Pandemic Offers Opportunity To Rethink Bizav, EBAA Experts Say

G550
Credit: Gulfstream

The COVID-19 pandemic has brought considerable challenges, but it can also provide businesses with an opportunity to reassess.

In a September webinar entitled “Rethinking Relationships in Business Aviation,” various members of the European Business Aviation Association’s (EBAA) Associate Member Advisory Council (AMAC) attempted to use the pandemic’s forced pause to look again at areas where new approaches could offer advantages. 

“The holy grail is a single contract for air chartering that we all use,” said Adam Twidell, founder and CEO of British charter broker PrivateFly and co-chair of AMAC’s charter-broker committee. “A bit like world peace and eliminating hunger, it’s a goal we might never get to,” he added. But with the sector seeing an unprecedented number of new customers, the need for the industry to present itself coherently and consistently is becoming increasingly important. 

Regulating and licensing charter brokers is an idea that appears to have wide support and would certainly help ensure that new customers could be assured of a consistent level of service. But it raises further questions that may be difficult to answer. 

“Who’s responsible for advising who’s a good broker or not? And who’s going to police it and kick people out?” asked Twidell’s committee co-chair Mike Ryan, managing director of consultant and spot-charter provider Vikingar. Rather than follow a prescriptive route, Ryan suggests that brokers who are members of groups such as the EBAA or Air Charter Association (ACA) could get their standard contracts reviewed and receive a form of endorsement via their continuing membership. 

“Rather than having a formal process, those who pass the contractual methodology could or should get some sort of stamp” from the EBAA or ACA, he argued. 

In the pre-owned aircraft sales arena, “‘challenging’ is the understatement of the year,” says sales and acquisition committee chair and AMAC Vice Chair Janine Iannarelli, founder and president of Par Avion Ltd. To illustrate typical problems, she discussed two sales her company had been involved in: one in which an American aircraft was being sold to a French buyer, the other in which she had to travel from her Houston base to inspect an aircraft for a customer. While her own direct knowledge of the two aircraft plus the arrangement of virtual inspections via Zoom proved sufficient to keep the deals on track, these are not viable long-term solutions, she argues. 

“We definitely will go back to the way we were before,” Iannarelli said. “Personal connection is not something you can convey through a video camera. You only get so much out of a video conference—you don’t get to know the person. And, I would venture to say, you don’t get to know an airplane until you put your hands on it.” 

Of concern to both Iannarelli and members of AMAC’s financiers committee is the current focus on shorter-range flights, which is leading to diminished interest in larger jets. While this is likely to be temporary, it brings challenges not just for those looking to sell long-range aircraft. When transactions are for smaller amounts, the work required to arrange financing is barely worth the effort. And banks, lacking experience in these lower-value deals, may struggle to accurately value the aircraft. 

“There is no liquidity shortage. Financing is available, and most of the financing institutions are more than willing to do deals, so long as we are confident in aircraft values,” said Marie-Laure Gassier of BNP Paribas, who chairs AMAC’s financiers committee. “There is a bit of a question mark over this at the moment.”

Both Gassier and Iannarelli dismissed as unrealistic those who have expected to see massive reductions in aircraft prices as a result of the pandemic. 

“There may be some buyers trying to benefit from the situation,” Gassier said, “but most of the transactions that we’ve seen have been normally priced. The main challenge will be the size of the transaction, because financing an aircraft remains complex and we need a sizable transaction to make it meaningful both for the client and for the bank.”