Ian Petts, Head of Yachting and Aviation, and Mark A Hagan, Director – VAT, recently attended Corporate Jet Investor (CJI) in London. CJI is the European headline event for business aviation and brought together over 600 businesses, key decision makers, manufacturers and individuals from the sector.
As well as presentations from industry leaders, the event is characterised by excellent networking, bringing together global industry players from Asia, Europe, Africa and the Americas.
The key topics discussed by individuals in the aviation industry are outlined below.
Environmental, social and governance (ESG) issues
The environmental solutions of Sustainable Aviation Fuel (SAF), carbon/emission offsetting, technological progress and sustainable manufacturing were keenly debated and discussed.
Fuel suppliers such as BP and Neste reported investing in major biofuel projects and outlined their future plans to meet demand for sustainable and synthetic fuels, with the next generation of fuels expected to offer enhanced engine performance and reduce wear on engines.
Gulfstream reported that they became the first business jet manufacturers to fly one of their aircraft on 100% SAF. Manufacturers are aiming to obtain permission for aircrafts to use 100% SAF but noted that certification was taking time.
Electric innovations, especially in electric vertical take-off and landing (eVTOL), were discussed including the regulatory environment of how the eVTOLs would operate in airspace. Discussions focused on using electric battery power for peak high energy loads such as taxiing, take-off and climb The Paris 2024 Olympics continues to be the forecasted event to bring the product to market.
The heaviness and inferior energy density of these alternative energy sources, as well as reservations on supply chain raw materials involved in battery production continues to challenge their widespread adoption, despite passionate and significant investment in the technology.
It was encouraging that so many businesses in the industry, such as Dassault Aviation, Pratt & Whittney, Gulfstream, Bombardier, and Textron, to name a few, are fully transparent. ESG reporting and leadership is now a key component of their winning strategies and setting out their visions for the future and obtaining the business aviation commitments on climate change.
Diversity in the aviation industry
Roles in the aviation industry such as pilots, mechanics, and brokers continue to be staffed typically by white male professionals, coupled with the fact that it’s an ageing industry too with the average age approaching 10 years to retirement.
To ensure the sustainability in aviation and improve innovation, the industry has reacted and recognised the need to improve diversity at all levels, with a real drive towards retaining talent and attracting youth. It was encouraging to see the initiatives of manufacturers and other companies, with a noticeable improvement in the balance and diversity of the attendees over the recent years.
Aviation growth and economy
Whilst manufacturers were predicting industry growth over the next ten years, several Original Equipment Manufacturers (OEMs) reported deliveries falling short of forecast due to a misjudgement on how many aircraft they could deliver, and a very complex supply chain. There were several reports of persistent supply chain issues especially in engines, titanium, chips, resisters, forgings and landing gear supply which was holding back deliveries.
The European Business Aviation Association (EBAA) reminded the industry that the demand from businesses and the wealthy for business aviation continues to be strong as it is unrivalled in flexibility, security and connectivity with over 1,400 airports and 25,000 city pairs in Europe. It is a product that time-poor wealthy individuals and businesses value to retain top executives and ensure maximum productivity.
Pre-owned inventory levels are increasing due to concerns over a recession. The realisation by new entrants, of the high operating costs and expiration of the 100% bonus depreciation in the US, has been curtailing the demand seen in the previous two years. Statements by some French politicians and environmental groups calling for bans on the jets, or higher taxation, were drowned out by the contribution the industry makes to the economy, innovation and the improvement in efficiency that has been achieved over the last 20 years.
Brokers also reported that owners with multiple aircraft were intelligently trading for profit and taking strategic opportunities to reduce the age of their fleet and reduce operating costs by purchasing more efficient aircraft.
Textron and other manufacturers reported that young buyers below 45 were up 24% in Europe and 45% in Africa. New entrants to the market were proving sticky but in order to keep them as buyers the service providers emphasised that it’s important to maintain the service and availability of the jets. The infrastructure of servicing was being stretched and tested due to system capacity, and there was a lack of rental engines, parts and kits and talented experienced pilots were harder to come by.
The industry agreed that education on the true costs of ownership and transparency is key for new buyers. Explaining, that while it was possible to offset costs by chartering, the wear on the aircraft and increased landings would accelerate depreciation. Making a profit out of chartering was incredibly challenging unless you were running a fleet of aircraft and obtained significant purchase discounts on fleet purchase contracts to mitigate depreciation charges.
Evolving sanctions imposed against Russia and Russian war supply chain businesses continued to be an important topic, with experienced lawyers on hand to steer brokers and operators through the web of US, EU, UK sanctions. Know Your Client (KYC) is entering new levels of sophistication as jurisdictions fight to keep their whitelisting and companies are finding it increasingly necessary to engage trusted advisors and sanctions lawyers for transactions.
Most experts reported that Russian owners have restrictions on banking, insuring and obtaining spare parts and cannot be offered engine programs. Russian aviation also relies on American components and despite moving jets to neutral countries, it remains very difficult for Russians to operate jets. Passenger lists are actively screened, and reputational risk means that most businesses are prudently steering away from any Russian buyer or seller interest, and the only operation is within Russia and some middle eastern countries.
How Equiom can help
Following on from the high demand for aviation structuring and tax products post Brexit, Equiom is able to assist owners in obtaining free circulation of their jets in Europe, virtual customs warehouse and tax advice for facilitating jet transactions.
The Equiom team will be present at the Winter Aviation Conference in Geneva in March and EBACE in May to assist with all aspects of business aviation. For more information or to discuss your specific circumstances, contact Mark A Hagan.