Representational Image(Unsplash)
Representational Image(Unsplash)

Private jets are handy in a pandemic

The convenience and perceived health benefits of flying private are attracting converts. The companies that service the planes may be even bigger winners.
Bloomberg
UPDATED ON JAN 21, 2021 03:35 PM IST

Zoom video calls have replaced business meetings, the Davos World Economic Forum is taking place online, and booking a holiday overseas involves navigating a bewildering array of travel restrictions, virus testing and quarantine requirements. Why then are Bill Gates and Blackstone Group Inc. teaming up to buy a company that makes much of its money refueling private jets? Blackstone and Gates’s Cascade Investment LLC are weighing a takeover offer of at least $5.17 a share, or $4.3 billion before debt, for Signature Aviation Plc, which also provides passenger amenities and technical support for business jets. The bidding group will most likely need to raise its offer to seal the deal after Global Infrastructure Partners made a $5.50-a-share proposal, but Cascade’s preexisting 19% stake in Signature gives the Blackstone team a significant edge.

Blackstone is renowned for bold bets like the one it made on U.S. residential real estate in the wake of the 2008 recession. But servicing private jets is more of a sure thing. Global airline passenger traffic collapsed 66% last year through November, according to the International Air Transport Association. In contrast, private-jet activity was down just 11% in December, the best monthly performance since the pandemic began, according to data from WingX, an aviation data and consultancy company. While travel restrictions and health concerns have kept many corporate fleets grounded, those who can afford to travel privately and avoid crowded airports are doing so, a boon for charter flights and companies such as NetJets that offer fractional shares in private planes. (NetJets, owned by Warren Buffett's Berkshire Hathaway Inc., is Signature’s largest customer.) Traffic to and from Florida actually increased by 12% in December from a year earlier, with the Caribbean serving as another hot spot, the WingX data show. In Europe, private jets haven’t been taking off as regularly of late because ski resorts are closed, but it was a different story in August when they were in high demand to whisk customers to Mediterranean beaches in comparative safety. 

NetJets has said the leisure side of its business bounced almost all the way back to pre-Covid levels as early as July. The company signed three times as many new customers during the pandemic as in the prior year. Will that demand stick around once Covid-19 outbreaks abate and the jet-set crowd has been vaccinated?

A popular refrain in the industry is that once people fly private, they aren’t eager to go back to the headaches of commercial air travel. And the ultra-wealthy individual has largely been a winner in the pandemic thanks to rising asset prices. Eventually, businesses will start sending their executives around the world again, too, providing another leg of growth.

So far, companies haven’t offloaded their plane fleets to the extent they did after the 2008 recession. However, the pre-owned jet market remains bifurcated. Large jets for intercontinental travel are proving harder to move than small and medium-sized planes used on domestic routes. Inventories of light jets and turboprops are actually lower now than before the pandemic began, according to data provider Amstat. 

Manufacturers of private jets such as Bombardier Inc., General Dynamics Corp. and Textron Inc. slashed production rates earlier in the pandemic but lately have sounded optimistic about their ability to win new customers.

“You have people that are coming in to business aviation that have not historically been in business aviation or owned an equity piece of an aircraft,” Textron Chief Executive Officer Scott Donnelly told investors recently. “The reduction in the number of [commercial] flights is making it very difficult for people to get from point A to point B in the country without taking a whole day doing it.” North America accounts for nearly two-thirds of the world’s fleet of private jets.

Climate concerns are real but so are near-term safety worries, and the convenience of flying private yields real productivity benefits for top corporate managers, Carter Copeland of Melius Research said in an interview. While private jets have a larger carbon footprint relative to the number of seats, the emissions created by that corner of the market pale in comparison to the broader commercial aviation industry, so the latter will likely attract more attention from climate-change activists, he said. 

Honeywell International Inc., which makes engine technology and cockpit controls for business jets, has said it expects demand for private flights to return to 2019 levels by the middle of this year. The growth case from there is murkier and is most likely tied to private-jet travel becoming more attainable for the masses, or perhaps becoming a greener alternative to commercial flight if the sector can lead the way on electric planes.

In the meantime, airport real estate is a finite asset, and there's no business case for building more, which makes the prime leases that service providers such as Signature hold incredibly valuable, Copeland said. “The prospects for competition or disruption are effectively nil,” he said. He compared Signature to a gas-station operator, taking a cut of the fuel and snacks that customers buy. Because business-jet customers usually aren’t the most price-sensitive about things like catering, that cut tends to be large and profitable. It’s this recurring and lucrative nature of Signature’s revenue that makes this business attractive to the private equity world. 

In a gold rush, the real money’s often made by those selling shovels. In a pandemic, refueling the planes of the super-rich has similar appeal.

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.


This story has been published from a wire agency feed without modifications to the text.
SHARE THIS ARTICLE ON
Close
In the search of spiritual solace
In the search of spiritual solace

In the search of spiritual solace

By Swati Chaturvedi
PUBLISHED ON MAR 03, 2021 01:25 AM IST
From quaint ashrams reverberating with Vedic chants to Sufi shrines with magical and divine qawwalis, India offers a healing balm to the worn out soul
Close
Business travel estimated to not recover to its pre-pandemic peak until 2025(Photo by Kelsey Knight on Unsplash)
Business travel estimated to not recover to its pre-pandemic peak until 2025(Photo by Kelsey Knight on Unsplash)

Business travel estimated to not recover to its pre-pandemic peak until 2025

Bloomberg
UPDATED ON MAR 02, 2021 08:51 PM IST
Business travel to miss out on recovery until 2025 since only 27% of companies expect to spend money on travel in the next six months as many have found better substitutes to reach customers via teleconferencing and saved billions in transportation costs during the Covid-19 lockdown
Close
Ahead of Easter holidays, Germany drafts plans to start easing Covid-19 lockdown(Photo by Stefan Widua on Unsplash)
Ahead of Easter holidays, Germany drafts plans to start easing Covid-19 lockdown(Photo by Stefan Widua on Unsplash)

Ahead of Easter holidays, Germany drafts plans to start easing Covid-19 lockdown

Reuters
UPDATED ON MAR 02, 2021 08:35 PM IST
Germany to tentatively start easing Covid-19 restrictions from next week given that months of lockdowns have pushed down infection and death rates. However new daily cases have begun creeping up again amid the spread of coronavirus variants while vaccine roll-out is sluggish
Close
Thailand's Prime Minister Prayuth Chan-ocha and Public Health Minister Anutin Charnvirakul applaud next to a container as they attend the arrival of a plane with a shipment of 200,000 doses of the Sinovac coronavirus disease (COVID-19) vaccine from China at Bangkok's Suvarnabhumi International Airport, Thailand, February 24, 2021.(Reuters)
Thailand's Prime Minister Prayuth Chan-ocha and Public Health Minister Anutin Charnvirakul applaud next to a container as they attend the arrival of a plane with a shipment of 200,000 doses of the Sinovac coronavirus disease (COVID-19) vaccine from China at Bangkok's Suvarnabhumi International Airport, Thailand, February 24, 2021.(Reuters)

Thai PM orders study on "vaccine passports" to boost tourism

Reuters, Bangkok
UPDATED ON MAR 02, 2021 02:21 PM IST
Prime Minister Prayuth Chan-ocha said Thailand will proceed with caution, waiting to see how effective vaccines are first in preventing the spread of Covid-19.
Close
Austria plans to let cafe and restaurant terraces reopen this month(Pexels)
Austria plans to let cafe and restaurant terraces reopen this month(Pexels)

Cafe and restaurant terraces to reopen this month in Austria

Reuters, Vienna
PUBLISHED ON MAR 02, 2021 07:22 AM IST
On Monday, the government officials announced that coronavirus lockdown restrictions will become less stringent in Austria and as a result, the cafe and restaurant terraces can reopen this month.
Close
Valdes’s comments come amid optimism in the European tourism industry sparked by the announcement last week of the U.K.’s plan to lift all coronavirus related restrictions by June 21. (Unsplash)
Valdes’s comments come amid optimism in the European tourism industry sparked by the announcement last week of the U.K.’s plan to lift all coronavirus related restrictions by June 21. (Unsplash)

Spain to consider bilateral deals and travel corridors

Bloomberg
PUBLISHED ON MAR 01, 2021 07:53 PM IST
Spain is ready to consider bilateral deals and corridors “with third countries” if a solution on vaccine certificates cannot be reached at the European Union level, according to Tourism Secretary Fernando Valdes.
Close
Round-the-world cruises are selling out (Unsplash)
Round-the-world cruises are selling out (Unsplash)

World tour cruises for the next year are selling out already

Bloomberg
PUBLISHED ON MAR 01, 2021 11:58 AM IST
Globetrotters who have been staying put for the past year are trying to make up for lost time and booking expensive multimonth cruise itineraries for the next year.
Close
Jammu and Kashmir(Unsplash)
Jammu and Kashmir(Unsplash)

Union Tourism Secretary: Sustainable tourism only way of expanding sector

PTI, Srinagar
UPDATED ON MAR 01, 2021 07:32 AM IST
On Sunday, Union Tourism Secretary Arvind Singh said that sustainable tourism is the only way of expanding and it will bring a much-needed change in Jammu and Kashmir.
Close
Australian regional airline Rex to launch more flights amid Covid-19(Twitter/THE_Russell)
Australian regional airline Rex to launch more flights amid Covid-19(Twitter/THE_Russell)

Australian regional airline Rex to launch more flights amid Covid-19

Reuters
UPDATED ON FEB 28, 2021 07:01 PM IST
At a time when domestic air traffic remains low due to the Covid-19 pandemic, Australian regional airline, Rex, to challenge Qantas and Virgin on the country's big-city routes by launching more flights in competition
Close
Zojila pass, Srinagar-Leh highway reopen for vehicular traffic after 58 days(Twitter/fc_kangana)
Zojila pass, Srinagar-Leh highway reopen for vehicular traffic after 58 days(Twitter/fc_kangana)

Zojila pass, Srinagar-Leh highway reopen for vehicular traffic after 58 days

ANI
UPDATED ON FEB 28, 2021 06:46 PM IST
After clearing the snow along the Zojila pass, Srinagar-Leh highway has been declared open from February 28
Close
Dubai's first cat cafe, Ailuromania, hopes rescues will find purr-fect new homes(Twitter/fahiiHA/rapplerdotcom)
Dubai's first cat cafe, Ailuromania, hopes rescues will find purr-fect new homes(Twitter/fahiiHA/rapplerdotcom)

Dubai's first cat cafe, Ailuromania, hopes rescues will find purr-fect new homes

Reuters
UPDATED ON FEB 28, 2021 05:24 PM IST
The Ailuromania Cat Cafe, which was the Middle East's first cat cafe when it opened in 2015, hopes the relaxing properties of its 25 rescue and shelter cats will help find them their forever homes.
Close
In a notification, Pakistan Civil Aviation Authority (PCAA) said that the instructions issued on December 31, 2020 would remain in place till March 14.(Unsplash)
In a notification, Pakistan Civil Aviation Authority (PCAA) said that the instructions issued on December 31, 2020 would remain in place till March 14.(Unsplash)

Pakistan extends travel restrictions as coronavirus cases continue to rise

PTI, Islamabad
PUBLISHED ON FEB 28, 2021 01:37 PM IST
Pakistan’s aviation authority on Saturday extended the existing restrictions for all inbound travellers for another two weeks as the nation continues to witness a surge in the number of coronavirus cases.
Close
The Odisha Government has limited the measures to passengers from five high-risk states instead of twelve.(Unsplash)
The Odisha Government has limited the measures to passengers from five high-risk states instead of twelve.(Unsplash)

Odisha limits precautionary measures for travellers from five high-risk states

ANI, Bhubaneswar (odisha) [india]
PUBLISHED ON FEB 28, 2021 09:23 AM IST
Odisha Government has made a partial modification to its earlier precautionary measures issued for the passengers travelling from other States to Odisha.
Close
Imradul Ali, 10, looks for recyclable material at a landfill on the outskirts of Guwahati, India, Thursday, Feb. 4, 2021.(AP)
Imradul Ali, 10, looks for recyclable material at a landfill on the outskirts of Guwahati, India, Thursday, Feb. 4, 2021.(AP)

From school to rag picking: A day in the life of a child scavenger in India

AP, Guwahati, Assam
PUBLISHED ON FEB 27, 2021 08:10 PM IST
Once school is done for the day, 10-year-old Imradul Ali rushes home to change out of his uniform so he can start his job as a scavenger in India’s remote northeast. Armed with a gunny sack, he goes to a landfill in the slums of Guwahati, the capital of Assam state.
Close
Representational Image(Unsplash)
Representational Image(Unsplash)

Poughkeepsie is top pick for New Yorkers seeking small-town life amid pandemic

Bloomberg
UPDATED ON FEB 27, 2021 04:54 PM IST
New York-to-Poughkeepsie ranked as the eighth most popular relocation in a survey of Americans who left big cities last year -- up from 17th a year earlier.
Close
SHARE
Story Saved
OPEN APP