2023 in aviation is set to be a year like no other. As the aviation industry accelerates out of the effects of the COVID-19 downturn, we reflect on how the pandemic’s effects — and the three years since 2019 — have changed aviation forever. In this eight-part post-pandemic series we dive deep into these changes, and talked business aviation with Alton Aviation Consultancy and MySky.
Business aviation saw a massive surge in operations during the first years of the COVID-19 pandemic, but the nuances in the industry’s boom show gaps in technology and operations that need to be filled. We spoke with Christopher Marich, cofounder and global strategy director of AI-powered private aviation spend management platform MySky, and Alan Lim, engagement manager at Alton Aviation Consultancy, for a strategic view on the challenges that the industry is facing.
“The COVID-19 pandemic brought a wave of new aircraft owners and charter passengers to the market,” Marich tells us. “In the midst of border closures and travel restrictions in 2020, pandemic travellers looked for easier and safer modes of travel and began to view private flying as a viable alternative to commercial airline flights.”
Indeed, he continues, “this trend continued into 2021 with many finding that once they’d flown privately, they didn’t want to look back. For charter passengers, taking flights to less crowded destinations became a must. For corporate flight departments, the speed and convenience of private travel yielded a level of productivity and efficiency for company executives to which even the best airlines could not compare.”
2022 full-year data is not in, but growth compared with 2019 for the first half of the year looks to be roughly 20 percent, depending on the data source. While the growth is good news for the private aviation industry, it has thrown up capacity issues, and “has placed tremendous pressure on back office processes such as charter quoting and invoicing,” Marich says. “As it stands, most charter operators receive up to a thousand charter requests per day with only 1% actually being quoted.”
The industry may also not have completely stabilised post-COVID, and some of the demand may have changed in unexpected ways. This is especially true when considering the demand levels from specific customer groups, whether high net worth individuals or those passengers for whom fractional ownership and chartering has opened up private aviation.
Indeed, says Alan Lim from Alton, there may be some softness in the market. “While leisure demand has contributed greatly to business aviation demand during the pandemic, business demand has yet to demonstrate a sustained recovery. The charter market has ‘traded suits for shorts’, as seen in the aircraft mix — greater light jet activity — and destination mix: strong leisure destination trips, weaker at urban business destinations. There will be some time to go before we can see a sustainable full return of business demand to pre-COVID levels.”
Moreover, he notes, the spikes in some parts of business aviation have not entirely read across to the rest of the industry: “it is estimated that from 2018-2021, fractional and charter business jet departures had grown at 7.8%, more than double the growth in business jet departures over the same period. This was mainly driven by a confluence of one-off factors such as the lack of commercial aviation flights and an increased focus on health and hygiene,” Lim explains.
And, of course, there is the wider economic situation. Ensuring that private aviation has the management information that is responsive enough to monitor and adapt to rapidly changing economic conditions — and the way they change demand — will be vital.
“For aircraft owners, macroeconomic conditions including rising fuel prices and inflation in both Europe and North America continue to drive up operating costs, making financial management of aircraft assets more important than ever,” says Marich. “These costs are also felt by customers at the end of the line when prices rise as a result.”
Business process improvements remain relatively low-hanging fruit
Business process improvement — principally around digitalisation — is critical to removing blockers from the industry’s growth and to convert customers who perhaps tried private aviation at the height of the pandemic into long-term users of the industry’s services.
The bedrock on which this is built, Marich says, is “the digitisation of so many other areas of the industry including navigation, flight operations and aircraft purchasing. Business aviation is largely digital now, so those who don’t adapt and modernise their processes run the risk of being left behind because customers now expect a standard of instant results and information.”
From on-the-ground technology, like automated OCR scanning for invoices and receipts, to real-time back-office spending analytics with KPI tracking, business aviation does not operate in a vacuum: owners, operators and clients all see these improvements elsewhere in their lives and expect them within the industry too.
“Some of the most striking transformations in day-to-day work have occurred through new digital tools introduced to charter operations,” Marich says. Whether it’s automating dynamic cost calculation including time-specific landing fees, crew accommodation, overflight fees or other operational costs, he notes, “having access to this kind of technology in 2022 completely changes the way charter offices run internally. The new speed and accuracy found for charter operators means passengers will benefit from clearer and reliable prices. The many people who have chosen to join the market in the last three years as a result of the pandemic or otherwise will see the faster and convenient option they turned to become even more fast and convenient.”
Environmental, social and governance risks may require swift pivots and new technology adoption
The speed and volume with which societies and their governments are responding to climate change poses a substantial threat to private aviation. Changes in taxation structure to disincentivise use, or even outright bans, have been mooted within Europe.
“Changes in society – particularly with regards to ESG sensibility – have begun to force a re-think on how the business aviation sector would position itself both publicly and as an industry, as well as how it may decarbonise as political and social scrutiny become more intense,” says Alton’s Lim. “Today, industry surveys have shown that there is less pressure for the business aviation community to decarbonise as compared to commercial aviation and that ESG is not as pressing a concern to business aviation stakeholders.”
The industry may well be behind the curve on this one, since it has so far seen only limited regulatory pressure to lower carbon and carbon-equivalent emissions, and a different cost-benefit profile compared with commercial aviation owing to the substantially different utilisation profiles. Nonetheless, offsetting, voluntary carbon taxation and the use of more sustainable aviation fuels have been introduced by some operators and FBOs. More coordinated action is needed here — as it is when it comes to technical improvements to decarbonise the industry.
“To fully implement long-term decarbonisation goals,” Lim says, “will require technological advancements in airframe and propulsion systems, such as Bombardier’s blended wing body business jet concept, as well as greater adoption of flight and fuel optimisation tools. The wheels for such concepts and solutions have been set in motion, and will soon make their mark on the industry.”
Author: John Walton
Published: 20th December 2022
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