Traffic – B

There are two ways of looking at traffic data. US traffic for the year is down 1% on a strong 2023, according to WingX. Compared with the 2022 post-lockdown peak US business aviation is down about 6%. Europe business jet flights are down 2% versus the first half of 2023.

But rather than focusing on this, it is worth comparing with before Covid 19. WingX says that US business jet traffic is up 28.9% compared with the first six months of 2019. The big winners  in the US are super mid-size jets (up 50.3%), turboprops (47.3%), ultra-long range (45.6%) and very-light jets (39.1%).

European business aviation flights are up 7.5% in 2024 compared with the first six months of 2019.

Traffic alone is not a guaranteed sign of a strong industry (it is possible to fly a lot and lose money) but it is an important metric for maintenance providers and OEMs. Who also have a lot to be happy about.

Aircraft and engine manufacturers – A-

Business jet manufacturers are not showing any signs of wanting to suddenly increase  deliveries. Some of this discipline is because supply chains are still catching up. To be fair, this is also because all of the senior managers at manufacturers vividly remember what happened after the global financial crisis when they had an oversupply of aircraft.

As well as building jets, they are also continuing to sell decent numbers at good prices. Demand for new aircraft is down from 2022 but the first-quarter results were very good. It seems likely that book-to-build ratios could fall in the fourth quarter, especially as production ramps up. But it has been a good six months.

Pre-owned market and residual values – C

The state of the pre-owned market is more balanced. The number of business jets for sale has risen significantly, In June 2023 Amstat listed 1,019 business jets for sale. Now it says there are 1,203 on the market. But this is not a massive rise.

The percentage of aircraft for sale is still relatively low. Amstat says that 7.65% of large jets are for sale, 7.22% of medium jets and 6.12% of light jets. This means the market was still balanced at the end of June 2024. Aircraft are not depreciating as you would expect.

Perhaps the biggest worry is that experienced brokers – many of whom have had a good start to the year – are finding it hard to predict what will happen in the next six months, let alone in 2025.

Fractional operators – A+

“Our biggest challenge in 2024 is beating 2023,” says Andrew Collins, co-chair of Flexjet, speaking from Flexjet’s new owner’s lounge in Mayfair, London. Like other fractionals, Flexjet has quietly been investing in new corporate headquarters, buying maintenance and interiors companies, and selling a lot aircraft shares. WingX says that fractional fleets are flying more flight hours than at any time in the  past five years.

Fractional operators are also increasingly important to manufacturers. NetJets has been unveiled as the customer who placed this order in December order for the 12 Challenger 3500 jets. It now has 232 Challenger 3,500 options outstanding. Fractional operators are also set to benefit from owners looking for privacy.

As everyone know, things can change quickly. Looking at the market in June 2007 would have felt very similar (and everyone knows what happened then). The first six months have been pretty good. A sudden economic downturn would, of course, change things very quickly – but worry about that when you are back from holiday. 

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If you walk through one of the many unmarked doors and go down a floor, you find a network of kitchens, storerooms, the staff canteen, loading bays and shortcuts. It typically takes staff a week to learn their way around the basement.

It is the same in business aviation. When things go well, customers do not see the grind that goes into making a flight happen or buying a jet. Unfortunately, they are increasingly seeing these problems. Particularly when aircraft are grounded or in pre-purchase inspections. Some 75% of the nearly 500 delegates believe supply chains are better than in 2022.

“For the first time in modern history, it’s all about the supply chain determining how many aircraft can be built. It is not just affecting production, it is affecting MRO and maintenance as well,” said Kevin Michaels, MD, AeroDynamic Advisory, on the supply chain panel.

Nick McBoyle, procurement director at Bombardier explained how the OEM has embedded about 60 interventions specialists into suppliers to help them manage their supply chains.

“There is a whack-a-mole effect where problems suddenly emerge,” said McBoyle. “We’re then into a cycle of operational gymnastics to make sure that we can continue the aircraft build as close to the schedule as possible and obviously get them out the door.”

Despite these efforts, 37% of delegates do not expect supply chains to return to pre-pandemic normality until 2025. (32% believe it will be 2026).

Predicting demand is much harder. Research firm Vertical Partners says that business jet OEMs had an average book to bill of 1.4x in the third quarter. It says that manufacturers had a 1.2x average for 2023. But delegates are worried that high interest rates and political turmoil could make 2024 a difficult year.

Some 69% of attendees were very optimistic about the next 12 months (with 19% fairly optimistic). But not everyone was that bullish. “Is it me or does this feel a lot like the spring of 2008?” said one delegate.

The general consensus from people at the event is that they expect fewer transactions in 2024 (although the first quarter may benefit from delayed fourth quarter deals) and demand for charter to soften.

Andrew Collins, co-CEO, Flexjet said that demand had clearly fallen from 2020: “Demand for jet cards was so strong I could have sold them by knocking on my neighbour’s door.” But he added that Sentient Jet and Flexjet are on track for great years in 2023.

Most believe that many of the richest customers that discovered business aviation will continue using it. “There is a reason why hearses don’t have luggage racks,” said Peder von Harten, president, Nicholas Air.

Every speaker agreed that predicting the market is harder than ever.

Michael Amalfitano, president and CEO of Embraer Executive Jets opened the conference by highlighting how business aviation is leading aviation decarbonisation. He stressed how business aviation is a test-bed for innovation.

Ed Bolen, president and CEO, NBAA also used this argument in his keynote. “Every new business aircraft model being delivered today is 30% more efficient than the aircraft it is replacing,” said Bolen, outlining the new Climbing. Fast. campaign. “Business aviation is an incubator for new technologies.”

Some customers like to see the workings of the industry. Apparently Frank Sinatra, Dean Martin and Sammy Davis Jr (who filmed the original Oceans 11 film at the Fontainebleau) used the underground passages to slip around the hotel without being spotted.

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Question one: Is charter taking a dip?

If you answered Yes, take a point. There has been a 16% year-on-year (YoY) dip in charter demand in the US by the 11th week of 2023, including a 22% decline in Florida, according to WINGX. And Europe’s charter flights dropped 10% since this time in 2022.

James Leach, chief marketing officer, Air Charter Service (ACS) agrees: “The feedback from the market for us is that overall, the charter market is cooling.” While he recognises the drop in charter sector-wide, he says that ACS has experienced a levelling out, partly due to former Russian businesses still contributing in February last year.

Doug Gollan, founder, Private Jet Card Comparisons, Andrew Collins, co-CEO, Flexjet and Glenn Hogben, CEO, The Air Charter Association (ACA) all agree charter has dipped. Hogben thinks this is no surprise. “This year’s figures, compared with 2022, have fallen. But 2022 was an exceptional year for demand,” he says. “It was anticipated that there would be a reduction or levelling off in demand as the market normalises.”

Question two: Why is this happening? (Multiple choice).

Is the answer: The airlines’ recovering schedules, Rising prices, or Satiated demand? Gollan believes the first option is the correct one. “While the airlines [schedules] are still awful, if people are flying alone and don’t have to check baggage, they will pay $1,000 to fly first class for a two-and-a-half-hour flight, instead of $20,000 for a light jet,” says Gollan.

Leach also thinks the airlines are to blame. “There were a lot of new customers coming into the charter market over the past two years,” he says. “While some are now chartering regularly, many have returned to scheduled service for most of their air travel, chartering only occasionally.”

Richard Koe, MD, WINGX says that while industry-wide issues are affecting travel, people also don’t have the same appetite for jet travel as they did immediately post-lockdown. “Economic uncertainty and down-trending equity markets have capped business jet charter demand in the last nine months,” he says. “Combine that with the inevitable drop off in ‘revenge travel’ as pent-up demand from lockdowns dissipates. Year-to-date, scheduled airlines are flying well above last year and closing the gap on pre-pandemic levels.”

But ACS’s Leach also sees another factor. “Pricing has also played a big role,” he adds. “We have seen charter pricing rise significantly over the past 12 months and no doubt this will have priced some lower end charterers out of the market.” Leach says this is evident in the ACS statistics, which show flight numbers in February this year level with February 2022, but overall gross revenue rose by 20% YoY.

Question three: Should we be worried?

“Very hard to say,” says Gollan. “There was more demand than the market could support. There are still issues with supply chains, maintenance delays, pilot shortages, training slots, so this is giving everyone a chance to take a breath and begin again providing a dependable product.”

But Gollan adds a warning: “That said, a slide in charter was a precursor to the 2008 financial crisis.”

Leach worries not for the sector overall, but perhaps for some companies. “It will be a cause for concern for those organisations whose business model requires strong growth to service debt or who over-expanded their cost base during the boom,” he says. “However, a big economic shock if the banking crisis escalates may change things.”

On the other hand, ACA’s Hogben is optimistic. “The growth experienced over the last two years has been exceptional, and for this to be maintained is still a very positive situation for the industry.”

Collins adds: “Looking ahead, pre-sold demand is strong and will eventually unlock flight legs.” US passport renewals for international travel have seen a 30-40% YoY increase in applications, which shows there is still strong demand. “We will see a return to a more normalised world of flying,” he says.

Koe adds that appetite for business jets is still strong, with charter activity in Europe and North America still “well up” from 2019.

So, how did your answers compare with ours? (Please let us know via email). Whether you answered the last question Yes or No, it could be time for a well-earned drink – after work.

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The offsets are equal to planting 345,000 acres and nearly 5,000,000 trees or providing the energy for an entire average US town for a full year, according to 2021’s US Census Bureau estimates. Sentient Jet’s carbon offset programme supports a variety of renewable energy and forest conservation projects.

Andrew Collins, president and CEO, Sentient Jet said: “We chose to focus on a more comprehensive offsetting program, as we knew this was the best method to help reduce the footprint of our client’s flights while also taking definitive steps to reducing emission levels. Within 18 months we’re extremely pleased with the success of this program, but of course we’re always looking for ways to improve and evolve our ongoing sustainability efforts.”

“We hope Sentient’s sustainability efforts can become an example for what the private aviation industry as a whole can accomplish in terms of making meaningful steps toward reducing overall emissions and prioritising our planet,” said Collins.

As noted, Sentient Jet’s initiative comes from its partnership with 4AIR, the private aviation sustainability rating system. Sentient Jet’s offset programme “goes beyond” by offsetting all aviation emissions, including water vapour, aerosols, and nitrous oxide.

Kennedy Ricci, President, 4AIR said: “Sentient Jet continues to demonstrate true leadership by committing all of its flights to 4AIR’s Emissions Neutral level on behalf of its clients. Sentient goes beyond just carbon neutrality, addressing the impact from CO2 and non-CO2 emissions in a truly comprehensive fashion.”

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A new breed of High Net Worth Individuals and Ultra High Net Worth Individuals is emerging to re-energise business jet sales, Michael Amalfitano, President and CEO, Embraer Executive Jets, told more than 500 delegates in his keynote address.

“This is leading to much stronger than usual first-time buyer activity,” he said. “Before [Covid-19] first-time buyers used to represent 10% to 15% of business jet deliveries. Now it’s approaching 50% in some classes – especially entry level jet categories.” A clear trend was buyers’ interest in smaller aircraft. “We have also seen the pre-owned customers active and this market is heating up, particularly for smaller class aircraft – at least for now.”

Hamish Harding, Action Aviation chairman, also highlighted the trend towards new customers. “Most of our buyers are new buyers – the corporates aren’t buying at the moment – but there are exceptions. Only 10% of the people who could buy private jets have private jets,” he said. Harding confirmed buyers’ interest in smaller jets worldwide, if not in the Middle East. “People do want a private jet, so they don’t have to travel with other people. The concept of buying a smaller jet, just to be on your own, becomes possible and that trend is driving the current light jet market.”

‘People do want a private jet’

Garett Jerde, founder and MD, JetHQ, was equally upbeat about the prospects for new entrants revitalising private aviation. “I don’t think we have even scratched the surface. There’s so many people that can afford private aviation and now they’re coming out,” said Jerde. He also detected interest in smaller-sized aircraft. “Everybody thinks of G550 or a G650 or a Global 5000, but you can start a lot smaller to serve your purposes.” New entrants could buy a 400XP for $1.5m, he added.

Joseph Carfagna Jr, President and CEO, Leading Edge Aviation Solutions, agreed buyers were focusing on small aircraft. “This upturn [in 2020] is different because it’s driven by smaller aircraft,” said Carfagna. “The first-time buyers back when the market was hot in 2007 were buying big airplanes, as their first airplanes. This is a different segment that seems to be stepping in because of necessity because they don’t want to fly on airlines. It’s not wretched excess, which is what we had in 2007.”

‘It’s not wretched excess’

Brian Proctor, founder, President and CEO, Mente Group, guides his customers towards considering price rather than aircraft size. “Instead of looking at a segment we should be looking at a price point. The market will continue to be strong at $20m and below for the foreseeable future. At that price point you can buy everything except for a Sovereign, a 650, a 7500. There are a lot of airplanes that you can buy at $20m and below.”

Retaining new clients was the focus of interest for Andrew Collins, Sentient Jet President and CEO and lead executive, OneSky. “The first wave of new entrants has somewhat subsided,” he said. “So in order for us to breakout further into this addressable market space, we are going to have to retain those clients.” He noted a trend towards lower level executives now flying privately.

Concern about the fate of 100% bonus depreciation on aircraft sales also focused speakers’ attention. Clay Healey, AIC Title Service CEO, worried a new administration in the White House was likely to change the structure of taxation and probably remove the 100% depreciation from aircraft buyers, which was “very beneficial” for buyers, OEMs and used aircraft dealers.

Carfagna thought 100% bonus depreciation would survive next year if the Republicans held the Senate. “If Republicans keep the Senate on January 5th, there will be no change and people will keep buying aircraft into 2021.”

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As an official partner of the two annual races and their shared home track, Sentient Jet has curated several extraordinary experiences surrounding the weekend’s celebrations including bespoke private travel services, special on-site hospitality offerings and the third annual Derby Day Breakfast hosted by Brand Ambassador and Celebrity Chef Bobby Flay.

Further, the private aviation company will add additional support to the horseracing community over the weekend through its position as the presenting sponsor of the Alysheba Stakes, a highlight of Oaks Day. The 2019 event marks the fourth consecutive that Sentient Jet will offer signature services for fans and participants since becoming the first private jet provider to assume the role of Preferred Private Aviation Partner in 2016, as well as the latest demonstration of the brand’s longstanding commitment to the Thoroughbred horseracing industry as a whole.

“Over the past decade, Sentient Jet has become deeply engrained in the horseracing community with a proud presence at many major industry events,” said Andrew Collins, president and CEO of Sentient Jet. “We’re thrilled to kick off our twentieth anniversary year with the renewal of our commitment to the Kentucky Derby, Kentucky Oaks and Churchill Downs – three of the world’s most prestigious racing organisations – and look forward to continuing our longstanding support of the sport and all of those who dedicate their livelihoods to it.”

Sentient Jet will usher in Derby Day at the brand’s third annual, invite-only Derby Day Breakfast hosted by Bobby Flay. Taking place from 9:00 to 11:00 am on Saturday, May 4 at 21c Museum Hotel, Louisville’s leading hotel, the exclusive culinary event will feature delectable dishes, craft cocktails and engaging entertainment. A bespoke menu of Kentucky-inspired dishes will include indulgent mains such as Blue Corn Crepes with Sweetened Ricotta, Strawberry Rhubarb Compote and Blueberry Sauce and Sweet Potato-Chicken Hash with Poached Eggs and Green Onion Hollandaise served alongside Julep Spritzers and Strawberry Rhubarb Margaritas.

“The Derby has been a highlight of my annual calendar for many years, and I’m proud to be a part of the weekend’s newest tradition with the Derby Day Breakfast,” said Bobby Flay. “It’s a joy to combine my passion for cooking with my love of horseracing, and I’m looking forward to sharing race day predictions with fellow fans over fine food and drink.”

Additionally, Sentient Jet will once again provide private flight access to the races through its prestigious Jet Card platform, which offers the most seamless and stylish way to travel to and from Louisville during Derby weekend. Through the singular service, all Derby guests will be able to fly to Kentucky through Sentient Jet without entering into a Jet Card commitment. Beyond the flight experience itself, passengers will also gain access to the additional benefits offered to Sentient Jet Cardholders at the event, including entry to the Derby Day Breakfast.

“Year after year, our Cardholders make way to Churchill Downs to take in the most exciting two minutes in sports, and it’s an honor to be an eagerly anticipated part of their festivities,” said Collins. “Whether through our signature travel services, annual breakfast or on-site experiences, we can’t wait to welcome new friends and old to celebrate the Kentucky Derby with Sentient Jet.”

Sentient Jet was named the first-ever Preferred Private Aviation Partner of the Kentucky Derby, Kentucky Oaks and Churchill Downs in a multi-year agreement in 2016. The partnership reaffirmed the company’s longtime presence in the horseracing community as a sponsor of the Breeders’ Cup World Championships and Fasig-Tipton and provides Cardholders and clients with premium perks, including exclusive ticket pre-sale opportunities. Sentient Jet’s support of the Thoroughbred industry has also included endorsements of several of the sport’s most notable horses.

As one of the country’s leading private aviation companies, Sentient Jet provides clients with private flying opportunities for all their air travel needs. Sentient Jet offers its 25-Hour Jet Card in four jet-size options, allowing clients to purchase flight time on Light, Mid, Super-Mid, and Heavy aircraft as well as in two age classes (Preferred and Select), starting at just $131,800.

The company recently announced the SJ25+ Super-Mid Jet Card. Offered at $224,275 for 25 hours of flight time, SJ25+ offers Cardholders guaranteed access to the most popular Super-Mid Size jets, all of which are Wi-Fi enabled. Sentient Jet Cardholders receive a rare combination of industry leading service and safety, complete with a one-year lock on all-inclusive hourly rates, with the added bonus of 15% discounts on hourly pricing for qualifying round-trip travel. Through Sentient Jet’s mobile app, Sentient Jet Cardholders can also book private jet travel on-the-go, as well as access flight details, initiate assistance through a 24/7 live chat feature, and localised recommendations for exclusive benefits.

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Once you have got past the tourists outside, there is a surprising calm in the Wheels Up offices (it possibly helped that Kenny Dichter, the founder of Wheels Up, was not in that day). But one of the things you quickly realise is how important tech is to the company. The office is full of programmers, digital marketing experts, people who specialise in user experience, apps, systems and artificial intelligence. There is a lot of concentration and analysis taking place.

Tech has been important to the company since it launched; in fact its first official hire was Terrance Truta, its chief technical officer. Since then it has hired more than 50 tech specialists (since Wheels Up launched five years ago they have only lost two tech staff one to Apple and the other to Google).

Dan Crowe, the company’s chief information officer and executive vice president, joined from Weight Watchers, where he led the digital strategy of this very different membership company. Before that he led a team of 1,200 people at IBM and also grew Autotrader.com (the same company that ended up buying their CFO’s former company) from a start-up to one of the biggest car buying sites. He clearly loves his job at Wheels Up.

“Hiring tech people is hard and I spend a lot of time doing it,”  says Crowe, “but there are a lot of benefits in working here. They get to create products that people use – and improve their experience – and we are growing fast.” He adds that they also have a we work standard table tennis table.

Crowe says that Wheels Up are constantly trying to improve how customers interact digitally. This week it launched a product that allows people – such as personal assistants – to track flights in real time.  Crowe says that staff are spending a lot of time understanding data. “Anyone who knows the industry can predict the top 30 peak days,” he says. “You need AI to predict the next 30 days and the next 30.”

Wheels Up is just one business aviation company that sees technology as a priority.

Vista Global last week formally launched TechX, its new technology company. “The pressure from the client side will be, over the years, to have the highest level of technological platform,” says Thomas Flohr, founder of Vista Group (who this week also bought XOJET). “I don’t see the need for every single operator in the world to build their own technology platform, I believe that we have a platform and we will continue to invest in a platform which we can make available for many operators around the world.”

Last year Directional Aviation, the parent of OneSky, launched OneSky Network which also wants to run IT for operators. Last month it bought PrivateFly, the pioneering online booking site.

All of the companies are doing this because customer behaviours are changing.

“We are not far from a world where 50 per cent of SkyJet’s transactions are digital,” says Andrew Collins, president of OneSky’s Skyjet and Sentient Jet. “This can be a high-touching business and we are happy to support customers who want to speak with us as many times as they want. But when I travel I am not a high-touch person. I use Uber, I use hotel apps, I like knowing autonomously that I can move about. We have a lot of customers like that.”

But traditionalists do not need to be too worried. One of the reasons that Wheels Up’s offices have a high proportion of tech specialists is because it likes its salespeople to be out of the office and with customers. The membership company has offices all over the US – including Boston, Miami, Los Angeles and Nashville. Old fashioned referrals and face-to-face sales are still very important to the company.

Business jet companies are watching each other’s tech developments closely. “We had a similar thing when I was at Autotrader,” says Wheels Up’s Crowe. “There is definitely a tech Arms Race going on and it is going to continue.”

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