“We are back, in person,” JetNet (#601) iQ creator Rolland Vincent proclaimed, opening the 10th JetNet iQ Summit in New York City in September after a Covid-induced year-long absence.
Vincent's words apply equally to business aviation, as data and other evidence presented at the two-day conference underscored. JetNet’s annual iQ Market Forecast—a perennial highlight at the summit—predicts “an enduring business aircraft recovery” (see sidebar); the CEOs of four business jet manufacturers, sharing the dais, reported new business jet sales are “robust” and “on acceleration,” as Bombardier’s Eric Martel put it; and demand and rising valuations for preowned aircraft are “just absolutely off the scale,” with no signs of abating, said Bob Zuskin, CEO of appraisal firm Jet Perspectives.
Yet these favorable prognoses face major challenges, with supply-chain issues, workforce shortages, and demands for sustainability among the industry’s most critical issues ahead. The open dialog between the 180-plus C-suite attendees and panelists at the summit gave a clear view from the top of industry leaders’ views, and their responses to the challenges of the past year and those coming.
Indeed, four of the dozen sessions focused on leadership perspectives, with panelists addressing such topics as aircraft and engine manufacturing, business jet operations, and aircraft financing, while other sessions spotlighted sustainability, industry advocacy, preowned aircraft values, workforce diversity, customer experience, and more. Together, the sessions addressed the industry’s opportunities and major challenges from a variety of angles.
The iconic Eero Saarinen-designed TWA Hotel and Terminal 5 at JFK International Airport, showcasing aviation’s enduring legacy of innovation and resiliency, proved the perfect backdrop for the gathering. And an evening reception on the tarmac around and inside the Lockheed Constellation Starliner on permanent display seemed to serve as both a coming out and welcome home party for the crowd.
Taking the stage for one leadership perspective discussion, the CEOs of Bombardier, Dassault Falcon Jet, Embraer Executive Jets, and Textron Aviation agreed that demand has risen to levels unseen in more than a decade, driven by new-to-business-aviation customers, who are often buying midsize, super-mid and large-cabin, rather than entry-level, jets.
Manufacturers must “provide a collaborative environment” to educate them on ownership, said Embraer’s Michael Amalfitano, outlining the process his company has instituted, and his peers explained their analogous sales adaptations. It was roundly noted at the event that the demand is occurring without the participation of corporate customers, who remain unable to resume normal operations due to pandemic concerns and travel restrictions.
The CEOs also agreed—as did many others at the event—that, notwithstanding electric and hydrogen powerplant developments, sustainable aviation fuel (SAF) is “the only way that makes sense” for business jets to meet CO2 reduction targets for the next decade at least, as Dassault’s Thierry Betbeze said.
But a critical part of the industry hasn’t regained positive lift. “The one thing that has been adversely impacted by Covid is the supply chain,” said Textron Aviation’s Ron Draper. He cited a 150 percent increase in shipping costs from Asia and “20,000 fewer shipping containers” among myriad indicators of supply-chain problems, a list many panelists and audience members added to during the summit.
Asked in one of the perspective sessions how Gulfstream Aerospace managed its supply chain through lockdown, senior v-p and CMO Jeannine Hass said via Zoom, “It really comes down to investing in those [supplier] relationships, setting expectations, having a lot of clarity about who's responsible for what, and then having contingency plans in place.”
The pandemic’s impact and lessons learned were referenced throughout the summit and were the subject of the perspectives session on “Climbing Out of Covid.” Clay Lacy Aviation president and CEO Brian Kirkdoffer said his 53-year-old company was on track for its best year after the first quarter of 2020 when Covid cut flight operations in April by 95 percent. But his customers—and those of other operators—“used that downtime to modify aircraft, so our maintenance business went way up.”
Since the rebound, the number of new charter clients has doubled and the number of management clients—including “younger and younger owners"—has tripled, he said. “Covid showcased the inherent health and time benefits of private jet travel, as people reevaluated what’s important to them,” another sentiment expressed repeatedly throughout the gathering.
In that same panel, Ron Epstein, Ph.D., a Bank of America Merrill Lynch Global Research managing director, called the pandemic “a great amplifier…if you went in weak, you got weaker; if you went in strong, you got stronger.”
Against a backdrop of the lowest and still-dropping inventory levels in history—according to JetNet’s market report, only 6.2 percent of the jet fleet and 5.4 percent of the turboprop fleet were available for sale at the end of the second quarter—preowned market activity was another topic of interest. Prices are rising, but the “dynamic” activity has challenged appraisers in determining and keeping up with preowned aircraft values, said Joe Zulueta, managing partner and ASA at Aeronautical Systems, in the “Aircraft Values: Up, Down, Flying Around?” session.
Meanwhile, as manufacturers and buyers fret about meeting the rise in demand amid supply-chain problems, Wall Street is leery about OEMs expanding too quickly. “We want lower production numbers,” Jeffries research analyst Sheila Kahyaoglu said during a Wall Street perspective session, as investors “don’t want to go through [another] decade of oversupply.”
Yet a growing shortage of skilled business aviation professionals across all positions was cited by some panelists and attendees as the industry’s greatest threat to long-term prosperity, with diversity in the workforce seen as the most promising panacea, and a key to better organizational performance. But that goal seems more intractable for business aviation than creating sustainable fuel or righting a parts supply chain, judging by the information presented during the summit.
In a session on the importance of diversity, Sheryl Barden, president and CEO of Aviation Personnel International, noted that women comprise 9 percent of air carrier pilots, while their share of the jobs in business aviation is lower, adding that “pressure [for diversity] is coming from the greater corporation, not necessarily from the aviation department.”
Acknowledging that stringent flight-time requirements and a lack of necessary technical skills hamper diversity efforts, Barden recommended hiring some not-yet-qualified candidates and putting them to work as they develop, an investment that will pay large dividends for employers, she said.
Dr. Sharon DeVivo, president of Vaughn College, which offers aviation degree programs, seconded that advice. “If you're going to grow a diverse workforce in the pilot’s seat and in the technician’s seat, you've got to put your money where your mouth is.”
Located adjacent to New York’s La Guardia Airport, Vaughn has 1,500 students, 80 percent of whom are minorities. The school ranked No. 1 in a New York Times study of educational institutions best at moving attendees from the lower 40 percent of household incomes to the upper 40 percent.
A handful of students and recent grads accompanied Dr. DeVivo to the summit.
Lack of exposure to the industry and its employment opportunities is another impediment, as GE Aviation general manager of business aviation engines Melvyn Heard indicated in a leadership perspectives session otherwise focused on keeping teams and operations moving forward. Heard recounted being inspired by hearing NASA astronaut Ron McNair speak at his junior high school, and said he vowed after the Challenger space shuttle disaster to join the aviation industry “to make sure that didn’t happen again."
A high school teacher advised him to attend college at Tuskegee Institute, where he got an internship with GE and learned about the company and industry. Today, he manages all the turbine engine development and production programs in the company’s business aviation portfolio.
“I know there's a lot of discussion about workforce development and education,” Heard said in a closing comment. “I'm going to challenge people to figure out how to reach back to some of the smaller institutions to provide recruitment support—not only with internships but financial aid. For me, personally, I'll be giving Vaughn College a $500 contribution today.”
The JetNet iQ Market Report 2021 forecasts 718 new business jet deliveries this year, up 15 percent from 2020, growing 7 percent next year, and then flatlining in 2023 due to supply-chain issues before rebounding, in total, it predicts deliveries of some 8,529 jets worth $245 billion over the next decade.
In this year’s preowned market, as of the end of July, 3,205 retail business jet and turboprop transactions were registered globally and 1,289 aircraft were available, while the global fleet count at the end of the second quarter was 7,765 business jets and 15,738 turboprops. “We’ve never seen inventory so low,” JetNet iQ creator Rolland Vincent said, with the shortage driving some shoppers to buy new, even as delivery slots for some airframes stretch into 2023.
Data from ongoing, statistically valid quarterly surveys of owners and operators registered the highest level of optimism since the polling began over a decade ago, with more than 80 percent of respondents reporting themselves “likely” to buy a new business jet in the next five years. Another bullish indicator for the industry: 19 of the world’s 20 largest economies are expected to grow 3 percent or more this year.