Business aviation, often maligned as an excess enjoyed by the rich and famous, has experienced a resurgence since 2019 and the COVID-19 pandemic, which caused the largest downturn in passenger demand in the history of airlines. But it isn't traditional corporate flight departments or Hollywood A-listers that are leading the way, it's fractional ownership and aircraft management companies that are driving the growth.
Fractional operators sell ownership shares (for example 1/8 or 1/4, shares, etc.) of an aircraft, enabling companies and private individuals to get access to a business jet for a fraction of the total purchase price. And, with this type of access, someone else worries about maintenance, insurance, pilots, pilot training, and a menagerie of other requirements. One downside is that, although you may not be buying a $25 million aircraft, it is still extremely expensive.
Aircraft management companies are just that: companies that manage aircraft for owners and usually use them as charter aircraft when the owners are not using them. This is a great way for owners to defray ownership costs, while still getting all the benefits of airplane ownership.
As an Aviation Week article relates, fractional operators and aircraft management companies have seen flights grow 62% and 43%, respectively, since 2019, while corporate flight department activity declined by 9% in the same period.
This trend presents a compelling investment opportunity for investors and lenders who want to put capital to work in a rapidly expanding market that is underpinned by assets with long useful lives, stable values, and a robust resale market.
In the first seven months of 2024, 2.1 million global business aviation flights occurred—up 31% compared with 2019—comprising 3.5 million flight hours. Some 383,000 of these flights were by fractional operators—up an astounding 62% during the same period. Flights by aircraft management companies, which operate charter flights using client-owned equipment, increased 43%. Flights by branded charters, where aircraft are owned by the operator, were up a more modest 11%. In contrast, corporate flight department activity was down 9%.
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