In the midst of a COVID-19 pandemic and future recovery, what are the biggest concerns of business aviation leaders now? When it subsides, will there be permanent fundamental changes in the industry, either positive or negative? The Weekly of Business Aviation asks leaders to weigh in. Below is Part Two of a two-part series. Please see Part One.
Q. What are your biggest concerns as it relates to the business aviation industry as the world grapples with the COVID-19 pandemic?
Richard Aboulafia, Teal Group vice president of analysis: It’s overcapacity. Too many products and too many companies. It’s never too soon to start talking about the art of the possible–consolidation.
Ed Bolen, National Business Aviation Association president and CEO: One of the enormous values of business aviation is that it promotes face-to-face communication. I believe that will be as important if not more important in the future as it is today. But as long as there are travel restrictions, as long as social distancing requirements are in place, that presents challenges that are unique from challenges we’ve had in the past. There are signs that have been consistent across all civilizations and across all continents and across the centuries–and that is a desire and need for people to build relationships for face-to-face communications.
Pete Bunce, General Aviation Manufacturers Association president and CEO: The development of our industry’s workforce is always at the forefront. We were already operating under a shortfall and the gains that we were working toward have been stymied by this pandemic. However, as our industry continues to make strides with technological advances, I am confident that we can excite and attract future generations into careers in aviation.
Brant Dahlfors, JetTransactions co-founder: How much economic demand will be damaged by shutting down the economy and the difficulty we face getting it up and running again.
Brian Foley, Brian Foley Associates consultant: Short term, (it’s a concern of) furloughs rolling into layoffs. Liquidity issues for those overleveraged and/or with limited access to additional capital. Midterm, the ability to continue functioning at reduced levels until a vaccine becomes widely available. Reorganization of existing or weaker players across all segments of business aviation. Adequate funding for industry associations. Long term, there are few lasting concerns after a shakeout and return to normalcy.
Tim Obitts, National Air Transportation president, CEO: One of our biggest concerns is the irreparable loss of many essential small aviation businesses that will not be able to weather the impact of COVID-19, leaving some of the remote and rural areas without important services provided by our members. With prolonged stay-at-home orders, a drop in fuel sales and a steep loss of business with many operators, small aviation businesses are having to downsize or furlough some or most of their workforce. This will further exacerbate efforts to attract and retain the industry’s labor force.
Shawn Vick, Global Jet Capital chairman, CEO: No. 1, the continuation of the infection rates across the country. Everything comes down to whether there is a protracted infection rate, a protracted recession and unprecedented labor unemployment. These are the things which will be the underlying or underpinning foundations that create dislocation across all the economic sectors. When I think about the biggest concern for my segment, the financing segment, it would be to ensure that the credit markets remain functioning and open while we go through these series of shocks. The banking environment is in significantly better conditions pre-, during and post the Great Recession. I think we have to be careful that we don’t remove any of the safeguards that are in place within the banking industry to ensure its continuing to act prudently at a time like this. As long as the credit markets don’t seize up, we should have no issues.
Q. Do you see any permanent fundamental changes in business aviation, either positive or negative?
Richard Aboulafia: Industry consolidation would be a key. I think there’s a very good chance of it depending upon the severity and duration of the downturn. A lot also depends on the politics of it all. One thing is different now than in 2008. Back then, we were heading for a more global world. That was good for business aviation. Now this may be the reversal of that–with nationalism, borders going up, barriers to trade. Everything you don’t want for business aviation. On the positive side, consolidation could lower costs. We do have high structural costs in this industry because of overcapacity. The optimist in me says this experience is going to be traumatic for people and they’re going to realize how important human connections are in business and in every other way. You’ve got all the Zoom meetings you want. Is that working for you? God knows, they’re not working for me. Maybe there are people who are holding back on making big investments in travel because they were anticipating this golden age of telecoms, which is frankly kind of lacking. The future is still very much in person.
Ed Bolen: I think a need to fly and travel where you need to when you need to get there, and the effectiveness business aviation offers will be an enduring value and perhaps a heightened value going forward. What we don’t know is what the impact will be on scheduled airline service … and what the frequency will be. General and business aviation serves 5,000 communities, so we are particularly important. I don’t know if it will be a situation where we will be a good option or whether we will be the only option going forward. I know we will continue to be an important part in our nation’s infrastructure.
Pete Bunce: We are all in this together and I believe our industry will come out of this stronger. I am proud to see that so many of our companies are doing whatever they can to help their communities in this uncertain time. To see them donate, deliver or begin to produce equipment and supplies that are in demand shows the devotion and commitment they have for their communities and neighbors.
Brant Dahlfors: Not negative. My view is neutral or positive. COVID-19 will bring more people into the use of private aviation for safety and security concerns. Increased usage will be spread across all sectors of Charter, Fractional and Whole Ownership. The question over the long term is if the new customers can offset the reduced demand overall based on simple economics.
Brian Foley: Negative–some surprisingly well-known brands or companies will reorganize, exit or be acquired. Positive–the powerful new pillar of social distancing will be added to the list of business aviation benefits and justification, adding to future demand.
Tim Obitts: Heartbreakingly, we will see a number of small aviation businesses, some family run for generations and others brand new and promising, not survive in these troubling times. As the FAA is continuing to ramp up its investigations, the industry will need to be more diligent than ever about illegal operations potentially brought on by the economic impact of distressed aircraft owners and pilot layoffs and furloughs. With the near term and/or prolonged shuttering of many small aviation businesses coupled with the steep loss of jobs in our industry due to downsizing, we will suffer an even longer-term impact from the further deterioration of our skilled workforce. In the positive column, more companies may be looking at business aviation as a healthier and safer alternative to commercial travel. It remains to be seen whether this will have more of an impact on aircraft ownership or fractional and on-demand charter. This has been a time when a positive light is being shined on our industry, as the majority of our members are considered essential and have been providing lifesaving services to communities all throughout the nation. We are seeing an uptick in the use of our Safety 1st training platform, with an increasing number of companies completing important safety training ... We’ve also witnessed the aviation business industry coming together to support each other and their respective communities with one voice.
Shawn Vick: We have an industry which is credit intensive. What it takes to build a new airplane, what it is to invest in developing new wings, new engines, to build a new MRO facility and staff it and equip it–this is very capital intensive. We have too many models of aircraft that do the same thing and we have too many OEMs. I, for one, have felt that consolidation has been overdue. But you have to recognize the very high barriers to accomplishing that. There’s a lot of choice. I think that’s led to a challenge in maintaining pricing discipline. The oversupply likely isn’t going to come to a conclusion until and unless there’s a consolidation. Circumstances need to emerge so the barriers to getting that accomplished are lowered significantly. Often that means that one of the two parties are not operating from a position of strength. Economic shocks are not going away in this interconnected world. They are going to be more frequent, not less frequent. It’s the way we designed this world today. Hopefully, there’s consolidation at some point in the not-to-distant future and we end up more nimble and an industry that can deal with these shocks.
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