This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.
People have been stuck inside during the pandemic, and now that the economy is working to reopen everyone is ready to get back out. We still have many obstacles in front of us, but the discussion of pent-up demand is taking center stage in our client discussions for preowned business aircraft.
The burning questions are how do we get back out safely, and how do we approach private jet travel in the Covid environment?
On the mind of everyone I speak to is hygiene, front and center. Of course, owning and operating your own aircraft without a component of charter use is probably the easiest way to control the hygiene of the aircraft and the crew. It gets far more complicated when you are using fractional or charter lift to keep the aircraft safe and clean.
I have spoken to several operators and find a very clear protocol in effect. A few common threads that seem to run throughout the providers include sanitizing the aircraft thoroughly after and before every flight; temperatures checks for crew and passengers before every flight; mandatory mask wearing for crews and ground support personnel; and masks provided and suggested wearing for passengers.
Many companies, both charter and fractional, are also operating with crew pairs, meaning the same crew is always flying together. This way if one of the pair gets sick, they are both quarantined for 14 days and they are not cross infecting a broader crew population. And many larger operators with bigger aircraft are also installing HEPA cabin air filtration systems.
Of course, aircraft pricing and costs are also top areas of discussion. Has the Covid pandemic affected the price of aircraft? Has the pandemic affected any of the operating costs of the aircraft? Are the jet card or charter companies offering incentives or discounts that were not contemplated prior to this event?
We are finding pricing and cost opportunities in every facet of the industry. Today, owners and operators, buyers and sellers, are finding varying price weaknesses in the aircraft themselves. These vary between approximately 5 percent and 20 percent off of pre-Covid pricing. Much of that spread difference depends on an aircraft’s age, capability, and pre-Covid demand.
Will demand come back as travel restrictions are eased or lifted? We are getting calls from prospects saying, “I will never travel on a commercial aircraft again.” As the economy opens up and we begin to learn the reality of a vaccine, we will all better understand if people really act on those sentiments. We could actually end up with a larger industry, though.
Will the prices of aircraft recover as demand increases? Is there a history of recovery that our industry can point to?
Except when the emerging markets came into play from 2003 through 2008, prices of aircraft never rebounded from a downturn. Even during that period, the premiums paid for airplanes mostly affected new or very new aircraft. Realistically, one should expect the residual loss rate to slow to a more normal rate for an aircraft between 5 percent and 10 percent annually, rather than go back up to pre-Covid values.
Takeaways: our industry is vibrant and robust and will come back; the market will enjoy a resurgence of first-time buyers of both fractional, charter customers, and whole aircraft owners; and this is a good time to engage in private jet travel.