Expect a busy decade in business aviation but not quite ‘the Roaring Twenties’. That was the assessment of Ford von Weise, Citi Private Bank, head of Aviation Finance at last week’s Corporate Jet Investor Town Hall online meeting. Also, two key factors could undermine growth, he warned.
Asked about prospects for the Roaring Twenties, von Weise told delegates: “We will have not a roar but an increase in volume. I am concerned that if we had a huge increase, it could contribute to inflationary pressures. I don’t want to see roaring – I’d rather everyone was pleasantly feeling good about the industry.”
Citi is forecasting “a very robust” recovery from the global pandemic. “There is a widespread belief there’s going to be a broad economic expansion of GDP [Gross Domestic Product] and broad economic activity globally – particularly as more countries vaccinate their populations.” The final catalysts to reboot the global economy would be the return of international air travel and international commerce, added von Weise.
As the recovery in the private jet market continues, attention will switch from High Net Worth Individuals (HNWIs) to mid-sized corporate buyers, he predicted. “UNWI clients cannot be buying aircraft forever,” von Weise explained. “You are going to see middle market companies, which buy smaller aircraft, jump into the space robustly to continue what we see as a very strong or nascent recovery.” Many larger corporations are considering rationalising their fleet of corporate aircraft.
‘The catalyst that propels this recovery’
But the recovery in the global economy could not reply on “the vast injection of liquidity” via both fiscal and monetary policies than have been seen from central banks around the world. “That can’t be the catalyst that propels this recovery forward.”
While the prospects for the growth of business aviation were good, two factors could limit progress, he said. The first risk was that broad-based recovery, which included middle market companies, failed to develop. Some parts of the economy have done well and other parts have performed performed poorly. The expansion needs to be broad-based.
The second threat to growth was environmentalism. “It’s going to be a much bigger problem than people in the business aviation community have acknowledged or, frankly, are willing to acknowledge. We are vulnerable to flight shaming and environmental concerns,” warned von Weise. He believed three factors could help to diffuse the threat: Sustainable Aviation Fuel (SAF), carbon offset pricing and a credible emissions trading programme.
Shelley Svoren, CEO and founder of new consultancy of Infinite Branches, said business aviation would soon become increasingly familiar with the term environmental, social and governance (ESG) topics. ESG factors, used to measure the sustainability and societal impact of business investments, would be increasingly applied to business aviation. The recent proposal from a senator representing Cape Cod in the State of Massachusetts for a $1,000 landing tax for private, corporate and charter aircraft “reflected public sentiment towards the environmental impact of business aviation”, said Svoren.
$1,000 landing tax
Norway’s policies on sustainable transportation offered an example to the US, she said. For example, airline Widerøe pledged in March 2021 that its entire fleet of aircraft will be powered by Rolls-Royce electric engines by 2026. Also, large companies – such as investment and financial services company Blackrock – are heavily focused on ESG initiatives. “These companies are minimising, if not completely cancelling, their investments in companies and business that do not benefit the planet,” said Svoren.
The Corporate Jet Investor Town Hall – Get ready for the roaring Twenty Twenties – took place on May 12th 2021. Also taking part were Ian Moore, Vista Global’s chief operating officer and Reverend Professor William Whyte, of University of Oxford. All Town Hall episodes are now available as podcasts. You can listen here or on Spotify and other popular podcast platforms.
Meanwhile, the next Town Hall online meeting – Looking beyond the US – takes place on May 26th.
Ford von Weise, Citi Private Bank.
