Private Aviation Benefits From A Pandemic Pickup

High-net-worth individuals and private-company owners have driven the late-Covid boom in private aviation, but industry experts say corporate is coming.

Josh Miller travels more than 150,000 miles domestically each year as co-founder and president of Owen’s Craft Mixers. Recently, he decided to switch to private aviation rather than fight the headwinds still buffeting commercial air travel. 

“I wanted to reduce the stress and challenges of constant travel,” says Miller, whose cocktail-mixer company is based in New York City. “Private aviation provides you with full control over your trip and a level of comfort and ease that can’t be found in most airlines,” which remain “riddled with traditional travel challenges like overcrowded flights, long delays and other unexpected issues.” 

Miller joined XO, an on-demand jet-charter company, this year. He’s among the many CEOs and company owners joining private-plane rental outfits, including FlexJet and Wheels Up, for the first time. Other business leaders are opting to buy their first new or used aircraft to put the hassles of airline travel behind them for good. 

First-time charter clients for XO were up in June by 56 percent over a year ago. “We’re really seeing a change in behavior,” says CMO Lynn Fischer. “We’re seeing many first-time flyers who are choosing us for security, safety and accessibility. As we’ve had closure of regional airports and cancellations of commercial flights, this is providing a real solution and option.” 

High-net-worth individuals, private-company owners—and, initially, leisure rather than business travel—have driven the late-Covid boom in private aviation. “There hasn’t been as much pickup in corporate activity, but that’s coming,” says Janine Iannarelli, president of aircraft broker Par Avion. 

Pawel Chudzicki also foresees a robust pickup in corporate aviation in late 2021 and early 2022. “With the challenges that come with using commercial aviation, it’s only logical that U.S. companies are building or refurbishing their private fleets to carry executives from point A to point B as people are feeling more comfortable about having in-person meetings,” says the aviation partner at the Miller Canfield law firm. 

Delta-Driven Concerns 

Business travelers are ready to re-ascent, but airlines have yet to restore the many shorter routes they junked at the beginning of the pandemic. “Regional jet service is still limited in a city like Lincoln, Nebraska,” says Craig Picken, managing director of NorthStar Group, an aviation-personnel search firm. “So now a CEO of a company who flew private maybe once a year will do it five to 10 times a year.” 

These dynamics are boosting private-aviation activity to levels previously unseen. Demand for seats on small aircraft was so robust in the second quarter that NetJets, a leading charter operator, was forced to stop selling jet cards, shares or leases on entry-level Citation XLS and Phenom 300 jets—the first time it had to suspend availability in 57 years in business.

“All signs point to the fourth quarter showing not enough aircraft to cover the charter demand around the country,” says Nick Tarascio, CEO of Ventura Air Services. “That’s never happened before.”

Meanwhile, aircraft sales, especially of pre-owned models, are recovering apace. Citation made 410 five-passenger, entry-level CJs beginning 20 years ago and “today there are maybe only 10 for sale” total, Iannarelli says. Meanwhile, prices of those scarce-used craft have appreciated from just over $2 million to about $4.5 million in 2019. “We’re in a bull market for planes,” Iannarelli concludes, “that will run for the foreseeable future and could run for years.”

Here are some of the wrinkles playing out in the U.S. business-aviation market:

• Technology enablers: Fractional-share and charter operators are providing more options that make flying private akin to renting an Airbnb or ordering a pizza. “Previously, the industry provided ad hoc or quite complex ways to book and to experience private jet aviation, and it was quite fragmented,” Fischer says. “But today you can fly anytime, anywhere and at a moment’s notice.” 

One innovation is crowdfunding apps in which demand organically coagulates among users and essentially forces the scheduling of a flight. “If two people want to fly from New York to South Florida, they can purchase those seats with the ability of others to join the flight to make sure it’s confirmed—and also to reduce the cost of the aircraft for each passenger,” Fischer explains. “It’s changing behavior and perceptions while still delivering a premium and elevated service.” 

• Easy money: Aircraft purchases are benefiting from the cheap-money economy like everything else. “We have a very mature finance market, and there are a lot of products out there from traditional banks and financing companies that make it very appealing to corporations to take out classic loans or leases with a variety of structures,” says Chudzicki.

Charter- and aircraft-management outfit Ventura, for instance, launched a program making it easier for private ownership with only about 50 hours of use a year instead of the conventional 150 hours. “You buy the plane, we pay all the fixed expenses, and you only pay for your direct operating cost when you fly,” Tarascio says. “You pay for the plane only when you use it.”

• Home sweet home: Private planes make one-day trips easier, and more business leaders are embracing the benefit—what XO cutely calls “flyority.”

“Instead of leaving Monday or Tuesday and traveling point to point and staying overnight,” says Megan Wolf, COO of fractional-share carrier Flexjet, “We’re seeing a lot more travel the same day—hit two or three locations in a day versus making it an extended trip. Also, many owners purchased second homes during the pandemic, and they’re ending up there. That confidence of sleeping in your own bed and being home is important, and people are valuing it more.”

• Covid diaspora: The market demand for long-flight planes is considered even better than for aircraft overall, as more of the jet set seek out more remote and pristine locales. That’s one reason Flexjet, for example, just launched a new rental program for the large Gulfstream G650 that combines access to it with price discounts on packages of domestic flights on other planes. The $70 million aircraft has a range of 7,000 nautical miles, can carry up to 15 passengers and has a luxurious cabin that features a 42-inch TV, Ka-band WiFi and artisanal details.

Meanwhile, the growth in private flights may be greater than recognized because trips involving secondary and tertiary locations around the country are gaining at the expense of traditional corporate-aviation centers. “A company owner may have relocated his family from New York to Sedona, Arizona, during the pandemic, so now his travel takes place out of there rather than Teterboro” Airport in Bergen County, New Jersey, Wolf says. “The top private-aviation airport now [in activity] is Palm Beach, Florida.”

Labor squeeze: Airlines’ mass layoffs of pilots during Covid are still reverberating but not in ways that necessarily benefit private aviation. In fact, after essentially removing many senior pilots from the industry labor pool for good, recovering airlines now are actually dipping into the business-aviation pot for pilots.

“They’re scrambling to begin to train and have job fairs every month now in different parts of the country,” says Sheryl Barden, CEO of Aviation Personnel International. “Business aviation is a place where [airlines] can hire experienced pilots now.”

• Health watch: Many large companies haven’t returned to pre-Covid travel levels as they continue to struggle with rules over mask-wearing and vaccinations. “They’re managing the PR and the liabilities, and trying to decide their rules of engagement for airplane use,” Wolf says. “Whereas heads of smaller companies and entrepreneurs are making decisions relatively quickly.”

Business travelers also remain concerned about reducing exposure to Covid. “At a commercial airport, there are more than 700 touchpoints for a typical flight,” Iannarelli says. “With a private jet, you cut that down to about one-third and get into a known asset and a controlled environment.”

Flexjet focused on building out its network of private terminals during the pandemic, including new facilities in Van Nuys, California, and in Dallas. They feature conference rooms for meetings, whereas before open lobbies were about the only space available, Wolf says.

Once on board, passengers find that private-aviation operators have cleaned up protocols that used to involve shaking hands, for example, as well as remained punctilious about cleaning the cabins. 

• Heads down: President Obama socked private aviation with new regulations, while President Trump was friendly in a general business-boosting way. President Biden has been a cipher so far—which is just fine with the industry.

“Private aviation realizes it can continue flourishing,” Chudzicki says, “because the current administration is unlikely to take steps to limit it in the short term.” 

 

Is Smaller Better?

Places as disparate as Allentown, Pennsylvania, and Scottsdale, Arizona are positioning their smaller airports to take advantage of a Covid-19-fueled ongoing boom in private aviation—and drive economic development in the process. “Having a private fixed base operator (FBO) with a runway of at least 5,000 feet has increasingly been moving up the scale of importance for companies making site decisions,” says Didi Caldwell, head of economic development consultancy Global Location Strategies. “They have executives who want to be able to get in and out quickly, or customers they want to bring in and out.”

Detroit’s city leaders, for instance, relatively recently reversed a decision to shut down the old City Airport in 2017, seeing potential for a revitalized facility to service Motown’s burgeoning economic revival. Now the plan is to sink $150 million over 20 years into a complete refurbishment of the old airport located just six miles from Detroit’s central business district. A new passenger terminal, new private hangars and even office space for two companies developing electric vertical takeoff and landing aircraft—eVTOL, the aviation technology of the future—now are in the cards. 

In Addison, Texas, the airport is adding a 20,000-square-foot new terminal and large new hangars. Over the summer, airport authorities in Scottsdale put the finishing touches on the airport’s biggest runway repairs in decades. The project shut the facility for weeks, but the landing strip for corporate jets now is ready to participate in business-aviation expansion. 

In Allentown, Lehigh Valley International Airport wrapped up construction last year on Hangar 11. The $16 million facility was “built on the premise of creating a space where we can become an option for new-age large private aircraft like the Gulfstream G650,” says Colin Riccobon, the airport’s spokesperson. “We’re in the Northeast corridor [with] New York and Philadelphia, and the Teterboro airport [in New Jersey] doesn’t have any more space.”