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2020 Business Aircraft Industry Outlook

Like many other industries, general aviation has undergone many changes from year to year. What can pilots and other industry professionals expect in 2020? Here are some thoughts, trends and predictions for the coming year, courtesy of Forbes.com.

Flight-shaming and environmental concerns

"Flight-shaming" is a relatively new term that has been gaining momentum in the industry. The term comes from the Swedish word Flygskam and was developed by environmentalists to create the perception that one should be ashamed for flying and leaving a carbon footprint. Whereas criticism of corporate executives flying off into the sunset in their private jets had always been a thing, adding the environmental aspect now ups the ante.

In 2020, private flyers will gravitate towards ways to evade this kind of judgement and public humiliation, either by voluntarily paying into third-party carbon offset programs or by ditching aircraft ownership altogether by using charter, fractional or other non-ownership models that better protect identities. The latter is not at all helpful to new business jet sales which have been stubbornly anemic for the past decade.

To create favorable corporate identities of being deeply concerned, committed stewards of the environment, companies in the business aviation industry may consider taking efforts to demonstrate commitment, such as tweaking ad copy and making use of one-time flights using Sustainable Aviation Fuel (SAF). Others will offer voluntary access to pay-as-you-go carbon taxes to accommodate those who really care and others who want what is essentially an insurance policy to avoid public shaming.

The only way out of this quagmire would be through the gradual introduction of hybrid-electric propulsion systems which eventually lead to all-electric engines. While the former could take 10 years and the latter 20 to come to limited fruition, it would eventually squelch the criticism even if smoke-belching, coal-fired electric plants are being used to charge the batteries.

The sharing economy and airplane ownership

A lot has been said of late of the sharing economy’s effect on the aviation industry. It’s been popularized that a younger generation of fliers want nothing to do with aircraft ownership, only wanting access and the experience of private flying. The theory was this would further dent new aircraft sales while benefiting non-ownership models such as charter, fractional and jet cards — essentially a prepaid charter debit card.

If that’s the case, it’s certainly not showing up in FAA flight statistics or even notionally. Charter continues to be an oversupplied market with what seems like a race to the bottom on pricing. The number of flight operations, or takeoffs and landings of chartered business jets in the U.S. barely budges each month, while fractional aircraft providers such as Berkshire Hathaway’s Netjets division is still a shadow of its former self since the worldwide financial crisis.

Feedback from leaders in the charter business suggests that millennials representing the sharing economy are barely moving the needle. While the topic makes for good cocktail conversation, it cannot be verified either objectively or subjectively. The unpopular and contrarian truth is that the new aircraft sales lull cannot be attributed to the instant gratification crowd, nor are they swarming to any non-ownership means of private air travel.

The economy and jet sales

U.S. stock markets and corporate profitability have been consistently breaking records. In previous times this would have signaled a booming jet sales environment. Instead, sales have been flat.

Instead of purchasing jets, companies are deploying capital to areas of higher return instead of a depreciating asset. Profits have been going towards company stock buybacks while jets, which at one point held close to 80% of their value after 5 years, can be worth less than 50% of the new price as supply equals demand and a business jet finally depreciates like any other capital good should.

It could even be argued that sales have remained stable and not fallen any further only because of a good economy. This kind of reasoning would then portend a decrease in sales should economic growth falter in any way.

2020 outlook and predictions

2020 will hardly be a repeat of 2019 in the business aviation industry. The green movement will continue to rise creating a widespread move for companies to rebrand themselves as environmentally responsible while their clients seek carbon offset programs or explore non-ownership private flying models to also protect their image.

With poor sales for the last several years, emerging markets will slowly be resuscitated to become more meaningful purveyors of new business jets. This would be timely as the next generation of millennial flyers aren’t pulling their weight, and the U.S economy can’t sustain the industry forever as talk of a recession in the next year or two permeates financial conversations.

Lastly, a measly 700 worldwide business jet sales per year will test the resolve of some plane manufacturers, with the possibility of a previously well-known brand being sold or quieted.

In short, 2020 will not be just another cookie-cutter 2019.

Source: Forbes.com

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