Fast Five With Aerospace Analyst Richard Aboulafia

Richard Aboulafia Credit: Teal Group

Business & Commercial Aviation Editor-In-Chief William Garvey talks with Richard Aboulafia, Teal Group vice president of analysis, about projections for business aviation after the COVID-19 crisis.

Let’s go straight to the final page of this frightening novel we are living. How does it finish for business aviation? For aircraft owners and manufacturers, there’s no way the top end doesn’t take an extremely serious hit. However, the lighter end may be less vulnerable than in 2008. We can’t know the length and depth of the recession that’s coming, but business aviation could have a really rough couple of years. Still, the segment really started climbing in the early 1960s and has followed a pretty impressive long-term growth trend. I believe the outlook for private aviation is bright, especially with people being increasingly concerned about the risks of exposure to disease associated with traveling on the airlines. So, taking the long view, we’ll get back on that growth trajectory. We’re still a really solid business that employs a lot of people. There’s a lot of money to be made by a lot of different types of companies.

Before we get there, are failures and consolidation likely? Some failures, yes. But that’s always been the case. As for consolidation, especially among the airframers, that’s a mixed bag. The only thing I can see that even vaguely resembles a safe haven in this crazy world is defense spending. Gulfstream’s parent, General Dynamics, earns more than half its revenue in that sector. That’s good for Gulfstream as it develops the G700. And Dassault also makes the Rafale fighter. Embraer has a small military arm as well. So that leaves Bombardier without a defense backstop and puts it in a fairly vulnerable place. In my view, if you could put ownership issues, ego issues and whatever else aside, it’s hard to imagine a better combination than Embraer and Bombardier. That would actually go pretty well as retrenchment occurs in this business. But I don’t think any manufacturers have the wherewithal or will to acquire another.

There has been much talk about people embracing business aviation over airline travel for its assurance of health safety and direct service. Will airlines strike back? Nobody competes on safety. That’s a given in all aviation segments. But it’s kind of implicit before people feel comfortable getting back into airports and onto airlines, they’re going to feel better about private aviation. However, operators will have to manage the “optics” carefully to avoid a repeat of the class warfare that dominated the news a decade ago, especially regarding use of private aircraft. Otherwise, there’s going to be a certain degree of tension. And to help accelerate their recovery, airlines could set prices to win back customers, and that could become a complicating factor.  

What if business aviation found a way to set prices to win more customers? A study of the eight million so-called “millionaires next door” revealed their preferred drink was beer and of that they had two favorites: Budweiser and free. The fact is while they could afford luxuries, they’re frugal. That’s how they accumulated their wealth. The core users of business aviation are well-financed corporations and high-net-worth individuals. That won’t change. But I’m conscious of the “democratization” of business aviation and intrigued by WheelsUp, jet cards and similar options. We’ll see how much such offers can lower the price points and attract new users.

There’s much investment and buzz over drones, urban air, electric flight and such technologies. What’s their impact? Unfortunately, it could be negative. I knew there would be a lot of carnage among these new tech “disrupters,” but I believed a part of the industry would benefit from their work. Now with massive financial setbacks as a result of COVID-19, I’m concerned there will be a chill on R&D spending and that all the work on connectivity, hybrid power, batteries and such will fall behind because of budget cuts. That’s not good. 

William Garvey

Bill was Editor-in-Chief of Business & Commercial Aviation from 2000 to 2020. During his stewardship, the monthly magazine received scores of awards for editorial excellence.