How's Business In Business Aviation? The Answer Is Both Simple And Complicated

National Business Aviation Association kicks off its annual conference and exhibition here in Las Vegas, if you are asking about the state of business aviation, the answer probably has a lot to do with where you are sitting and what you are selling.

Inside the new Bombardier Inc. Global 7000 business jet. Photographer: Mark Elias/Bloomberg

On Friday, Aviation International News (AIN) published its annual Charter Market Report titled, “The industry is climbing.” It reported private charters in the U.S. increased 10% in the number of flights (543,449 compared with 493,431) and 12.7% in flight hours (765,196 compared with 679,018) during the first half of 2017.

With that type of good news, perhaps it’s not surprising Wheels Up, VistaJet, Victor, Stellar Aero Labs and JetSmarter, which all operate in that space, collectively announced nearly $400 million in new investments just since the start of the summer. “People have business to do and you can't-do it flying commercially,” says Kenny Dichter, the CEO and co-founder of Wheels Up, which uses the King Air 350i to help its customers get to those smaller airports that are hard to reach. At the other end of the charter and jet card and program membership spectrum, VistaJet has made its mark with luxury-laden long-range jets catering to Ultra High Net Worth families and global executives who hop between Continents like you and I cross the street.

A Dassault Aviation SA Falcon 8X business jet performs a flying display on the opening day of the 51st International Paris Air Show in Paris, France, on Monday, June 15, 2015. Photographer: Jasper Juinen/Bloomberg

From the seat of the jet manufacturers, it’s a bit more subdued. Sunday night, Honeywell issued its 26^th annual Global Business Aviation Outlook projecting some 8,300 new private jet deliveries in the next 10 years valued at $249 billion, or a clip of 830 new aircraft annually. It’s estimated 630 new jets will be added this year and the last time more than 800 jets were delivered in a single year was back in 2009. Either way, both numbers are a long way below Honeywell's pre-recession expectation in 2007 that 14,000 new private jets would come online in the past decade, about double what was actually realized. The numbers are from surveying over 1,500 non-fractional fleet corporate flight departments, and executives admit that there is a tendency for respondents to err on the optimistic side, although they characterize current projections as “realistic.”

For those of you who like to look at the water level in the glass optimistically, Honeywell's current 10-year projection for business jet sales ($249 billion) is above its 2008 10-year forecast of $233 billion. In other words, the trend to larger, longer range and more expensive aircraft means even as unit volume has dropped, revenue per jet sold is increasing. If you do the numbers, the average value of each private jet Honeywell expects to be delivered in the next decade is $30 million apiece versus $16.6 million back in 2007.

What’s really happening is up for debate. A lengthy analysis by Bloomberg came to the conclusion, “A rise in demand for new company planes, which would help stabilize the market, isn’t in the cards.” In the article, published yesterday, it notes used plane prices are still falling despite manufacturers scaling back of production and points out in the Honeywell forecast, the number of flight departments that plan to replace or add to existing fleets in the next five years dropped from 27% in 2016 to 19% this year.

Honeywell Senior Manager Gaetan Handfield says the biggest hurdle is that there are “too many young aircraft for sale.” Since 95% of private jet buyers are current jet owners, those owners with the relatively new planes are standing pat, hoping the faltering used jet market picks up so they can get more money before trading up for something newer.

Other places for optimism include those selling technology for both passengers and pilots. For example, John Peterson, Honeywell’s director of product marketing, estimates only about a third of the worldwide private jet fleet has WiFi, meaning there is plenty of room for sales growth. The company is also showing off cockpit displays that can be manipulated via new touchscreen technology in addition to a mouse, again, a sales opportunity.

How’s business in business aviation? That’s easy. It’s good, challenging (read not good) or somewhere in between. As the National Business Aviation Association kicks off its annual conference and exhibition here in Las Vegas, if you are asking about the state of business aviation, the answer probably has a lot to do with where you are sitting and what you are selling.

Inside the new Bombardier Inc. Global 7000 business jet. Photographer: Mark Elias/Bloomberg

On Friday, Aviation International News (AIN) published its annual Charter Market Report titled, “The industry is climbing.” It reported private charters in the U.S. increased 10% in the number of flights (543,449 compared with 493,431) and 12.7% in flight hours (765,196 compared with 679,018) during the first half of 2017.

With that type of good news, perhaps it’s not surprising Wheels Up, VistaJet, Victor, Stellar Aero Labs and JetSmarter, which all operate in that space, collectively announced nearly $400 million in new investments just since the start of the summer. “People have business to do and you can't-do it flying commercially,” says Kenny Dichter, the CEO and co-founder of Wheels Up, which uses the King Air 350i to help its customers get to those smaller airports that are hard to reach. At the other end of the charter and jet card and program membership spectrum, VistaJet has made its mark with luxury-laden long-range jets catering to Ultra High Net Worth families and global executives who hop between Continents like you and I cross the street.

From the seat of the jet manufacturers, it’s a bit more subdued. Sunday night, Honeywell issued its 26^th annual Global Business Aviation Outlook projecting some 8,300 new private jet deliveries in the next 10 years valued at $249 billion, or a clip of 830 new aircraft annually. It’s estimated 630 new jets will be added this year and the last time more than 800 jets were delivered in a single year was back in 2009. Either way, both numbers are a long way below Honeywell's pre-recession expectation in 2007 that 14,000 new private jets would come online in the past decade, about double what was actually realized. The numbers are from surveying over 1,500 non-fractional fleet corporate flight departments, and executives admit that there is a tendency for respondents to err on the optimistic side, although they characterize current projections as “realistic.”

Other places for optimism include those selling technology for both passengers and pilots. For example, John Peterson, Honeywell’s director of product marketing, estimates only about a third of the worldwide private jet fleet has WiFi, meaning there is plenty of room for sales growth. The company is also showing off cockpit displays that can be manipulated via new touchscreen technology in addition to a mouse, again, a sales opportunity.

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