The future of travel: Commercial vs Business & General Aviation

What will the future of air travel look like post-COVID? There are plenty of ideas in different forums tackling this question separately from the viewpoints of commercial aviation or business and general aviation (B&GA). But the reality is that they are not mutually exclusive, so I thought it would be interesting to look at them together.

In the past, when commercial air travel has experienced a major decline due to security concerns, there was a clear increase in demand for B&GA flying which persisted long after the crisis had passed. Presumably, some portion of this increased demand in B&GA was offset by a reduction in demand for travel on commercial airlines.

For example, if we look back at what happened post-9/11, commercial aviation traffic in the US took about 15 months to recover, while business jet activity saw a clear uptick in demand that peaked around 14% higher. After that peak, there was some retrenchment as people presumably felt more secure about returning to commercial air travel. Still though, the increased demand for B&GA travel persisted all the way through the US financial crisis of 2007-2009. 

Fast forward to today: We’ve seen a faster recovery of B&GA compared to commercial airline travel but we’ve not yet seen a clear ‘bubble’ emerge. At least not yet. My interpretation is that today’s crisis, unlike say 9/11, is less about a fear of flying commercial…and more an abundance of caution about travel in general.

Limitations on travel – both domestic and international – have proved to be much more wide-spread and persistent. It will be interesting to see how this plays out once travel restrictions are lifted. Will we see a bubble emerge or not? And if we do, how long will it persist and what does this mean for the future demand for commercial aviation vs B&GA?

Anecdotally, we are hearing a lot about growing interest in B&GA travel for both personal and business travel. At a macro-level, this seems to be supported by the data where B&GA utilization has been more resilient and faster to recover compared to commercial airline traffic. According to Aviation Week Intelligence Network (AWIN), B&GA utilization – with the exception of large jets, used mainly for international travel – had largely recovered to pre-COVID levels by the middle of summer. In contrast, Revenue Passenger Kilometers (RPKs) for commercial airlines were down 66% for the year, according to IATA.

Since COVID-19 began, virtually all major B&GA fleet operators – and some new ones – announced plans to expand their operations.

In August of last year, Cirrus Aircraft launched its new VisionAirTM Ownership Program, a program the company’s website says is geared towards making aircraft ownership “more accessible than ever”. Cirrus’ CEO, Zean Nielsen, said at the time:

“Now, more than ever, people are looking for alternative ways to travel, with the added assurance of safety and privacy.”

Zean Nielsen, CEO, Cirrus Aircraft

Just this month, Wheels Up – a membership based private aviation company which provides access to over 1,500 aircraft – went public at a $2BN valuation that is reported to be more than 2x the company’s valuation in 2019, according to CNBC. At the time, Kenny Dichter, Founder and CEO of Wheels Up was quoted stating that in 2020:

“We saw so many new people who had never flown private before…”

Kenny Dichter, Founder and CEO, Wheels Up

It’s difficult to know exactly how much of this boom is driven by net-new customers entering the B&GA market or simply the pre-COVID customer base returning to the skies. It’s not hard to believe though that at least some portion of this uptick is coming from travelers that might otherwise have been a commercial airline customer.

The B&GA sector, however, is not without its challenges. According to AWIN, new aircraft deliveries were down ~33% for the year in 2020 and used aircraft values fell between 8-13%. There is also significant variation between different types of aircraft. My interpretation is that while there is some increased demand in the market overall, much of it is being addressed through increasing aircraft utilization as opposed to growing the global fleet.

In the end, only time will tell for certain – travelers can be fickle with their habits and the economics of flying private vs commercial are an uphill battle. OEMs and fleet operators are reducing the cost of ownership and making the option of B&GA flying more accessible. But airlines and travel companies are working equally hard to attract customers back to commercial flying as soon as possible. For this typically high-yield segment of the market it is unlikely that the commercial travel industry will give up easily.

What do you think? Will we see a surge in demand for B&GA travel once travel restrictions are lifted, or won’t we? And if we do, how long will it stay?