THE BUSSINESS OF BUSINESS JETS IS EXPECTED TO HEAT UP IN 2019
Before predicting what happens in this specific aviation sector in 2019 and beyond, some perspective is useful. In 2008 the number of new business jets delivered worldwide numbered around 1300 units. Not a very high-volume business even in the best of times. Following the 2008 recession, deliveries dwindled to around half that amount and they have stubbornly remained in this region today. Therefore anything to the upside after nearly a decade of flat deliveries would be more than welcome. It is anticipated that this sector will change for the better this year as brand new models, which tend to excite the market and cause a spurt of sales, begin to enter the market. These spanking-new business jets include the G500 and G600 from General Dynamics Gulfstream division, Global 7500 from Bombardier and Citation Longitude from Cessna. Industry professional expect 2019 will be a better year than the past few years since the new business jets move the needle upwards on overall industry delivery values and units. However, a number of factors question the sustainability of this increase.
For example, emerging markets, which once accounted for 40% of all business jet deliveries, are struggling and account for just 15% today. As a whole, Asia, Latin America, Europe, the Mideast and Africa are displaying a relative weakness for now. That leaves the North American powerhouse, principally the US, to drive the market. However, there is growing evidence that its current economic strength will not last forever as the stock market, consumer sentiment and other metrics begin to suggest otherwise and with increased talk of a recession looming somewhere around the corner.
Another damper on new business jet sales is that they now depreciate quickly. A new jet price could easily be in the region of US$35 million. In five years that jet will be worth just 50% of its new value, for a whopping equity loss of over $17 million. This has taken the market some getting used to, since just 10 years ago it wasn’t unheard of for an aircraft to appreciate in value after five years due to simple supply and demand economics. Today though, there is an active fleet of close to 22,000 business jets worldwide according to aircraft data provider AMSTAT, a more than ample supply which now causes private jets to depreciate just like other capital goods.
What about the African market?
There are significant growth opportunities for business and charter aviation in Africa. Already, there are 481 registered private jets in Africa and the continent’s year-on-year business aviation growth is projected at 44%. This is despite current constraints on the sector across the continent. Thus, not all African aviation authorities work around the clock, which often delays overflight approvals for chartered aircraft. Presently around 50% of African citizens need a visa to visit their African neighbours only 27 African countries have signed the African Union’s protocol of free movement of people. When African states finally wake up to the advantages of business aviation within a single African aviation market this will create seamless air traffic across the continent, improve air service connectivity, improved continental integration, increase convenience for air passengers, save time, create jobs (especially for the young) and boost tourism.
Meanwhile, new opportunities are emerging for business aviation across the continent. Consequently, affluent tourists (not just Europeans) are now chartering business jets in Europe and flying to African destinations. What is seriously required are partnerships between African operators to exploit these opportunities as they arise, whilst at the same time operators source as much as possible from local suppliers, employ and upskill as many locals as possible, whilst generally engaging local business sectors and communities.
Providing quality service
One thing is certain worldwide: the success of the charter business model lies, first of all, in the capacity to provide a quality service and on the competence to service different needs. The latter is met by having presence in different markets and serving today’s main private jet trend: a growing demand in new regions around the globe, places that roughly 10 to 15 years ago had very little private jet activity. Furthermore, local charter providers have the advantage of knowing the market, the culture and the needs of the executive traveller, while international providers only market an aircraft, without the ‘local touch’. In different industries, these local insights are what make or break products and services and in the private jet market this is no different. The challenge for local operators is offering the same high
If one subscribes to trade associations estimates, business aviation contributes $150 billion annually to the US economy and provides 1.2 million jobs. From this perspective, it matters how the sector is expected to perform this year and beyond.
standards, online booking accessibility, different payment methods and taking advantage of actually being in the region, aware of the local economic, social and political trends that might impact bookings.
In the United States and South Africa, business aircraft may be operated under either FAR 91 as private operations for the business purposes of the owner, or under FAR 135 as commercial operations for the business purposes of a third party. One common arrangement for operational flexibility purposes is for the aircraft’s owner to operate the aircraft under FAR 91 when needed for its own purposes and to allow a third-party charter-manager to operate it under FAR 135 when the aircraft is needed for the business purposes of third parties. Fractional ownership, often called ‘time share’, involves an individual or corporation that pays an upfront equity share for the cost of an aircraft. If four parties are involved, a partner would pay one quarter of the aircraft price. That partner is now an equity owner in that aircraft and can sell the equity position if necessary. This entitles the new owner to 100 hours of flight time per year on that aircraft, or any comparable aircraft in the fleet. Additional fees include monthly management fees and incidentals such as catering and ground transportation.
2019 Business Jets feature
In order to differentiate this feature from previous Business Jets features, I have decided to only include that Jets that have come to market within the past few years. In addition, African Pilot has also sourced information from several of southern Africa’s Business Jet operators. Observant readers will notice the absence of several business jets that were previously published within past African Pilot business Jet features. This has been for two reasons: Firstly, several well-known business jet manufacturers are not present yet within the African market yet and secondly, several of these Original Equipment Manufactures (OEMs) appear to be focused on other world regions and not southern Africa.
ExecuJet Aviation Group
ExecuJet, part of the Luxaviation Group, offers a diverse range of services, including aircraft management for private and commercially registered aircraft, charter, maintenance, completions management and fixed base operations. ExecuJet has operations in six regions: Africa, the Americas, Asia-Pacific, the Caribbean, Europe and the Middle East, embracing a workforce of more than 1,000 experienced staff.
ExecuJet manages 165 business jets worldwide under the most stringent safety standards. Its commercial fleet is operated under the regulatory umbrella of six regional civil aviation issued air operating certificates (AOCs). ExecuJet has many authorised maintenance facilities throughout four regions, certified to work on most business jets. ExecuJet, in collaboration with the Paragon Aviation GroupTM, has a network of 53 FBOs globally, 27 of which are managed by ExecuJet.
Website: www.execujet.com
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