Business & Commercial Aviation Editor-In-Chief William Garvey talks with Steve Varsano, founding director of The Jet Business, a retail business jet showroom in London, on business aviation after the COVID-19 crisis.
COVID-19 and stay-at-home directives hit Europe before the U.S. How was business aviation affected?
In March activity started to fall, and by April we went completely into a pause mode. By then, our team was working from home. We had multiple transactions in various stages of the deal process but two in pre-buy. Those buyers felt there would be a free fall in values and hence, they wanted to renegotiate to unrealistically low prices. When the owners quite rightly refused, both deals fell through. It obviously disrupts your regular deal flow when these things happen. Still, I’ve heard that back in the U.S., a quarter of the transactions that were in the closing process fell apart. Fortunately, by the beginning of May, I was buying a Falcon 7X for a client and trying to buy a Global 6000 for another and had signed a letter of intent on a G-V for another. Two of the three were at very realistic prices and one was waiting for a bigger price opportunity. With the G-V, we were trying to find a way to get our client to Europe to see it and waiting for border restrictions to be lifted. So, we’re starting to see a pulse and it seems to be growing more each day. There is oxygen coming through the arteries now.
The airlines would like some of that.
There are some 800 airlines in the world, and I would think 20% are not going to come back or will in some different form, and they won’t launch without putting people in the middle seat. They can’t make money with occupancy of 66% or less, so they won’t make up their losses by increasing flights. By the way, blocking the middle seat should be seen as a stupid idea since the cabin air is usually just recirculated, and the guy coughing in the seat in front or behind you is just inches away, not 6 ft. Regardless, it took years for passengers to adjust to the Transportation Security Administration checks, and now it’s going to get worse: You’ll need masks and gloves and the flight attendants will be even more empowered and be able to throw you off the plane if you say “Boo.” Most passengers feel the airlines have been less than friendly or accommodating, and now they’ve got a tough road ahead.
Are used business jet values going to fall?
Some people out there are being pessimists and predicting so many exits from the market that values will drop excessively. Not me. Sure, some companies with airplanes will find themselves with what they call “preexisting or underlying issues” and have to sell now and sell cheap. But those are the one-offs.
And if you don’t have an airplane?
Charter. Many operators had a tough time during the shutdown. If they owned their fleets, they had payments to make but had no income to cover them. Failures were inevitable. However, for those who survive, over the next six months or more they should see a very nice increasing business curve. Business aircraft provide the answer for people who need to go to non-airline destinations, for executives who don’t want to make stops to get there, and for those who demand a safe environment and the flexibility to go when they want to go.
Is that message getting through to the public?
It should and might be, considering all the industry is doing to help the needy and all the different global governments in this crisis. Maybe now it will be less of a political target, and that would be beneficial. However, this is the time for Washington trade organizations like the NBAA, GAMA and the other associations to be tooting the industry’s horns and really promoting the good things this sector does. It seems little Greta [Thunberg, the teenage Swedish environmental activist] has disappeared. Well, she got what she wanted: carbon-free skies, roads and industries. Unfortunately, the price was over 30 million jobs and tens of thousands of bankrupt businesses. Be careful what you ask for, little girl, as the right objective sometimes comes with unforgivable and harmful long-lasting consequences. The world’s operating gearbox is business. Don’t screw with the system!
