LONDON—The pre-owned business aviation market is stabilizing, OEMs will bounce back, and the influx of new customers that the sector has seen since the start of the COVID-19 pandemic provides plenty of ground for optimism, London-based aircraft dealer Steve Varsano says.
But he warns that the burgeoning urban air mobility (UAM) industry may herald the end of the helicopter business, and, in the longer term, it could supplant the light jet segment too.
“The activity of all the charter companies went from 80% [down year-on-year] in March, April, May and June,” he says. “Then it went to between 80 and 120% of the previous year from July through December. Really, the charter market went through the roof, and the guys who were selling jet cards said they had record months that they’d never had before. But the key take from that is that 50% of the people buying those jet cards never chartered an airplane before. That’s fantastic.”
This high amount of new business is all the more remarkable, Varsano argues, because it arrived at a time when corporate flight departments were at a virtual standstill. When prepandemic travel patterns resume, the sector will start to see the full benefit.
“If you go back 35, 40 years ago to when NetJets started, that was really the first business model that was going to bring new people into our industry,” he says. “People couldn’t afford to buy, so they’d buy fractional—it was something new. And this [post-COVID situation] is one of those events. It brought a lot of people into the market to fly private.”
The other trends currently shaping the pre-owned marketplace are a changing conventional wisdom on what constitutes “too old,” along with what Varsano sees as the consolidation of a kind of level-headed rationalism about value and utility that has been growing since the financial crash of 2008-2009.
“The inventory of airplanes less than five years old is very low,” he says. “Everybody has a different impression [of when ‘old’ becomes ‘too old’]. There’s a certain point where you don’t want to buy something that old, and that will push people to buy something new. But instead of a [Gulfstream] G550, which was maybe getting too old, you might say, ‘I don’t really need that,’ and buy a new 450.
“Today, the reason most people buy bigger, longer-range airplanes is because of ego, not because of necessity,” he continues. “Since the 2008 financial crisis, everyone has wanted value. Before that, everybody was just buying, and they didn’t care. People will get more realistic on what they buy, and they may step down on ego and get something more practical. And I think that will push people back to the OEMs.”
The advent of multiple COVID vaccines is giving realistic hope that a return to some kind of normality can be achieved this year. The other main headwind hitting British-based business aviation entities—Brexit—is not directly affecting Varsano and his firm. But the long-term trends that caused it continue to exert significant pressures on the sector.
“The British government has done nothing to assist the corporate aircraft market in the UK, because they’ve been doing everything they can to chase out every wealthy person in this country,” Varsano says. He argues that, following changes to rules regarding the taxation of non-domiciled nationals in the UK, “an immense number of wealthy people left. I don’t want to say Brexit is the final nail in the coffin, but they’ve done everything they could to chase out the wealthy people here.”
‘UAM Sector A ‘Huge Opportunity’
Varsano is not considering opening a showroom in continental Europe, but he is planning an expansion of The Jet Business. Details are still sketchy, but he has his eye on the UAM sector—and has already bought a number of appropriate web domains, including flyingcarbusiness.com.
“I think it’s a huge, huge opportunity,” he says. “It’s going to destroy the helicopter business, and it’s going to take the ultralight and light jets out. I think it’s going to replace all that. And it’s real: these are significant companies, and there’s so much money chasing that space. I’m still trying to figure out how I get involved and be a part of it, because I do think that is the future.”
UAM’s appeal, in part, lies in its ability to follow the recent jet card market expansion, and dramatically enlarge the private flying demographic.
“You’re going to find [aircraft] from $100,000-$200,000 up to $7-$10 million—you’re not talking about a $40 million jet,” he says. “So, it opens up the door. The potential of this market is huge compared to the corporate jet market.”
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