual name of the pilot for a reservation, and that making pilot substitutions or reserving an open slot cannot be made.  This makes it difficult for a company when onboarding a new pilot who needs recurrent or a type training, as the wait can be lengthy before they can complete the course and start working.  

On the technician side, if a firm is willing to pay for talent then they aren’t as scarce as we’ve been led to believe.  Hourly employees are willing to go across the street for a relatively modest pay increase, so it’s in everyone’s best interest to pay them a competitive wage. 

Delta Air Lines

Spokesman: At Delta we are constantly working to ensure that our staffing levels are calibrated to properly support the needs of our safe, reliable operations.

Pilot hiring at Delta remains robust, at a rate of about 200 pilots per month, and is expected to continue for the coming months. We expect to hire more than 2,000 pilots in 2023 to support future growth.

Through our skills-first approach to hiring, and through initiatives such as our Propel Pilot Career Path Program, we are creating new, equitable pathways for qualified pilot candidates and aspiring pilots to join our team at Delta. Since its inception in 2018, more than 100 Propel participants have graduated and are now flying Delta customers with another 700 currently in the program.

In addition to our community, collegiate and company Propel pathways, we now offer a flight academy path with partial funding from Delta. This broad funnel approach will help sustain a steady pipeline of talented pilots for years to come.

Delta plans to hire between 4,000 to 6,000 additional flight attendants in 2023 to support Delta’s continued growth and bolster their work-life balance.

Delta’s longstanding and strong reputation as a great place to work continues to attract talent across our business, including for aviation maintenance technicians. To date in 2023, we’ve hired more than 700.

In recent years, Delta has established partnerships with more than 50 FAA-certified aviation maintenance training institutions around the US. We have also bolstered our strategic recruitment of transitioning military personnel, veterans and their families along with initiatives to cultivate new technician talent in collaboration with our regional partners and to upskill members of Delta’s existing workforce.

United Airlines

Spokesman:

Hiring at United

• At United, we’re hiring across all major metro areas – coast-to-coast at our seven major domestic hubs – Newark, D.C., Chicago, Denver, Houston, San Francisco and Los Angeles – and many cities including Orlando, Boston, Colorado Springs to name a few.
• We’re hiring across a broad range of positions: we need pilots, technicians, flight attendants and agents but we also need accountants, technologists, lawyers, finance experts, cyber experts and network planners to run our business.
• To date, we’ve hired more than 10,000 people and are on track to bring on more than 15,000 people by the end of the year. Last year (2022), we hired 15,000 people.

Pilots

• Last year we added more than 2,400 pilots – that was our highest pilot hiring year ever – 85% more than 2021.
• This year we’ll add about that same number of pilots. In fact, we already hired more than 1,400 pilots and are well on track to add 10,000 pilots this decade.

Tech Ops (maintenance technicians)

• Since January, we’ve hired over 1,550 maintenance technicians. In the first five months of the year, we’ve hired nearly as many technicians as we did last year – and are confident we will meet our goal of hiring 2,500 maintenance technicians this year alone.
• To support our ambitious growth plan, we need to hire more than 7,000 maintenance technicians by 2026.

Flight Attendants

• We’ve received more than 20,000 applications for the 4,000 flight attendant roles we need to fill this year. That brings our Year-to-Date total to over 32,000, exceeding the total number of applications we received last year alone.

Meanwhile, read the original article here and register for your free One Minute Week newsletter here.

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Slimming down from a multinational conglomerate to a one-trick pony with a crushing $9 billion debt load would seem like the beginning of the end, but during its first 2 years the reconstituted company has proven otherwise. 

The first scare under its new identity came when COVID-19 lockdowns closed the factory, disrupted the supply chain and gave would-be buyers a reason to pause due to economic uncertainty. Shortly thereafter the pandemic instead became a boon to the private jet industry as first-time flyers sought ways to circumvent the public airport petri dish and reduced airline schedules.

Bombardier was at the right place at the right time with a family of business jets to meet this sudden market demand for new aircraft, which buyers were forced to turn to after the late model preowned supply was completely picked over. This prosperity was shared by all bizjet manufacturers as demand outstripped supply granting them negotiating leverage and in turn pricing power.

For whatever reason, be it supply chain challenges or not wanting to further extend itself, Bombardier only produced the same number of planes in 2022 as they did in 2021, undoubtedly missing out on making more deliveries and revenues. Despite this, plane backlogs continued to grow and like a responsible borrower, the company dutifully paid down its debt by almost half raising its credit ratings.

Citing 2020-2022 revenue growth of 23% and a quadrupling of profitability, combined with diversifying beyond civil business jets with its year-old Defense Division, the company revised its 2025 financial projections upwards by 20% for revenues and 8% for profits, while anticipating further debt reductions. Having broadened into military will allow it to better weather the ups and downs of the highly cyclical civil private jet market.

While in a much better place today, there are still potential risks to Bombardier’s Cinderella story. Although their top-end Global series of aircraft models are fresh, their smaller Challenger counterparts are in need of expensive, meaningful improvements to remain competitive and to differentiate them from the same models on the less-expensive preowned market.

As for the Global jets, the company is in the middle of moving the Global business jets to a new production facility, which could cause disruptions. There are also a bevy of new products coming from Dassault and Gulfstream that will directly compete.

Further, the pandemic-fueled furor over private aviation has subsided as evidenced by lower new aircraft book-to-bill sales activity, reduced charter usage and a sharp increase in the number of preowned jets for sale. Regardless, I forecast that the business aviation industry as a whole will enjoy a permanent 10% addressable market expansion thanks to some of those new flyers sticking with private air travel even after things return to normal.

Due to the sudden popularity and scarcity of new aircraft, manufacturers are now more at risk of having speculators in their order books. With a relatively modest deposit they can buy an aircraft delivery position with no intention of ever taking it and instead flip it to an impatient buyer at a premium. Due to their tendency to cancel orders when the market drops, speculators make for a less sticky order book.

Another risk is that one-third of 2022 worldwide business jet deliveries went to large charter and fractional fleet operators. Like the airlines, these types of companies will cancel or defer their orders in a heartbeat should demand ebb.

To this point, branded charter activity has fallen by 23% year-over-year in the world’s busiest market in North America, but still remains 10% over pre-pandemic levels according to WINGX. Bombardier has oversized exposure to one fleet client who if ever were to fall on bad times, could flood the market with over 150 late model Bombardier aircraft that would compete directly with new sales for many years to come.

Lastly, business jet sales don’t do well in times of economic downturn or uncertainty. As such, there are hopes within the industry that the next recession will be a soft landing.

Despite all of these what-if’s, for now the all-new Bombardier is proving its ability to endure as a pure-play business jet manufacturer. The company can continue to buttress its financial footing or in the longer-term tie-up with another company. After all the company has been through, it’s nice to have choices.

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Trappier’s warning is significant, according to Rob Stallard, partner Global Aerospace and Defence, Vertical Research Partners. “I’ve not seen any other aerospace company put a slide into their accounts about jet bashing,” he tells CJI. “I didn’t think it would be quite so blatant as Dassault accusing people of jet bashing. It’s reflective of the press coverage in France and Europe.”

This may reflect the company’s European roots. “Behind the scenes, companies in the US are well aware of the issue, which can be seen in the investment in Sustainable Aviation Fuel that is happening,” says Stallard. “But the US is lagging behind on ESG [Environmental, Social and Governance] issues. ESG is much lower on the agenda for them.”

Investment fundamentals are likely to win precedence in investors’ minds, according to Brian Foley founder of the consultancy Brian Foley Associates. “There is already pushback from some fund managers who insist on investing in fundamentals, not the ideology du-jour,” he says. “Regardless, objective data suggests ESG investments aren’t performing as well as their peers, and some investors will bring their funds elsewhere if not given a choice. Thus, longer term I wouldn’t see any measurable impact on the aviation sector.”

Much of the current debacle arises from banks having underlying assets (bonds) and being forced to sell them at a loss before maturity to cover customer withdrawals, says Foley. “That said, there will be an ongoing rout in startup, early-stage and high-debt aviation companies as capital becomes harder to obtain as investors find higher return opportunities as interest rates rise.”

Brian Flynn, MD, venture capital firm DiamondStream Partners – which is typically an early stage investor – notes the inevitable (and desirable) greening of corporate agendas. “Most or nearly all of the companies in which they’ve invested are articulating more clearly what they are doing to reduce their environmental footprint,” he tells us. “This is both the right course of action and one that will rightfully dampen some of the criticism. Some aviation investors feel more strongly than others, but I’ve not heard of any exiting their aviation investments because the companies in which they’ve invested are not working to reduce their carbon footprint.”

For Flynn, communicating facts and goals is the best way to combat environmental criticism of aviation and to educate those who are upset. “The environmental activists will surely hold the companies accountable for achieving their goals. And maybe, in some cases, encouraging those companies to set the bar higher.”

It was also a tough week for banks since the fall of Silicon Valley Bank. Stallard, at Vertical Research Partners, sees a connection with business aviation. “I think what’s going on with the banks isn’t going to have much of an impact on the aerospace sector,” he says. “But it could be a symptom of what’s happening on a wider scale. I think the levelling off in demand that we’re seeing in business aviation is partly linked to the technology companies not doing as well as they had hoped.”

Returning to “aviation bashing”, Foley at Brian Foley Associates, ends on an ominous note: “There are certainly bigger fish to fry than business aviation’s 0.04% annual worldwide contribution to greenhouse emissions. But none are as sexy and attention-getting.”

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Brian Foley, founder, Brian Foley Associates tells Corporate Jet Investor (CJI) that he  is not promising that it will live up to the last two years. “2023 is likely to be uncharacteristically normal compared to the recent past.” But he does expect the rising tide of new entrants to private jet aviation to ebb.

Less than 10% of those new to general aviation “will remain in the fold”, he says. That compares with some charter providers reporting new clients accounting for up to 50% of their business last year.

“First-time users can be lured by making the initial process as painless as possible, but keeping them is really outside the industry’s control,” Foley tells us. “Private aviation is a discretionary spend, and there are external factors that always conspire to end the romance.” Queuing up to sour that romance are: improved airline schedules, fewer health issues, unfavourable 2022 stock portfolio statements and worry about a possible economic recession. “It still favourably raises the baseline obtainable market for the industry from this point forward.”

Other key challenges of last year – including manufacturing supply chain disruptions and labour shortages (other than the pilot shortage) – have already begun working themselves out going into 2023, he says.

Richard Aboulafia, MD, AeroDynamic Advisory acknowledges that retaining newcomers will be a key challenge – albeit a little overstated. “Purchasers and fractional share purchasers have made commitments that aren’t easy, in the short term, to get out of,” he tells CJI. That leaves charter market entrants. “Here again, I’m not sure what, if anything, can be done, since it’s really just a function of airline service being restored to smaller markets (and with reasonable frequencies) over the next 12-24 months.”

The big challenge for manufacturers will be to maintain production discipline, particularly as supply chain disruptions are resolved. But at present, production rates are steady, prices are increasing, and backlogs are large and healthy again. “Rising production rates would jeopardise that. Here again, not sure I see a way to stop any OEM who starts trying to out-build the others.”

Environmental and social governance (ESG) concerns will remain a challenge – but one that can be mitigated by concerted industry action. “Making bizav a test market for SAF [sustainable aviation fuel], a pump-primer market if you will, would be a great message to send and it would be genuinely good for all concerned,” says Aboulafia. “Since bizav is less cost-conscious than the scheduled air crowd, there’s greater potential for up-front SAF adaptation.”

Sustainability was also selected as the third of six top challenges facing business aviation by Heather Gordon, legal director aircraft ownership and leasing specialist Martyn Fiddler Aviation. The industry needs a plan to boost decarbonisation and to “own that narrative”, says Gordon. The other five challenges are: The (real) war for talent, Coping with the downturn, Activism on social media, Crime, sanctions and politics and Investing in innovation.

The industry is changing and much of that change is coming from external forces, Gordon tells CJI. “The challenges predicted to affect us in 2023 are very much concerned about how to safeguard the future of business aviation; and that relies increasingly on the younger generation and new talent entering the industry.” Talent that will require private jet aviation to share its industry knowledge, pay forward opportunities and increase its diversity and inclusion.

But what do you think? What do you think are the top three challenges facing business aviation in 2023? And – just as important – how can the industry meet those challenges in the year ahead? Please let us know.

As Bowie said: “Tomorrow belongs to those who hear it coming.”

David Bowie’s advice for business aviation: “Tomorrow belongs to those who hear it coming.”

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Shortly after the pandemic was declared, first-time users of private aircraft began to flock to the easiest access to personal flights — charter and fractional aircraft providers. These business models allow instant access to a fleet of planes without the hassle of buying and maintaining one. Some charter providers reported upwards of 50% of their business being booked by new clients who had never flown privately before.

The sudden rush of new customers made servicing these trip requests challenging for a finite network in a niche, capital-intensive industry sized for much lower utilisation.  A few providers such as Berkshire Hathaway’s NetJets division were even forced to suspend further new charter sales just so they could provide an adequate service level to their existing clients.

Buying a used aircraft was another way for newcomers with the resources and commitment to take to the skies on their own terms. This trend proved so popular as to empty the supply of used aircraft on the market to all-time lows. This predictably caused prices to surge as it promptly became a seller’s market, often leaving only the choice of older, overpriced, ugly duckling jets with a laundry list of expensive maintenance requirements.

This frustration led some first-time buyers to the most expensive solution of them all — buying a brand-new plane. Just as the charter, fractional and pre-owned markets were inundated, so too had the manufacturers’ order books begin to swell. In 2021 Textron Aviation, maker of such private aircraft as the Cessna Citation business jet and King Air turboprop, reported that 20% of their customers were new to ownership. This sudden surge in interest caused the next-available buyer delivery slots to extend out to the 2025 timeframe and beyond at some manufacturers.

As with any extreme swings from market norms, these exceptional times weren’t to last forever. Early signs of the froth receding a bit — not catastrophically but in a manner that relieves an overworked market — have begun to appear.

The catalysts for this change have come in the forms of sagging stock and bond markets, inflation, rising interest rates, reduced virus anxiety and the looming threat of a recession. Flyers may not feel as rich or secure as they had been, and being a discretionary spend, cutting back or eliminating the relatively costly private flying expense is one way to shore up the finances at least mentally. With no strings attached when leaving charter, many business aircraft newbies have opted to go back to their economy plus airline seats.

As proof of this exodus, WINGX reports that branded charter activity in North America is now down 23% compared with year-ago levels and is even 5% below the pre-pandemic levels of 2019. Part of the reason for the quick turnaround is the ease at which one can decide whether to charter. It would appear that many of those first-time users were only interested in a one-time trip and were financially humbled by the $20,000 one-way ticket from New York to Palm Beach.

On the pre-owned aircraft side, the level of inventory has doubled in just the past six months according to AMSTAT. While still near historical lows, the availability of used jets is still well below traditional levels but with a noticeable upward change. Similarly, an industry that had seen some used airplane model prices spike by 80% or more are now seeing modest price decreases across the board. Inventory is expected to keep increasing after some of the newly minted used airplane owners get schooled in yearly maintenance and operating costs which can be many multiples of the sales price.

After a string of record-setting years, the association for the preowned aircraft market IADA reported a 6% decrease in sales transactions year-to-date through the third quarter in 2022 compared with the same period in 2021. Further decreases are likely to be in store as the 100% accelerated US tax depreciation benefit decreases to 80% in 2023 and even less beyond making the ownership proposition less compelling to certain buyers.

New business jet makers have been seeing the recent downshift as well, as book-to-bill ratios, a measure of sales activity, declined somewhat. Despite this, backlogs have already swelled to multi-year highs, equivalent to a couple of years’ production. Benefitting are such OEMs as Dassault, Bombardier, Gulfstream, Embraer and Textron’s aviation division.

The reduction in charter activity coupled with fewer new and preowned aircraft sales indicates the peak has passed for the general public’s discovery and fascination with private aviation. This is frankly a relief for an industry that was never scaled to be a mass transit system and has been overwhelmed over the past couple of years.

The shift won’t come without some longer-term risks. Fractional providers, having been unable to meet the surge in demand for their charter programs, placed massive new airplane fleet orders with manufacturers. The stickiness of these orders remains to be seen as aviation newcomers become fewer and farther between. Another crack that could appear are for those charter/fractional companies that depend heavily on client growth to make their numbers or satisfy investors.

Regardless, my estimate is that less than 10% of those new to general aviation will remain in the fold, which still favorably raises the baseline obtainable market for the industry from this point forward. It took nothing less than a pandemic to finally shake this low-hanging fruit from the tree.

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Foley told CJI OEMs are planning to up production, but it takes time, resources and qualified people – many of whom found new careers as a result of the pandemic.

“Procurement can be a multi-year process,” said Foley, “A lot of these contracts with tier one suppliers for engines and avionics those are signed for specific quantities potentially years in advance. It’s not a simple matter of turning up production volume on a switch.”

Gulfstream will struggle to add to production before 2023, it only expects to produce four more jets than last year. The Savannah-based OEM is also facing a temporary wing shortage.

Bombardier also is not a suitable position to take advantage of the upswing in demand, according to Foley. Despite a fourth-quarter book-to-bill ratio of 1.5:1 (1.5 new sales to each aircraft delivered) and backlogs swelling by $1.5bn last year, 2022 deliveries are only ramping up by a “little bit” compared with last year, according to CEO Eric Martel.

“I think OEMs are preparing to increase production incrementally. At the moment, they can hold a little bit and drive those list prices up. They can negotiate less, not give as many discounts and subsequently get their margins up,” said Foley.“Then once there is firm pricing and a firm backlog, then they will increase production.”

Foley suggest a reason for limited production is that Bombardier does not want to “bloat already high debt levels any further” by spending more funds on procurement and capacity expansion.

As with Gulfstream, Bombardier is signalling a larger, 15-20% production increase in 2023.

Textron also hinted in its fourth quarter 2021 results announcement that it planned to make more aircraft in the coming year. Foley noted Dassault also had a planned production increase in place.

The post No ‘switch to flip’ on jet production increase appeared first on Corporate Jet Investor.

Back in 2008, the industry delivered over 1,300 shiny new aircraft worldwide.  Following the 2008-09 Great Recession, that figure atrophied to just half that amount annually, around where it still remains today. But that’s all about to change.

Call them one of the late beneficiaries of the pandemic. For 2020, which included the depths of the pandemic, the industry actually had 20% fewer aircraft deliveries than the previous year, an anemic level not seen since 2004. This was brought on by a combination of factory shutdowns, supplier hiccups and buyers waiting for economic confidence before plunking down millions on a new jet.

However while manufacturers were taking action to again right-size their operations to what could conceivably be the new reality, other sectors of the industry suddenly began to flourish. Well-heeled travelers looked for alternatives to the airlines’ crowded terminals and being shoe-horned into a middle seat next to strangers, looking to private jet charter or fractional ownership to avoid the mosh pit. Objective data showed business jet travel quickly climbing back toward pre-pandemic levels, while airlines continued to languish.

This crush of first-time private aircraft users, which caused upwards of a 20% increase in business, coupled with increased jet usage by existing users, led fractional jet provider NetJets, a unit of Berkshire HathawayBRK.B, to temporarily suspend further sales of its jet card charter service. Doing so ensured existing customers adequate access to the fleet while allowing recovery to an acceptable service level standard.

Concurrently, the number of preowned business jet transactions took off in the last half of 2020, setting all-time records and reducing to nil the inventory left to choose from.

The 2020 increase in charter activity and used aircraft sales were to be a harbinger of what was to come for business jet manufacturers. While early 2021 was still a little sleepy, by the first half most OEMs were reporting new jet orders outpacing shipments by a two-to-one margin, fattening depleted backlogs and giving hope that the long lost go-go days of the early 2000’s may finally be returning.

Since airplane production can’t be increased with the flip of a switch, overall 2021 deliveries won’t be all that different from previous years over the past decade.  However, as OEMs gain confidence that the increased demand is real, and that they can crank out more planes without the risk of unsold units becoming expensive lawn ornaments, the spin-up will become more pronounced.

Our latest delivery forecast at my consultancy anticipates around 700 industry deliveries in 2021 — on par with what it has been for many years. A meaningful ramp-up will begin in 2022 and continue unabated for several years, easily surpassing the 900-unit level for the first time since 2007.  The demand will be driven by first-time owners and corporations that hunkered down during the pandemic but are now ready to buy and charter/fractional providers who need larger fleets, by the hundreds, to meet increased market demand.

The primary industry players who stand to benefit from the trend include the aviation unit of Textron, General Dynamics with its Gulfstream division, Dassault Falcon Jet, Embraer and Bombardier.  The improving market has been particularly beneficial to the latter company, which only recently became a pure-play business jet manufacturer, with its future tied to the segment.

For now, bizjet makers will continue to happily take orders while replenishing their backlogs, and will finally have the luxury to contemplate future production increases.  “It’s a good time to be in the business,” a phrase not uttered since 2007, will soon return to the industry’s vernacular. As Aristotle once said, “Patience is bitter, but its fruit is sweet.”

About Brian Foley Associates (BRiFO)

Since 2006 Brian Foley Associates (BRiFO) has helped aerospace firms and investors with strategic research and guidance.  www.BRiFO.com  Its sister company AvStrategies helps match aviation investors with great companies www.AvStrategies.com

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