Much has been made in recent months about the state of all aviation, not just commercial aviation and the downfall of the airline world. What makes the news of course is the customer impact on how flying has changed, but there are a lot of impacts that go way down the line and into the supply chain, both in human capital and the actual assets. On the human capital side, the announced furloughs of pilots and support staff have been well-publicized and it will leave a glut of highly qualified professionals with technical experience who are going to search for jobs in the short term. On the equipment side, the major manufacturers are reeling, watching aircraft deliveries fall off the map in the short run. These deferrals or outright cancellations of aircraft orders are rampant and create a large burden for those OEMs.
The private and business aviation market mirrors this in many ways, but the currency (read: the jet type) is just different. Quietly, many operators have deferred or canceled aircraft orders as they saw their finances take a hit, causing them to downsize staff and salary, but more importantly put their growth plans on hold. Publicly, announcements for aircraft deliveries at large providers have been made for Netjets (Columbus, OH) and Nicholas Air (Oxford, MS). Netjets had previously scaled back its aircraft delivery schedule with the advent of virus impacts and recently had reversed its direction with the bounce-back of flying traffic. Nicholas Air, which was noted as never having furloughed or downsized during this period, recently acquired new Phenom 300E airframes from Embraer.
The growth phase of the business is not just limited to acquiring aircraft from the manufacturers as Jet Card provider Jet Linx recently purchased Meridian out of the New York area, showcasing the gamble taken by pushing further into the Supermid and Heavy Jet markets. This acquisition is in stark contrast to other trends in the industry that has seen the market for those aircraft fall off exponentially given the low demand for international travel that is frequented by the Gulfstream and Global Express frames.
Regardless of the segment of private aviation, things remain in flux. While brands like Netjets and Nicholas Air acquire aircraft, other brands continue to shut their doors. This type of instability reinforces an earlier sentiment that knowledgeable flyers that are in the market for new options should do a heavy amount of due diligence. They should ask themselves the following:
- What is the growth trajectory of the company over the long run?
- Have they shown consistent growth and not just ride the current surge in demand?
- Do they own and operate their fleet of aircraft?
- As an aside, owning and operating one’s fleet in this economy is vitally important. For starters, it allows you to know the Operational Control elements that are being handled, specifically aircraft cleanliness. Second, it shows the stability of the brand as banks are not as keen to lend to operators who are not entirely rock solid right now. Lastly, the broker market (read: those that do not own/operate their fleet) will remain entirely dependent upon the financial health of the operators that fly in their program. If those operators struggle on their own, then the larger broker jet card will eventually see pricing changes by way of supply and demand shifts.
- Do they employ their pilots?
- What is the process publicly shown that speaks to their aircraft cleaning program?
- Who is buying from the brand? Are they new entrants to the market, or are they experienced flyers who know specifically the ups and downs of the industry and the things to look out for?
The smart buyer in this market is the informed buyer, and the informed buyer should insist upon these questions being answered. The responses are vitally important to vetting the provider, and the buyer should feel 100% confident in the provider they choose.
