The record of the Biden-Harris administration in tackling inflation, creating jobs, and generally getting the US economy back on track after the pandemic and the surge in prices that followed Russia’s 2022 invasion of Ukraine is being fiercely debated ahead of the presidential election.
While the political argument tends to revolve around how “ordinary” voters feel about their standard of living, it is the confidence of corporate America and those who can afford to fly privately for work or leisure that determines the wellbeing of the business aviation sector in the USA, still the biggest in the word by far. There is an inevitable nervousness among that demographic ahead of 5 November.
With lack of clarity around the path of interest rates, taxation, and the wider economy, the election “adds to that uncertainty and can be an excuse for people to delay spending decisions”, maintains Adam Cowburn, managing director at Alton Aviation Consultancy.
Chad Anderson, chief executive of brokerage and aircraft trading firm Jetcraft, agrees elections can “create a little bit of pause” as purchasers put acquisitions on hold until policy directions become clearer.
Clues to the mood of the industry are likely to emerge at the industry’s biggest annual gathering, the National Business Aviation Association (NBAA) convention and exhibition in Las Vegas, Nevada. It takes place from 22-24 October, just two weeks from when voters will choose between Kamala Harris and Donald Trump as their next Commander in Chief.
Judging by the latest data and anecdotal evidence, the North American market appears in reasonable shape, despite the collapse of a post-Covid mini boom. Flying hours in the first half of the year were down from 2022 and 2023, but the decline seems to be slowing, and totals are still ahead of the average for the previous decade. Fractional ownership particularly remains in growth mode, bucking the trend in the rest of the market.
With several new variants now in production, manufacturers are shipping more aircraft, with worldwide deliveries of 322 business jets in the first half of the year representing an almost 9% increase over the same period in 2023, and offsetting a 3.4% decline in turboprops, according to newly published figures from the General Aviation Manufacturers Association (GAMA). This is despite ongoing challenges with supply chains.
During the first half of 2024, almost all the major airframers – including Bombardier, Embraer, Gulfstream, and Dassault Aviation – increased their shipments compared with January-June the previous year. Gulfstream saw its deliveries rise from 45 to 61, and Bombardier from 51 to 59. Among the top six, only Textron Aviation’s numbers fell, although Citation-family registrations were near static at 78.
And the pool of used aircraft for sale – a key indicator because in a booming market anything with a price sticker tends to get snapped up – remains in single figures. Inventory levels in the second quarter were 7.7% of the total fleet, according to Global Jet Capital (GJC), higher than the low water mark of 2022, but down on the previous decade’s average of around 10%. This, says GJC, indicates the market’s return to “its historic level of liquidity”.
‘STICKY DEMAND’
The 2022 surge in private aviation – especially in North America but also in Europe and elsewhere – was largely attributed to wealthy retirees and entrepreneurs who were desperate to resume travelling for business and pleasure once Covid-19 restrictions were lifted, but were frustrated by airline dysfunctionality and worried about the health risks of flying commercial. A big question as the pandemic receded was how “sticky” demand from these first-time users would be.
According to independent broker Michael Mikolay of Mikolay Jet Group, far from all these debutants have returned to the airlines. “Covid brought a bunch of new players to business aviation, and many have stayed”, including some who purchased their first aircraft during the period, he says. “Plenty of people have told me they are just not going back on commercial.”
Cowburn says that although the market has declined as many of those new or occasional users regain trust in commercial flying, departures will “settle down” to 15-20% ahead of pre-Covid activity, down from a 2022 peak of around 30%. “I think we’ll end up with a higher base, a new normal,” he says.
Argus International’s TRAQPac aircraft tracking data records a 2.7% year-on-year decline in flight activity in North America for the first two quarters, but this compares with a 3.7% drop in the same period in 2023. Overall traffic for the period remained almost 8% ahead of 2019, with a “very strong” fractional market partly compensating for declines in the Part 135 (charter) and Part 91 (private non-charter) segments.
“As we move through the second half of 2024, we expect the industry to remain mostly the same, with a slight improvement over H1. We remain in an environment that is stable but posting consistent slight declines,” says Argus International in its commentary. It expects 2024 to finish 1.9% down from 2023, 5.1% below 2022, but 9.6% above 2019.
In its report on the first six months, GJC says “the business jet market continued to normalise following record high utilisation and demand in the post Covid-19 period”, and that “as things stand, the industry is well positioned to weather any future economic downturn”.
There are two reasons the fractional sector is doing so well, suggests Cowburn. The “low end” of ad hoc charter has been hit by new business aviation users returning to airlines. Meanwhile, the rise of aircraft-tracking software and activists exposing on social media the environmental “hypocrisy” of private aircraft users such as singer Taylor Swift has increased the sensitivity around whole-aircraft ownership. Fractional ownership affords some anonymity, he says.
Fractional ownership also represents good value so long as travellers are using it properly, according to Mikolay. “If you are flying less than 100 hours a year, charter makes most sense,” he says. “Above 250 or 300 hours and fractional gets expensive and you probably want to look at owning your own aircraft. But anything in between, fractional is usually your best option.”
Business jet buyers are also getting better at “right-sizing”, says Jetcraft’s Anderson, whose company sources aircraft on behalf of clients. “If your mission requires a [Gulfstream] G280, you don’t need a G650,” he says. Allied to this is a desire by firms to be seen to be reducing their carbon footprint. As well as not operating larger aircraft than needed, corporates are also seeking sustainable aviation fuel where available. “Everyone is being attentive to the green mission,” he says.
CONTROVERSIAL COMMUTE
Despite high-profile stories in the press such as Starbucks coming under fire for its contract with new boss Brian Niccol that allows him to use the company’s jet to commute from his home in Newport Beach, California to the coffee chain’s headquarters in Seattle, Washington, the US business aviation sector is less exposed than its European counterpart to an environmental backlash.
There have been few instances such as the one at European business aviation convention EBACE in 2023 that saw anti-oil campaigners break through a security fence and chain themselves to exhibitors’ aircraft. However, climate sensitivity in the USA is increasing, believes Cowburn. “I wouldn’t expect physical activism to reach European levels, but it is an increasing part of the conversation,” he says.
Snagged supply chains and skills shortages also threaten to put a brake on industry growth, according to GAMA. “Impressive backlogs and plans for facility expansion by many of our OEMs” have been tempered by “ongoing supply chain and workforce recapitalisation issues… routinely compounded by unacceptable turn times in terms of responsiveness and lack of decision making” by the US Federal Aviation Administration, says president and chief executive Pete Bunce.
Our industry is the incubator of safety enhancing and aviation sustainability technology, which in turn serves as a catalyst for economic growth and exemplary employment for millions around the globe,” he adds. “It is vital that our regulators continue to improve effectiveness and efficiency of certification and validation processes.”
A further worry is the financial fragility of some prominent players, including Wheels Up, the largely Beechcraft King Air operator that was purchased by Delta Air Lines and a consortium of investors in 2023 after racking up losses in the hundreds of millions of dollars over several years. It is seen as particularly vulnerable to the drop in discretionary missions – or as analyst Brian Foley describes it: “Private flyers reconsidering the value of their $20,000 New York to Palm Beach flight.”
STRUCTURAL CHANGES
Commenting on the company’s second quarter results, which show a stemming of losses although not enough to push it into profit, new chief executive George Mattson said the company was making “great strides towards the structural changes that are necessary to build a sustainable business model”, including establishing closer ties with Delta’s airline passengers through loyalty programmes.
One barometer of industry confidence is its support for major trade shows. The NBAA convention – now in Las Vegas each year after a spell of alternating with Orlando, Florida – has been an annual pilgrimage for tens of thousands of business aviation professionals for decades and remains for many a must-attend. However, some believe cracks have begun to show. Gulfstream has stopped exhibiting at the event, and this year, for the first time, Dassault will be absent.
Meanwhile, EBACE was launched as a joint venture between the Brussels-based European Business Aviation Association (EBAA) and the NBAA in 2001 and has been staged every year since (except the Covid-affected 2020 and 2021). However, its final show in its current guise took place in Geneva in May. In August, both associations announced EBACE would continue to be run by the EBAA on its own, inevitably as a smaller-scale event.
Despite all the challenges facing the industry, many remain confident about its long-term prospects. Anderson sees signs that the industry’s post-Covid hangover in 2023 is already fading, with activity in the third quarter ahead of the previous two quarters, despite concern around the presidential election. For him, the benefits of business aviation as a time-saving tool will continue to appeal because commercial aviation simply cannot be relied upon.
“Our best sales team is the airlines, as their performance is never really going to improve,” he says. “Add to that the ramp appeal of a business jet, and the many examples we can point to of increased productivity and security, and you have a compelling case for using business aviation.”