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

JETNET

Data Is Not Intelligence

In response to the post below by Josh Mesinger, we couldn’t agree more regarding the widespread need for accurate, actionable business aviation market intelligence, to go hand-in-hand with a professional sales approach. In fact, this is what JETNET has been providing – and perfecting – for much of the past 25 years. Every buyer and seller has a vested interest in making informed decisions based on the best available intelligence. At the end of the day, knowing more – whether as a manufacturer, buyer, seller, financier, lessor, broker or dealer – is a success element that brings competitive advantage. Our view is that it is not enough to know what a particular aircraft bought or sold for, as the specifics of a single transaction are unique to that one deal, which is generally inconsequential within the broader marketplace. Knowledge of key market metrics within the business aviation industry – including an analysis of economic conditions and business cycles, price and inventory trends, and evolving customer purchase behaviors and perceptions – is essential to a fact-based, intelligent approach. JETNET has taken that essential next step with its JETNET iQ market intelligence reports and forecasts. Quarterly surveys of aircraft owners and operators worldwide reveal numerous patterns, such as purchase and selling intentions, brand preferences, utilization patterns and intentions, and other market factors. Each quarter, we incorporate economic, industry and survey data together to analyze and generate forecasts of where the markets are going – not just where we have been. Our view: at the end of the day, a knowledgeable and experienced sales professional, armed with fresh market insights and data-based research, can be a very good person to know, regardless of which side of the table you are sitting.

Rollie Vincent
JETNET iQ Creator / Director
rollie@jetnet.com
Tel: 972-439-2069

Data Is Not Intelligence
May 24, 2013
By Josh Mesinger

There is a lot of data in our industry.  There are countless websites that list aircraft for sale, there are resources for operating cost information and there is the rumor mill about what aircraft sold for among many other data points.  Unfortunately, none of that data on its own translates into intelligence or provides buyers and sellers what they really need to know to make smart informed decisions.  This is another place where aviation professionals who are actively in the industry daily add considerable value.  Turning data into intelligence is the only way to make smart informed decisions to complete a successful sale or acquisition and correctly protect your investment.

For example, when you look at today’s Challenger 604 market there are over 50 aircraft for sale and many of them with asking prices under $7,000,000.  Many buyers will tell you that they have heard that their friend bought one in the $6Ms or better and they want the same deal.  While those individual data points are accurate, they don’t tell the full story.  When you actually look at each of the 50+ aircraft for sale, you will see that very few might make a specific buyer’s short list.  Either the total time is higher than that buyer wants, or they have damage history or they have pedigree that makes them less desirable than others that are available.  Once the short list is created based on an intelligent review of the available options, the buyer’s representative can use their industry relationships to gather real market intelligence to apply to their discussions to understand what each individual aircraft should really be worth and what they should offer on each.  The same applies to aircraft sellers.  Without really understanding the details of the competitive aircraft in their make and model category and the competitive categories, they will never be able to build an intelligent pricing strategy that most effectively and quickly sells their aircraft ahead of the competitive aircraft.

When looking at operating cost information, there are generic high level analysis on different makes and models in the industry which can provide a good overview, but building specific budgets takes a lot of intelligent thought to understand the different intricacies of any specific aircraft and the operator’s requirements.  Unless someone takes the time to understand the maintenance history and future maintenance projections for a specific aircraft and how and where the owner will use it and intelligently think through those details, no amount of raw data will ever provide the right holistic understanding of the real costs of ownership.

There are those in our industry who wish that the amount of available data were more limited.  I consider the data a positive addition to our industry and it helps provide general high level knowledge to buyers, sellers and operators.  However, without smart people on your aviation team to help interpret that data and turn it into intelligence to apply to your sale, acquisition or operation, the data will not add any value and it will be distracting and misleading.  Choose your aviation team members wisely and go forward with intelligence that can lead to success.

JETNET

Guest Post: PLANE TALK

We’re happy to share this fantastic post by Janine Iannarelli, President of Par Avion Ltd. which originally appeared on their blog, but warrants sharing with our readers…

Well, if you haven’t heard by now, the U.S. President decided last week during a press conference to malign the business aviation industry by accusing users of business jets as enjoying tax benefits above and beyond what is afforded to users of other business equipment. Gee, last I heard accelerated depreciation was a creation of the current administration as part of the stimulus package to jumpstart the economy and create jobs. So when did the users of business jets become the primary reason why our economy is not recovering?

This attack seems to me like nothing more than an attempt to deflect attention from the fact that the administration has failed miserably in their efforts to restart the economy, primarily in the area of job creation. How easy it is to throw stones at a highly visible business tool and get the public believing that anyone with a business jet is living large as a result of enjoying certain tax benefits, while the rest are struggling. One important fact was not presented during this press conference: that the purchase of a business jet for personal use does not qualify for bonus depreciation. Kudos to NBAA and all who support this industry for quickly rallying and parrying the sword thrust at an important part of this country’s manufacturing sector.

Read the full post at the PAR Avion LTD blog…

Janine Iannarelli, President Par
Avion Ltd.
Diane Levine-Wilson

Guest Post: Aviation Advocacy, or in simple terms: “I’m Mad As Hell, and I’m Not Going To Take This Anymore!”

As one of my favorite guest bloggers, Jeremy Cox is very insightful. His comments regarding business aviation breaking out from our cloistered world to send our message out to the general (and voting) public is timely. Too much has been written in the popular media that sends the negative impression of our industry as elitist, unnecessary, and unsafe. That needs to change.

jeremycoxGuest Post by Jeremy Cox
Vice President at JetBrokers, Inc

I believe the alphabets and especially NBAA has to expand the message of our usefulness and necessity to the core economy of our country.

Many readers of this column might remember the 1976 film: “Network” from which I quoted the famous line above. Whether you do, or you don’t remember, the sentiment carried by this quote is totally appropriate to the aviation industry as it stands today: mired between the love that all of we insiders lavish upon it – the near total diffidence and almost total loathing that the eyes of the general public uses to view our industry – the secretive treatment of our industry by most leading company executives that the use of business aircraft is akin to maintain a mistress on the side –the empty words and visible stands made by self-serving politicians who are all heavy users of our products and services, and yet they rarely publically advocate the competitive advantages that business aviation use opens up for them – and lastly the media; a nasty mob of ill-informed, self opinionated asses who have truly lost the thread when it comes to ‘truth’ and ‘substantiated fact.’

All of the alphabet groups have spent millions of dollars of their member’s money on advertising campaigns that rarely deliver the carefully designed message to the right people. As accurate, as inspiring, and all out ‘feel-good’ as most of these print, internet and the odd but-rare television advertisement might make all of we ‘industry insiders’ believe that the right message is being delivered by our paid advocate organizations; unfortunately a lot of this advertising is aimed at us…We the believers, while there is no coordinated message being communicated to the business executives, the general public and so-called public servants, our politicians. My apologies to our alphabet leaders and communication directors, but like I said at the beginning of this piece: “I’m Mad As Hell, and I’m Not Going To Take This Anymore!”

As an industry, we have all been getting squeezed for some time now. Unfortunately most of us were either too focused or horse-blinkered into not seeing the outside forces gathering against us much sooner than we have today. The Global Financial Crisis (GFC) is the not the root cause of our identity problems, instead it has merely accentuated our public perception issues. No, a large chunk of the pie-chart that depicts our industry problems is due thanks to the secretive way in which we conduct our day-to-day operations. We cater to an elite group of people who choose private aviation, because it is just that: “private.” Continue reading

JETNET

Tank Half Empty or Half Full

Screen shot 2011-01-03 at 2.42.28 PMWe thought that this newsletter from Rolland Vincent Associates, LLC was a great read and received permission to share it with our readers. An excerpt is below, but you can download the entire newsletter (in PDF) by clicking here or on the graphic on the left

The Year 2010 has rapidly come to a close, and no doubt many business aviation executives are quietly whispering under their breath (for a second year in a row): “I’m glad that’s over.” Soon, the financial and sales numbers will be tallied and we will have a clearer picture of the results of all of our efforts.
In the meantime, recovery has certainly taken on a decidedly U- shape, as we first discussed in our July 2009 issue when we likened it to an upside-down Volkswagen Beetle. It takes time, energy, and coordinated action to return the Beetle to its wheels-down position. The good news is that this is exactly what is happening. Policy actions like the extension of accelerated depreciation, investment decisions in new models, facilities, and fleets by Gulfstream, Bombardier, Embraer, Honda, NetJets, and Flight Options, and consistent leadership from NBAA, EBAA, GAMA, AOPA, and others reflect a market that is returning to confidence. With slowed production lines and supply chains, and an overhang of used inventory, 2011 is shaping up to be no better than 2010 for new production delivery volumes. Delivery values are set to remain relatively strong as customers (particularly outside North America and Western Europe) continue to purchase and take delivery of high- end, longer-range aircraft.