JETNET

No Future Fears

The following post by Gil Wolin originally appeared in the August issue of World Aircraft Sales, www.avbuyer.com and was reposted with permission.

Uncertainty – aye, there’s the rub… Uncertainty, about what to expect – and what to plan for. What’s the economy going to do in the next few years? How will the regulatory environment change? And how will aircraft owners, users, OEMs, and service providers respond? More importantly, how will we grow the industry, and introduce the next generation to business jet travel?

The first week in June provided the opportunity to address both uncertainties: for the near term, via the third annual JETNET iQ Summit in New York City; and for introducing the next generation to aviation, via the NBAA Regional Forum and static display at Westchester County Airport.

The former was a lively assemblage of economists and demographic experts, as well as aviation industry professionals and pundits holding forth on what the short- and long-term hold for us as an industry and as citizens of an increasingly interconnected – and interdependent – world.

The latter was the second such gathering, and the hangar and temporary ramp tent at Panorama was jam-packed with booths and displays – and a static display chock-a-block with business aircraft buffed and polished to a fare-thee-well. I couldn’t resist this opportunity to introduce the beauty and comfort of aviation to the next generation. I offered to escort my six-year-old niece Emily (and her parents) on a tour of the Regional Forum’s static display.

It was with the kind understanding of NBAA staff that we made our way to the remote ramp, where she boarded her first, second, and third business jet, and her first and second helicopter. Now Emily is a very bright and well-mannered young lady. And that made it easy for the various OEM reps to greet her with a cheerful “Welcome aboard,” making her first encounter with aircraft an upbeat experience. Suffice it to say, I think we have another aviation aficionada in the making. And while the JETNET iQ was not quite as uniformly upbeat, it did provide some signposts as to what we can expect from markets and regulatory agencies over the next few years – and helped eliminate some uncertainties.

The good news, according to the first speaker, economist Brian Beaulieu of ITR, is that while the remainder of 2013 and 2014 will be flat, he expects to see robust growth for 2015 through 2017, with interest rates remaining low. He forecasts a downturn in 2018 and 2019, but the scary news for the average US homeowner – by 2020, 30-year fixed-rate mortgages will no longer be available. Rolland Vincent, JETNET’s partner in the iQ Summit and noted aviation market research analyst, added BizAv industry research to Beaulieu’s observations. This year will finish with 670 business jet deliveries, but we’ll see a 7.5% uptick to 720 units in 2014.

It’s not just the number of units forecast, however – it’s the product mix that’s fascinating. Large Cabin, long-range aircraft remain the order of the day, fueled by the continued growth of international business – and the increasing number of Ultra-High-Net-Worth-Individuals (UHNWIs). Yes, we’ve added yet another acronym to our industry, one that defines a segment with significant growth potential.

According to David Friedman of Wealth-X, a provider of intelligence on such folks for luxury brands, private banks and charitable organizations, there are 2,100 billionaires worldwide, with an average net worth of $2.9 billion. There are also more than 187,000 individuals in the world with a net worth of at least $25 million. While a $25 million net worth might not qualify as a G650 prospect, any charter sales rep would give his or her eyeteeth for a list of those email addresses.

Cash is king today in ways not seen in recent times, according to the banking panel chaired by Michael Amalfitano, Managing Director and Executive Head of Banc of America Leasing, Global Corporate Aircraft Finance. Cash buyers today represent 77% of all business jet transactions, up dramatically from the traditional 50%. New and like-new late model aircraft are the order of the day, with asset protection like hourly cost maintenance programs a “must.” Even nonbank financial institutions today face compliance with post-recession requirements such as Basel III and Dodd-Frank, as well as heightened scrutiny on each transaction.

A rosy outlook? Not quite. There is much on the horizon to give us pause. But with research and facts such as were presented at JETNET’s iQ Summit, we can plan and take action accordingly, rather than be paralyzed by nameless dread. Oh, and about the next generation? According to the note I just received from her mother, Emily’s new game at school is “airplane.” The youngster is the hostess, and some of her friends are pilot, passenger and flight attendant. Thanks to her “research” conducted at the NBAA Regional Forum, Emily knows that business aircraft are fun, and air travel is something to look forward to. And that helps allay my fears for our industry’s future.

Gil Wolin draws on forty years of aviation marketing and management experience as a consultant to the corporate aviation industry. His aviation career incorporates aircraft management, charter and FBO management experience (with TAG Aviation among others), and he is a frequent speaker at aviation, travel and service seminars. Gil is a past director of the RMBTA and NATA, and currently serves on the Advisory Board for Corporate Angel Network and GE Capital Solutions-Corporate Aviation. Gil can be contacted at gil@wolinaviation.com, www.wolinaviation.com