State of play

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 WINGX joint managing director Richard Koe and Avinode Managing Director Oliver King reflect on Brexit and business

The shock horror leave vote returned by a majority of the British public in June this year, and the ‘coronation’ of Theresa May as Prime Minister, made Brexit not just a threat but a certainty. Like death and taxes, it will happen, since the new Prime Minister has made a mantra out of “Brexit means Brexit”.

Of course, right now no-one has much of a clue what that will mean, either for industry or for business aviation in particular. Without any real guidance on how legislation and the regulatory environment might change, it appears that the world in general, including charter operators, charter customers, business jet operators and corporate flight departments have all decided to carry on pretty much as if nothing had changed…

Richard Koe, Joint Managing Director,WINGX Advance

Q: What have you seen so far in terms of the impact of Brexit on flight movements and attitudes generally?

A: Business aviation is uniquely tied to GDP and trade activity levels at the national and international level, so there is no doubt that the disruption that Brexit will bring, once it really starts to take effect, will have a negative impact on business aviation. However, it is still far too early to tell how deep or how long lasting that impact will be. What we do know for certain is that business aviation hates uncertainty and Brexit brings uncertainty in spades.

Looking at the statistics, however, it is clear that since June, Brexit has made no discernible dent in business aviation movements in the UK. In fact we have seen the UK having one of the more robust trends in terms of flight activity in 2016. This correlates well with the economic indicators since Brexit, which have also been pretty robust.

Ironically, since the Brexit vote hammered sterling, the world now sees London as pretty cheap. That boosts flight movement statistics as, say, rich Chinese and others fly into London to shop. British exporters are also doing well out of the low Pound, so we can assume that some flight movements are reflective of increased export activity too.

Things may well get trickier in a year or so, but I believe that the big corporates who have business jets will keep those jets and will continue to use them. They may extend their replacement cycles out further than ever, but actual movement numbers shouldn’t be too bad. I do not see them dropping out the picture the way they did after the 2008 global crash.

Q: With EASA pushing on with the licensing of single engine turboprops for charter, there is a lot of talk about the resurgence of the light aircraft-based air taxi market returning. Is this on?

A: The air taxi model did not do very well the last time around. It suffered from terrible timing, in that it was launched into the teeth of the Great Recession. The whole light aircraft segment took a hammering then from which it is only just starting to recover. Another point is that the B2C digital platforms that are now coming forward, enabling customers to spot buy charter flights, simply were not there at the time. Now potential customers are relatively familiar with the model and are used to ordering services from their smart phones. What we are seeing is that some of the air taxi fleets are really starting to make some solid progress. GlobeAir, for example, has 20 Mustangs flying. So in my view, an air taxi model is there for the taking.

Q: How do you see things playing out for your own business, WingX? You provide information on global flight movements on a subscription basis. How do you grow it further?

A: We are in the process of a very exciting new addition to what we do. There is a clear need in the sector for a data repository that gathers information on as many aspects of business aviation as possible. So we are hoovering up as much information as possible on the market, from a wide range of data sources. There is a tremendous wealth of information out there, but it is siloed in a huge number of places. If we can help the industry to look at and analyse its own data properly, via very intuitive charts and graphics, that will make for a real efficiency gain!

Oliver King, Managing Director, Avinode

Q: Are you optimistic that Brexit will pass by leaving business aviation relatively unscathed?

A: Interestingly, we recently ran an event at Gothenburg where we brought 100 of our operators together. All the big operators from across Europe were there. We asked them how they thought Brexit would impact their business. Our expectation was that Brexit would be seen as being bad for business aviation. In fact, only 21% thought that Brexit would have a negative impact. The other 79% thought it would have little or no discernible impact.

Also interesting was the fact that one of the delegates had been at a couple of sessions on the likely impact of Brexit, run by the UK CAA. They pointed out that no one had a clue yet about what the interim legislation would look like, whether VAT would be added to charter flights, or what additional regulatory or administrative burdens might result. Despite the Prime Minister’s recent speech to the Conservative Party Congress, it is still not clear exactly when Brexit will take place, let alone what it will mean for IATA and general aviation.

What is clear from the statistics we see at Avinode, is that despite the fact that we have had a roller coaster of ups and downs in the macro economy in 2016, plus terrorist attacks in France and Belgium and major impeachments in Latin America, on top of continuing China jitters, charter bookings have been pretty solid.

If you look at the five-year trends for flown movements for both the US and Europe, for the last four months the US is just a bit below its historic growth trend of about 3% to 4%. It has been maintaining this rate of growth in flight movements since about 2011. Europe is flat, but it has been stable at flat for some time now. And if you look at Asia, business aviation is such a small sector in Asia that it is really not impacted much by fluctuations in the economy.

The abundance of new millionaires in Asia is attractive to OEMs trying to sell into the region, but I think we are now at the stage where we are past the buying of jets as toys but not yet at the point where business aviation is seen as a serious business enabler as it is in the US. So Asia is maintaining its long-term growth trend of about 15%, which sounds a lot, but it is off a very tiny base. We are seeing growth this year in terms of EASA-controlled arrivals from Asia, and FAA-controlled arrivals from Asia coming out somewhere between 15% and 35% on an annualised growth rate. You have to remember though that 3-5% growth in the US movements totally dwarfs the input from Asia, despite that large percentage figure.

Q: Do you see the industry as oversupplied with business jets?

A: In the US, the flown traffic numbers seem to say that the market is still growing, so I would say that there is room for new models and for innovation and experimentation. On the other hand, it is difficult to argue that we are not well served with the models that we already have and that are close to certification. Certainly, a lot of Europe does not need more capacity, though that could change if there is movement in the light aircraft sector. I certainly do not see any trigger, though, that suggests we need a step up in manufacturing capacity!”

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Malissa Nesmith, Senior Vice President and Chief Operating Officer, GlobalParts.aero

Operating in the US, 2016 has been peculiar due to the presidential election. I think many people are holding back and waiting to see how it shakes out. It is an exciting and scary time for businesses, all at the same time. In supporting the aftermarket and legacy aircraft, we have continued to expand our customer base and tap into new markets for our company. Legacy aircraft are everywhere, in every country, and the operators really look for suppliers that remain consistent and reliable. That is what GlobalParts.aero provides for its customers worldwide. If we can hold steady in an uncertain time, it will help minimise the impact of the political environment and what that will bring us next year.

I do think we saw a slight pause in the activity coming out of the UK shortly after the Brexit vote. However, it appears that transactions are going forward and things are currently business as usual. Not knowing what the long-term implications will be, I would suspect that there will be more of a conservative approach to purchases of business aircraft and other large buying decisions. It will not, however, change the fact that aircraft will continue to fly and will continue to need support in the aftermarket.

I think that oil prices will remain between $40-$60 for some time yet. These prices may have had an immediate impact on aviation and the industry, but as time goes on I think things will become more steady and the impact will not be as dramatic in 2017. In business aviation, when people need to fly, they fly, regardless of the price that day. I still feel like it is good for the general aviation enthusiasts, but I know from my perspective, our company doesn’t watch the daily prices of fuel and decide if we will make a customer visit based on that. When we need to go, we go.

I have a very positive feel for 2017. There have been a number of changes in the past couple of years in the players of business aviation and production. That has had a slight impact on the aftermarket side as well. However, I think companies, like ours, are being more creative and innovative and continue to find solutions for the legacy aircraft operators. This opens the door for new and better ways of supporting the aftermarket in 2017 and beyond.

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Nick Rose, Director, Business Aviation, London City Airport

While worldwide traffic has been turbulent, Europe and particularly London has been at an all-time high, with traffic in many sectors outperforming the traffic numbers we saw in the highs of 2007/8. Northolt has taken more BA bookings than in previous years and London City has welcomed the Global 6000 and Embraer 550 to its ever-expanding list of approved aircraft types. Look out for the Falcon 8X, Challenger 350, Citation Latitude and Gulfstream 280 to be added in the very near future.

I think that despite Brexit, London will retain its position as the Financial Centre for Europe. As such, London City Airport will continue to be the gateway of choice for visitors to the financial district and the City of London. It’s therefore the least likely of the airports to be affected.

Oil prices can have both a positive and negative effect on business aircraft flight traffic as many operators pass on increases in prices as a supplemental cost to the customer which affects flying business aircraft for pleasure. However, higher oil prices usually relate to a buoyant economy and as a result one sees an increase in business flying for corporates. I think the upward trend in traffic numbers will continue.

At both London City and RAF Northolt we’re expecting a very busy end to the year as activity is at an all-time high, predominantly driven by both airports’ superior access to London and the competitive pricing introduced at London City Airport.

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