Maybe it was just that they were escaping the frigid weather gripping most of the U.S. and Canada this past week? Whatever the reason, the mood was sunny as CEOs from private jet manufacturers, operators and program providers mixed with executives of law firms, insurance companies and financial institutions gathered at Corporate Jet Investor in Miami.
As swimsuit clad vacationers strolled through the lobby on the way to the pool and beach, it seemed like the gray and blue suits were having a good time too, judging from the smiles, clinking glasses and laughter around the bar.
The outlook was sunny during the Corporate Jet Investor conference held this past week at the … [+]
Part of it could be that the first speaker, the chief economist with PNC Financial Services Group, Gus Faucher told the nearly 500 attendees, “Looking at the U.S. economy, I feel pretty optimistic…We are seeing the longest economic expansion in US history. And expansion will continue to at least mid-2020, if not beyond.”
Speaking to the broad strength of the U.S. economy he said, “Consumers have the ability to increase their spending…and income is going up a bit faster than spending meaning that they have more savings.” He noted rising home and stock prices, saying, “Conditions for consumers look fantastic.”
While he cautioned that trade wars and supply chain concerns continue to be a drag on business spending, and the U.K. could be thrown into a recession worse than the 2008-09 financial crisis by a hard Brexit, somebody sitting somewhere behind me quickly quipped of Great Britain, “They’re getting rid of private jets their anyway,” a reference to the Labour Party’s call for grounding business aircraft that spit out CO2 by 2025.
And yes, there is that flight shaming thing in Sweden, the Green New Deal, which in at least one version, wanted to eliminate all air travel by 2030, and a shortage of pilots pushing up pay.
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However, executives seemed more focused on what they see as the half full part of the business aviation glass.
For Michael Amalfitano, the CEO of Embraer Executive Jets, it is both his evolutionary and more fuel-efficient new Praetor midsize and super midsize jets bringing longer nonstop flights to their users, plus opportunities to revolutionize short flights as VTOLs make their way to the market.
Like virtually all industry executives, he outlined the industry’s push to reduce carbon emissions, and like most of the speakers, seemed not particularly bothered by the Luddite rhetoric.
From Patrick Gallagher, president of NetJets, the largest operator of private jets in the world, his optimism is based on the growth of UHNWs that has been drastically outstripping delivery of new aircraft.
Andrew Collins, the CEO of Directional Aviation’s Sentient Jet, was also beaming as his company celebrated the 20th anniversary of the jet card, which it created. It would be easy to argue along with fractional ownership, the asset light membership programs have significantly broadened access to private aviation. Since the Great Recession, the number of jet card sellers has more than doubled, and today there are over 300 membership programs on the market.
In fact, Leona Qi, VistaJet’s president for the U.S. and Asia said demand is so robust as it takes delivery of its first six Bombardier Global 7500s ultra long-range private jets in 2020, it has had to limit availability to only its Program members. They commit to buying at least 50 hours of flights per year for at least three years.
Another bright spot is that more new customers are starting at the top of the food chain. While turboprops and light jets were the traditional entry point for private aircraft ownership before graduating to bigger aircraft, Don Hal0burdo, a senior vice president with Jet Aviation, a unit of General Dynamics, said the wave of young billionaires is starting with large cabin planes carrying price tags beginning at $50 million and moving up from there.
Jonah Adler, the chief revenue & marketing officer of Jet Edge, which is adding two Boeing Business Jets to its fleet, and Andy Priester, CEO of Priester Aviation, who manage private jets for wealthy owners, said major challenges include educating first time buyers about the complexities of their newest acquisitions.
An outline from a two day Aircraft Transaction Master Class that followed the main conference shows 40 different steps it takes to buy a private jet, each which can be brutally complicated and requires the assistance a coterie of specialists.
Rob Scholl, senior vice president of sales and marketing at Textron Aviation, parent of Cessna and Beechcraft, spoke about the core mission of private aircraft, saying 97% of the global fleet is used for non-luxury travel, in many instances critical flights ranging from air ambulances to oceanic research.
He highlighted a Kentucky surgeon who uses his Citation Mustang to visit several rural hospitals in a single day, multiplying the patients he can care for. In another instance, he cited a cattle farmer who with his executives cut three day driving trips to a single day by using a King Air C90 that can land on grass strips.
Kenny Dichter, the founder and CEO of Wheels Up, who earlier this year launched a new membership to expand its jet sharing offer, said he believes there are two million households and businesses that “have private aviation money.” That could be as little as $10,000 a year buying seats on flights from Teterboro to Nantucket or going to college football games on the weekend.
With wealth creation coming faster than ever, Dichter says there are hundreds of thousands of more folks who want to fly privately and are “just one deal away.”
NetJets’ Gallagher, speaking the next day, seconded Dichter’s optimism about growth opportunities. He said the Warren Buffett-owned company, which popularized fractional ownership, flies 500 flights per day for owners, last year visiting over 3,000 airports.
The company has taken delivery of 366 new jets since 2012, all more environmentally friendly than older models. Gallagher reports research Netjets commissioned showed 81% of UHNWs believe flying privately is a worthwhile luxury.
He thinks the industry is being held back by flight shaming, plus those stereotypes tying private flights to corporate greed and opulent luxury.
Flying privately squares nicely with the 87% of the super rich who told researchers they are taking steps to simplify their lives.
The industry, according the Gallagher, has to do a better job of “holding (prospects’) hands and showing them the benefits.”
He told the audience that for the industry’s behemoth, with “only 8,000 customers worldwide (out of more that 230,000 Ultra High Net Worth households), there is phenomenal opportunity .”
