Corporate Jet Investor

  • Tracey Cheek posted an article
    Is business aviation ready for Blockchain? see more

    NAFA member, Corporate Jet Investor, discusses Blockchain and business aviation.

    BLOCKCHAIN IS one of those words nearly everyone has heard of or read about over the past decade, but very few people can define exactly what it is. Those who take a shot at explaining it usually end up saying something along the lines of: “Blockchain is a distributed, decentralized, public ledger.” Instead, the best way to think about blockchain is that it allows data to be held securely in a provable format. The blocks of the chain are digital pieces of information or data.

    This deep granularity means small items can be tracked, with the data stored on a network of computers. Fundamentally, the goal of blockchain is to allow digital information to be recorded and distributed, but not edited. Accessing indivudal blocks requires a key, created by complex algorithms. This ensures the data items cannot be tampered with, essentially helping the data points be verifiable.

    For business aviation the potential application of this technology could be vast, from storing individual financing documents to spare-parts tracking of the smallest aircraft components. Fuel companies are also working on using it.

    First movers

    Adoption across business aviation of blockchain is still very much in its early stages but this will change soon. Clay Healey, owner of AIC Title Service, is among the first movers. The firm has been using blockchain since last year, mainly placing closing information into it, for roughly 2,000 assets with a $2bn value in closing. Healey says that AIC uses blockchain primarily for security but adds that a lot of the language around blockchain is slowing its adoption.

    “For us at AIC, blockchain really is an added layer of security. I think a lot of the words used around blockchain make it incredibly hard for most people to grasp it. Nodes. Decentralisation. What do they mean?” he asks rhetorically.

    “Breaking it down logically, it’s a way to put information across a vast array of servers, and that makes it extremely secure and virtually un-hackable. I say virtually as for verification of the documents, 51% of the computers, or servers, need to agree that the data is correct. To hack 51% at the same time is a huge task.”

    Aiham Bader, founder and CEO of Click Aviation Network, is another pioneer. The trip support company is already using Blockchain technology for its Instant Permit Programme and is looking at leveraging it to help with parts traceability.

    “If you are going to implement blockchain, start from within,” said Bader. “Have a group from your company who understand your business, vision, the target and the plan. Then you have the engine within who understand blockchain and if it fits within your business. Then from all the problems you have to pick out only one problem and start with it first.”

    Todd Siena, founder and chief of Block Aero, a start-offering a blockchain platform, also highlights that for aviation blockchain offers security of data and a method to verify the truth of that data, which can be crucial for an aircraft’s resale value.

    “Where we see the value of blockchain at Block Aero is that it organises asset data and secures the verification of it. Given that aircraft value is linked to this asset trace data integrity, which grows over the life-cycle, being able to prove up that asset data is vital. If you lose the data, or it is incomplete, then you are losing resale value,” says Siena.

    Being able to store and verify crucial data cross many components is of obvious benefit to aviation, especially on the maintenaBlock Aero recently announced a flagship pilot project with Turbine Services & Solutions and Etihad Airways nce side where there are numerous parts to track.

    The blockchain pilot project, sponsored by Mubadala Aerospace R&D, aims to improve engine-overhaul times by enhancing cooperation between parties that need to collaborate on aircraft asset data.

    Healey agrees that blockchain’s ability to prove-up documents makes blockchain a good opation for aviation.

    “One great thing about packaging our closing documents into one PDF is that all the information is there and if it is housed on the blockchain it’s incredibly easy to obtain that information if and when there’s a need to prove upwards.”

    Siena thinks that aircraft will ultimately either be on the chain or not, with implications for the pricing of financing and asset sale value.

    “I think the world will diverge into a place where we have aircraft and assets on-chain and off-chain. Maybe those at the start will be newer aircraft and premium ones like business jets,” he says.

    On-chain aircraft may also be able to get tailored insurance policies as well, Sienna adds.

    “These on-chain assets will enjoy several advantages over those not on the blockchain. For example, insurance may be cheaper as you can prove to the insurer the condition of the asset with risk monitoring over the life-cycle,” says Siena.

    “Right now, most insurers offer very generalised policies, but providing more granular data means these can be more tailored. The same can be applied to asset financing.”

    Back on the chain gang

    One obstacle to blockchain’s wider adoption is that making a complete repository of all aviation assets is something of a herculean task.

    “But away from putting new stuff into the blockchain, reverse engineering blockchain into the aircraft title world may be near on impossible as there are just so many aircraft. You’d have to go so far back to get all the information. If someone was to draw a line in the sand and say ‘let’s just do it from say 2018’, then it might be feasible,” says Healey.

    Registry support would play a critical role in making the adoption of blockchain more feasible. But according to Healey no registry has embraced blockchain as of yet, though AIC is in talks with a European registry around use of blockchain.

    OEM support would also help fasttrack blockchain’s use across aviation, according to Paul Jebely, partner at law firm Pillsbury in Hong Kong. “The inevitable march towards modernity must invariably begin with the OEMs as first movers,” Jebely says.

    However, costs and a lack of immediate efficiency gain may dissuade OEMs from adopting blockchain swiftly, Healey argues.

    “I wouldn’t say blockchain really adds efficiency and it does cost a lot, even for relatively small users like us. If you’re an OEM, the cost will be many times more and imagine having to log every piece of metal, every change to that piece of metal – that’s not efficiency, that’s slowing you down! But then again when it comes to certification, you can just take all that data stored in one place, assert that it’s true and present to the FAA or whomever– that is where the streamlining blockchain offers starts to come in for OEMs.”

    Other technologies are available 

    Use of blockchain may not accelerate rapidly in business aviation, but there is little doubt that harnessing technology can bring business efficiencies. For example, Healey is using computing power to cut down the amount of time it takes to trace ownership.

    “We are working on a computer system that will essentially be able to read registry documents, and hope to have that online by June. That will bring efficiencies as, before, tracking all the owners, different parts etc could take four to five days,” Healey says. “There’s a 9ft tall office we have here, and some of the paper trails you’d produce from those registry searches would be as tall as the ceiling. And you have to double check all of that! Now the computer will read that document in eight minutes and all we will have to do is to check it, which might take an hour or two. That’s a tremendous time saving.”

    Smart business-aviation firms need to embrace technology that assists them. Whether blockchain is one that will become widespread looks unlikely in the near term. But as AIC’s planned new system shows, there are always new avenues to explore.

    This article was originally written and published by Jamie Bullen, Reporter, with Corporate Jet Investor in CJIQuarterly Q3 19, July 2019.  

     

     

  • Tracey Cheek posted an article
    You Do Not Need To Worry About the Downturn see more

    NAFA member, Alasdair Whyte, Editor, Corporate Jet Investor, discusses the last 10 years in business aviation.

    Are you an optimist or a pessimist? Is your glass half full or half empty? Or, worse, is it lying on its side with the liquid soaking into your laptop, as you watch that spreadsheet you have been working on for hours, but not saved, go blank.

    Your answer to this question will be a good guide to whether you think business aviation is about to see another industry downturn in 2019.

    By most measures, 2018 was a good year for business aviation. More people flew than ever before (although total flight hours slowed in the second half of the year), deliveries rose, and the number of pre-owned aircraft for sale fell to the lowest level for 10 years. Margins were lower than many businesses would like (although that is true for most businesses every year), but compared to some of the past 10 years, 2018 was a good one.

    Now many people are wondering if we are about to see another downturn?

    Asking the question itself is healthy. Business aviation, like most sectors, is a cyclical industry. It always has been and it always will be. On the whole people and companies buy or fly in jets when they are feeling confident about their businesses getting better. When times are tough, it is easy to forfeit a deposit and cancel an order or switch from charter to an airline (just not as pleasant). People forgetting that the market is cyclical or arguing that new fundamentals mean that it is no longer volatile are signs that the downturn is definitely coming – or has already started.

    One problem is that it is actually really hard to define a downturn. There are lots of different indicators – new aircraft orders, deliveries, the number of flights, the numbers or percentages of pre-owned aircraft for sale, industry confidence – and no set rules such as one of these declining for two consecutive quarters (which economists use for recessions). This is something for the International Business Aviation Analysts Association (I-BAAA) to debate at its next meeting. It also depends on the downturn. If you worked in business aviation in 2009 you know what it felt like. For now, let’s go with the woolly definition of things generally feeling worse than they did when they were at their strongest.

    The odds of 2019 or 2020 seeing some economic slowdowns are high. But the chances of a genuine global downturn are much, much lower.

    There is a chance that 2018 was the top of the cycle. Many markets are already in downturns. There are clear signs that China’s economy is slowing – due both to the trade war and (more importantly) to falling consumer demand. Anecdotally, brokers are also seeing some Chinese owners looking to sell aircraft and a few repossessions.

    European confidence is pretty low and there are signs that the Eurozone economy is slowing. Business investment in the UK is down because of uncertainty about leaving the European Union. Demand in Russia, Latin America, the Middle East and Africa is low. “At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead,” said Kristalina Georgieva, CEO of the World Bank in the Bank’s January 2019 Global Economic Prospects forecast. In the US – which still accounts for more than 65% of all business aircraft – the market is holding up well. But nothing lasts for ever. Hopefully demand will remain firm in 2019, but we should not be too worried if it slows slightly. Some 45% of the more than 300 people at Corporate Jet Investor Miami believe the next downturn will hit in 2020. One in four people went for 2019 with a similar number going for 2021.

    But they key issue is that things are not going to be as bad as last time.

    Forget 2008

    While it is good to remember the lessons from the last downmarket, we are not going to see a repeat of it. In 2007 and 2008 business aviation was completely different, dominated by people desperate to acquire aircraft and hyped up by market speculators.

    Faced with that record demand, OEMs took what was then the completely logical decision to raise production. In 2007 1,136 business jets were delivered, rising to 1,313 aircraft in 2008.

    The 2007/2008 Global Financial Crisis meant that all of the major economies and business jet markets went from hot to frozen in lock step. In 2006 Hawker Beechcraft had a backlog of $4 billion, by 2008 it rose to more than $7 billion. One year later, as customers cancelled orders, the backlog had more than halved to just above $3 billion. By the end of 2011 it was $1.13 billion. The company filed for Chapter 11 in 2012.

    This will not happen again. The odds of 2019 or 2020 seeing some economic slowdowns are high. But the chances of a genuine global downturn are much lower. Global recessions are relatively rare. The collapse of confidence in 2008 was faster and more widespread than during the Great Depression (1929-1939) – although thankfully the effects were not as bad. Since World War Two, the global economy has only failed to grow by 2% in four years – 1975, 1981, 1982 and 2009 (the first three were caused by oil shocks).

    It is highly likely that the world as a whole will experience a mild economic slowdown in 2019 and 2020. Economies are cyclical and many have been rising for a long time now. But this does not imply that we are going to see a severe business jet downmarket. Instead, we are more likely to see a series of mild downturns. This has already started.

    Look international

    At the moment the US economy is still pretty strong – and this could be enough to keep the US business aviation market healthy throughout 2019.

    Hopefully, when the American economy starts slowing, other markets will have started to recover (perhaps helped by a weaker dollar that makes aircraft more affordable). There is still a lot of pent-up demand in international markets and people who want to fly and own business aircraft again (once you have realised the benefits of business aviation it is hard to look back). Brazil could be one of these highlights in 2019.

    For many this downturn will feel a lot like the market in 2012-2017. Everyone will have to fight hard for new clients and things will still be very competitive. The growth in utilisation may fall, but traffic will not suddenly collapse as it did after the 2008 global financial crisis.

    The same is true for new aircraft orders. We may see a small drop in demand, but manufacturers can manage this. As a group, they have not delivered more than 800 jets a year since 2009.

    If we see a mild slowdown and the numbers of previously owned aircraft for sale rise, we may see price drops or residual value decreases, but nothing like the massive falls of 2012 when some types were losing 10% a quarter. In any event, as a rule anyone who owns an aircraft should still expect it to depreciate by around 12% a year.

    So, the bad news is that we may have hit the top of the cycle. But the good news is that for the majority of people, things are going to be nowhere near as bad as the last downturn. The market did not rise anywhere near as high in 2018 as it did in 2008, so it does not have anywhere near as far to fall.

    If you are focused on a domestic market that falls hard and stays in recession for longer, this may not be much comfort. Time to refill your glass.

    This article was originally published in Corporate Jet Investor's CJIQ Edition 1 Q1 2019, p.5

  • Tracey Cheek posted an article
    David Coleal: A new Global era for Bombardier see more

    NAFA members Alasdair Whyte, Editor and Co-Founder, and Alud Davies, Asia Editor, with Corporate Jet Investor, share their article on David Coleal's return to Bombardier.

    David Coleal re-joined Bombardier in 2015 as part of its turnaround team.  Now thing are looking a lot brighter.  

    A lot of exciting things are happening at Bombardier Business Aircraft. New aircraft are being delivered, new models developed, upgrades made to existing aircraft and serious investment in services. You can sense the confidence in the division. So, it is perhaps surprising that one of the words that David Coleal, president of Bombardier Business Aircraft, uses a lot when he is talking about the future is the word “prudent.”

    This partly reflects the wider organization. Bombardier is midway through a company-wide turnaround plan after problems with the CSeries commercial aircraft and the key theme of its December 2018 New York Investor Day was that things are very much on track.

    But it also reflects how Coleal sees his role. Coleal and his colleagues are keen to be innovative and take risks, but they have to deliver on their plan.

    Since Coleal returned to the company in 2015 he has been delivering on his promises. In the past five years the OEM has: delivered more business jets in its class than any other manufacturer (although Gulfstream wins on dollar amount); grown its backlog to $14.3 billion, the biggest in the industry; certificated the newly delivered Global 7500 and; launched the Global 5500 and Global 6500. He has also reshaped the business, selling its training business to CAE, while investing heavily in its own service network.

    “You’ve seen the numbers that we have posted over the past three-and-a-half years,” says Coleal, “driving our earnings, doubling our earnings, continuing to improve and drive our service and support and delivering the best aircraft in the industry including the Global 7500.”

    Coleal is speaking at a time when he and his team are still on a high from the delivery of the first Global 7500 to Stonebriar, a leading business jet financier.

    With a range of 7,700 nautical miles the Global 7500 is the longest-range dedicated business jet available – capable of flying between New York and Hong Kong without stopping.

    But the Global 7500 is not just about flying far. It is fast, capable of flying at Mach 0.925, and it is big. The Global 7500 has a cabin 10 feet longer than other Global models. With four living spaces and the largest kitchen (an area where Bombardier knows passengers like to congregate) the aircraft is exciting loyal customers as well as new ones. “The 7500 has been an amazing journey,” says Coleal. “It is going to set the standard for the industry of what people expect for this size and class of aircraft. We just couldn’t be prouder. We are elated that we’re delivering.”

    Launched in 2010, the Global 7500 (then branded the Global 7000) was delayed in 2015 – just after Coleal joined – due to issues with the design of the wing. The manufacturer then told customers that it would be ready in 2018.

    There was a lot of pressure on Coleal and his colleagues to make this happen. In fact, delayed certification was identified in 2018 by Alain Bellemare, Bombardier’s CEO, as one of the two biggest risks facing the whole company. Coleal also did not want to let customers down.

    “We met our commitments to our customers,” says Coleal. “The customers that have been in the backlog for many years are incredibly excited. I stay close to them with regular updates, and we exceeded both range and field performance, so everything about the aircraft is going extremely well.”

    The delivery of the Global 7500 is also a significant boost to the whole company.

    “This marks the dawn of a new era,” says Coleal. “We're basically making history with the delivery of this first aircraft and its entry into service.”

    But he is being prudent about Global 7500 deliveries. Following the first delivery in 2018, Coleal says that Bombardier is planning to deliver between 15 and 20 Global 7500s in 2019 - around three to five aircraft in the first half of the year with most coming in the second six months. He says that this is to ensure that the first customers have a good experience and that the entry into service is as smooth as possible. In 2020 he plans to deliver between 35 and 40 Global 7500s.

    Bombardier is also focused on building the new aircraft efficiently. Fitting the interior into the first Global 7500 took less time than it normally takes to complete a Global. Coleal says that Bombardier has also taken delivery of all of the parts it needs for its 2019 deliveries, so is confident that there will be no supply chain issues.

    Click here to read the full article.

    This article was originally published in Corporate Jet Investor's CJIQuarterly Q1 2019, p. 19. 

  • Tracey Cheek posted an article
    What will happen in 2019 see more

    NAFA member, Alasdair Whyte, Editor and Co-Founder of Corporate Jet Investor, shares his forecast for 2019.

    As we start 2019, it is hard to remember another year when so many forecasters are predicting a downturn. 

    And there is a lot of ammunition for pessimists. The year 2018 was the worst 12-months for US, UK and European stock indices since 2008. Investors and analysts are concerned about the potential fall-out from the US-China Trade War; US interest rate rises; and Europe ending quantitative easing. There are too many geopolitical risks to list.

    Some analysts are even warning that years that end in nine often have big changes. They argue that 1789 saw the French Revolution; 1919 the end of the First World War; 1929 The Wall Street Crash leading to the Great Depression; 1939 the start of the Second World War; 1979 the Iranian Revolution; and 1989 the fall of the Berlin Wall. Although this theory does not account for massive changes not happening in 1799, 1809, 1909, 2009 and so on – or huge events in 1912 and other years not ending in a nine. 

    With this gloomy backdrop in mind, here are the key themes for business aviation in 2019:

    US buyers will continue to dominate 
    There are still lots of American buyers who are planning to buy an aircraft in 2019. US equity markets may be skittish, but the firm link between share prices and business jet deliveries stopped working in 2009 (maybe that was the key change for that year). 

    We would argue that business confidence is more important. In November last year, the NFIB said that US small-business confidence was on a record run. Today’s job figures are another boost. Nothing lasts forever, but it is too early to write-off the US. There is still lots of confidence out there. 

    Although there are some bright spots – Brazil could be one – demand in the rest of the world is patchier. It looks set to be a tough year in China (as Apple’s recent announcement shows) and the Middle East. Demand in Europe may be flat – although UK operators are confident that they can cope with Brexit. 

    Business jet deliveries will rise moderately  
    Aircraft manufacturers will deliver more aircraft in 2019. Bombardier and Gulfstream will increase production of their Global 7500 and Gulfstream G500 aircraft. 

    The year will also see the delivery of exciting new aircraft including the Cessna Citation Longitude, Global 6500, Global 5500 and the Praetor 600. The first Airbus A319neo and Boeing BBJMax8 will also be completed. 

    But the key thing is that OEMs are not getting carried away with production – which is a great thing for when the downturn really hits.

    Utilisation will be flattish
    WINGX data coming out next week will show 2018 was a record year for business aircraft flights, although growth slowed in the last six months. The next 12 months are probably likely to be pretty flat – perhaps up by a few percent if we are lucky. Anyone around in 2009 and 2010 will take that.

    NextGen
    This time next year aircraft in the US will need to be equipped with ADS-B Out to fly. It is clear that not every aircraft will make this deadline – but some owners seem happy with this so the year 2020 could see a significant number of aircraft being scrapped. 

    So perhaps not as upbeat as last year’s very accurate forecast. As we said in August, winter is coming (it always comes), but 2019 will not see the full freeze.  

    Best wishes for a Happy, Healthy and Prosperous 2019 on behalf of me, Louisa and the Corporate Jet Investor Team.

    This article was originally published by Alasdair Whyte with CJI on January 7, 2019.

  • Tracey Cheek posted an article
    Wayne Starling’s advice for anyone starting out in business aviation see more

    NAFA member, Alasdair Whyte, Co-Founder and Editor of Corporate Jet Investor, talks with Wayne Starling, with Starling Consulting, LLC., about starting out in business aviation.

    Recently, I had the pleasure of being on a panel at the Corporate Jet Investor conference in Miami.  One of the questions asked was for any guidance or counseling that I could give a new person starting out in the aviation business.  My advice was for a person to find a mentor.

    I have thought about that question over the last few days.  I wished I would have had the time to go into more depth. Yes, a mentor is important throughout your career, but there are other important elements as well.    Throughout my career, I have hired and observed many young talented people come and go.  I often reflect on what makes the difference in people succeeding and what causes many of them to fail.  I have analyzed this for years and believe that the top 5% do many things that make a big difference in whether they “stay with the pack” or become top performers in their field.

    My observations watching those top 5%: 

    ATTITUDE:   It starts and ends with their attitude.  What is interesting is the fact that I have asked hundreds of people if they think they have a bad attitude.  No surprise here, but almost all of them never admit to being negative or having a bad attitude.  However, you and I know that when you are around a person that has a negative attitude, they will brighten a room by leaving! One person with a bad attitude can and will cause severe problems if they remain part of a team.

    MOTIVATED:  Have you noticed most people that complain and develop a bad attitude are the ones doing the least amount of work or nothing at all!  This is where they need help by taking an inventory of their activity.   It is hard to be unmotivated when you are busy.   If you want to get motivated, then get busy!  Do something, i.e. get motivated by making some calls, setting up appointments, talking with customers, reading, studying and learning.  Understand that real motivation comes from the “doing” not the “wishing” things would improve.

    STEP UP AND MOVE FORWARD:   Successful people have a desire to learn. They are involved in stepping up by setting realistic goals and then by moving forward.  They take action!  Do they make mistakes?  Yes, but that is a sign of stepping up and moving forward.  In many situations, they will learn from these mistakes more so than from the successes.   They don’t coast through life.  We all know if you are coasting, you can only coast downhill.

    PATIENCE AND COMMITMENT:  I don’t mean sit around and wait.  Yes, sustainable success takes real time and effort to get the greatest rewards. The road to success is not straight without bumps, hills, and plenty of detours.  How you handle the bumps and detours, will determine the person you become.  If you want to become a person of value, a person of character, a person respected, then you must be patient while you work and take the steps and move forward.

    MONITOR CLOSELY THE PEOPLE AROUND YOU:   Some person you meet along the road of life will either pick you up or pull you down, or just hang on to you for a ride.  People that don’t know you will form an opinion of your worth based on the people that are your associates. Who are your role models, your mentors, people you respect in the business and would like to emulate?  Life is full of choices on your way to success so be picky about your influencers!

    All of the above recommendations are part of the puzzle that will make up your success:  your attitude, people that you surround yourself with, your patience and commitment, staying motivated, finding a mentor.  All pieces of the success puzzle.

    Do you want to be one of the top 5% of highly successful people? Step up and move forward and you will not only enjoy the journey, but you will also enjoy success at the destination.   Good Luck!

    This article was originally published by Corporate Jet Investor on November 29, 2018.