Business travel demand changing with jet set growth

Demand for private business jet travel is expected to grow over the next decade as wealthier travelers migrate to more exclusive modes of travel, extending a trend that proliferated during the Covid-19 pandemic.

Operators in the business aviation sector are expected to take delivery of 7,400 new jets worth $238bn from 2022 to 2031, according to a global business aviation outlook released yesterday by Honeywell, a major manufacturer of aircraft components. That estimate was up by 1pc from the same 10-year forecast a year ago, reflecting low inventory for private jets and a customer survey in which 65pc of respondents anticipated increased business jet usage in 2022.

Whether because of Covid-19 concerns related to air travel or a rebounding stock market that has padded consumer pocketbooks, new customers have flocked to private jet travel firms since early in 2020, as commercial aviation counterparts struggle to regain pre-pandemic footing.

The number of private jet flights globally dropped about 23pc in 2020 compared to the year prior amid Covid-19-linked travel restrictions, according to data from the Federal Aviation Administration (FAA). While hardly a banner year for the sector, that decrease compared favorably to a 37pc year-over-year drop in traditional US airline flights on planes built to carry more than 60 passengers last year, according to data from the US Department of Transportation.

And demand for more exclusive business service has only continued to rise into 2021. This July, private business jet operators conducted 456,088 flights, the most for any month ever reported by the FAA as part of its monthly Business Jet Report, which dates back to January 2001. Year to date, private business aviation trends point to a nearly 50pc increase in flight hours in 2021 versus 2020, and roughly 5pc above pre-pandemic 2019, Honeywell said.

These dynamics have drawn the attention of Wall Street and private equity investors since the onset of Covid-19's effects on global travel. Signature Aviation, a UK-headquartered private jet services firm, was taken private in February in a $4.7bn deal led by the Bill Gates-backed Cascade fund, Blackstone and GIP. And investment firm KKR closed a deal on 7 June to purchase private jet services firm Atlantic Aviation for around $4.5bn.

Major carriers have likely taken notice, as they struggle to lure back business customers vital to their bottom lines. United Airlines projected during second quarter earnings that its business travel margins would pick up in September as customers returned to offices — expectations that the company later admitted were premature after it revised third quarter profit expectations below prior expectations on 9 September.

Delta Air Lines remained stuck at about 40pc of 2019 demand levels in its corporate travel area for much of the third quarter after concerns about the Delta variant of Covid-19 stymied growth in corporate travel, chief executive Ed Bastian said last month.

Compounding the issue, large corporations including EY and Bain have announced plans to cut corporate travel spending as a means of reducing company-wide emissions, potentially threatening major carriers' ability to ever fully recapture pre-pandemic demand. In the short-term, business air travel is expected to end 2021 down about 50pc amid a "lumpy and non-linear" recovery, Cowen analyst Helane Becker told MSNBC's Closing Bell on 11 August.

Delta Air Lines will be the first major carrier to kick off the third quarter earnings season when it reports tomorrow, with United following on 19 October.

By Dylan Chase