How to Read the International Sales & Charter Markets

What’s the status and the outlook for the global business aircraft charter and sales markets? Rebecca Applegarth asks Sparfell Aviation Group’s Edward Queffelec for his company’s perspective of the regions they operate in…

Rebecca Applegarth  |  15th May 2020
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    Rebecca Applegarth
    Rebecca Applegarth

    Rebecca Applegarth has been brought up around Aviation for as long as she can remember. As a current...

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    Gulfstream Private Jet in Hangar

    Founded in Geneva, Switzerland in 2006, Sparfell Aviation Group has established a solid global presence in the Business Aviation market today, only last year (in June 2019) acquiring Austrian operator LaudaMotion Executive.

    Among its portfolio of services, the group offers clients aircraft buying and selling services, as well as aircraft charter, aircraft leasing and aircraft management. With offices spread around the globe, Sparfell has a wide reach in the Business Aviation sector.

    AvBuyer spoke with the company’s CEO, Edward Queffelec, to discuss the current market situation, and obtain an outlook for what a recovery might look like for business aircraft sales and charter once the COVID-19 pandemic is over…

    AvBuyer: COVID-19 is prominent in everyone’s thoughts and conversations right now. With so many national borders being closed, what’s the story for the business aircraft charter market right now? Are there any pockets of demand that you're seeing?

    Queffelec:What we have observed, like many of our colleagues, is a sudden stop in the usual flight activity from early March, followed by a period of two-to-three weeks of several repatriation flights.

    Since early April the flight activity has been very low – however, there has still been some repatriation or mandatory travel occurring.

    Interestingly, roughly half of our flights have been for customers who rarely use private jet charter, but have had to do so because of the lack of airline solutions. This leads us to think that the crisis will highlight the real benefit of our industry in providing efficient travel solutions where there are no efficient airline solutions.

    Edward Queffelec, Sparfell Aviation Group

    One of these customers actually made a 1hr 45min flight within Europe where the only alternative airline solution would have been a 28hr trip with three stops.

    Business Aviation also offers the natural benefit of providing social distancing by avoiding large airport terminals and large numbers of fellow passengers. This limits contact between travellers and potential virus transmission.

    For these reasons we expect new customers to use charter services to protect themselves, their colleagues, their families and loved ones.

    AvBuyer:How quickly do you think the charter market will recover after the pandemic is over? Will some sections of the market be quicker than others?

    Queffelec: The recovery of the charter market will depend on one of two opposing trends emerging. The first is a downward trend similar to the one we experienced in the previous financial crisis: Many corporate and private customers reduced their charter use for economic reasons.

    The second, an upward trend, may emerge for the reason mentioned previously: The growing need for private jet solutions due to the lack of convenient airline service and a need for a safer travel solution with reduced contact thanks to having your own cabin and getting to choose who sits in your direct environment.

    All of this is linked, of course, to actual and current travel restrictions that are enforced by different countries. If passengers are not soon allowed to cross borders the likely rate of recovery will slow.

    Our feeling is that due to large areas being closed to foreign travellers for a significant period of time (Schengen is anticipated to be closed until at least the end of August), long-range flights will be the ones to trail in the recovery.

    Meanwhile, the Light and Super-Light Jets will prove a good match for the range needs and requirements of the newcomers to the charter industry. Therefore, we expect our European Bombardier Learjet and Challenger 300 fleets to be more active than our Bombardier Global and Gulfstream aircraft (for example).

    AvBuyer:We've been reading and hearing plenty about the US aircraft sales markets. With offices around the world, though, how do sales look in the regions you cover?

    Queffelec:After a complete ‘black-out’ for two-to-three weeks, we see some resilient market activity; but for reasons such as technical centers being closed, there are fewer deals closing.

    Most of the closings we see happening are for transactions that were already at an advanced stage before COVID-19. So, most of the activity is revolving around keeping those deals alive – mainly on Mid-size Jets (as opposed to Heavy or Light Jets), and with some demand for VIP helicopters.

    ‘Business flows’ (i.e. broadcasts, advertising and mail requests) have picked-up again, but are at a level of around 40-50% of where they were before COVID-19 struck. Ultimately, activity is currently low, but it’s improving.

    We’re seeing a quite significant number of Ultra-Long-Range Jets on the market. For example, there are 20 Bombardier Global 6000s for sale at this time.

    While many of these are based on orders for new jets, pressure on pricing is not yet apparent, and it’s still too early to see the impact in that respect.

    Although we do expect an increase in buyer ‘opportunities’, we have not yet seen many distressed assets enter the business jet market. The only fire-sales that we’ve seen have been on some low-end assets, including some older King Airs.

    AvBuyer:We’ve heard it said that the US’s pre-owned sales market will recover first, and that the rest of the world’s markets could be in for a tough year. What's your reading of the European market, in particular, and the other regions that you cover, generally?

    Queffelec: In Europe (including the UK), big corporates and Small-to-Medium-size Enterprises are being hit with financial issues. We expect to see aircraft sales under pressure occurring in the coming months (including from private owners).

    Opportunistic buyers are still waiting for significant price reductions to materialize. Some Letters of Intent (LOIs) are being submitted, but that is currently the stage where the deals are often grinding to a halt, since the borders are closed. Even a simple aircraft viewing is impossible unless the buyer and seller live in the same country.

    Interestingly, we are aware of several Ultra-Long-Range and Super Mid-size Jet owners who have decided to pull their aircraft off the market and plan to ‘wait it out’.

    Our opinion is that older (but fully 2020-complient) Ultra-Long-Range and Light Jets will be the first to pick-up within Europe, as individuals or companies that can afford them might prefer to acquire one to safely commute and avoid the exposure to potential diseases on the Scheduled Airlines and at their terminals.

    Our home-country of Switzerland is a geographically small and well-organized country, and it should adapt quickly after COVID-19. We are confident we will see Switzerland and its HB-registered aircraft rebound well in the market.

    The Middle East, meanwhile, is currently demonstrating poor activity. Historically a region of aircraft buyers, the Middle East faces an unprecedented drop in the price of oil. The proximity between Business Aviation and the Scheduled Airline players in the region might be a constraint to a quick restart and recovery. We expect to see some sales in the Long-Range and Mid-Size Jet segments, though.

    Our understanding of Africa is that the usual demands for ‘pre-flown’ aircraft and services will remain, and will restart immediately after the de-confinement (though the number of deals here are traditionally lower when compared to rest of the world).

    As for Asia, a lack of visibility in China – the engine for Asia – makes it difficult to assess that region at this time.

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