Bizav fortunes tied to economic performance

After a nine-year recovery, Canada’s business aviation industry is wondering how long the upswing will last.

Canada’s biz av industry is on an upswing, but the 2019 economy will be the wildcard to determine how long the upswing lasts. Mike Reyno Photo
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The wildcard will be how the economy performs in 2019, with uncertainty hanging over players in the private aircraft sector.

Early into the new year, the business of flying corporate jets remains attractive, said Bill Clark, an aviation lawyer at YYZlaw in Toronto. “We’re certainly seeing significant activity,” he said.

Clark, who witnessed the industry’s pain during the 2008-09 recession as interest in private jets plunged, cites one recent case to illustrate the ascent. “Out of the blue, a Canadian corporation that’s never had a jet is buying its first. It used charters before, but is now buying one,” he said.

Instead of fixating on political criticisms that corporate aircraft are symbols of excess, the focus should be on the productivity reasons for using private jets, emphasized Clark.

Protecting company secrets is another benefit. “Executives working on papers on a commercial flight? It’s a matter of security for corporate information,” he said.

Clark recalls Canada’s business aviation sector starting to rebound in 2010, trying to get back on track after the bad publicity surrounding top executives from the Detroit Three automakers in 2008. Those executives boarded corporate jets for Washington, D.C., pleading their case for billions in loan guarantees.

Corporate planes are important “business tools,” bolstered by the ability to land at a greater variety of airports, said Stan Kuliavas, vice-president of sales and business development at Levaero Aviation. Levaero is the exclusive Canadian dealer for the PC-12 single-engine turboprop and PC-24 twin-engine business jet.

“Unfortunately, business aviation got slapped with a horrible stigma during the ’08-’09 recession,” said Kuliavas. “But people came to realize that these are not frivolities or luxuries. They are essential tools for companies to do business.”

He said that too often in the past, companies grounded their fleets when faced with cost-cutting pressures due to “optics.”

But whether owned or leased, private jets drive productivity by saving time for busy executives instead of being bound by commercial airline schedules, Kuliavas said.

Firms with fixed-based operations in Canada, such as Skyservice Business Aviation Group, Chartright Air Group and Innotech-Execaire Aviation Group, have been riding the upward trend in the usage of private jets.

Others, such as AirSprint Inc.’s fractional ownership business model, have benefited from the upswing since the 2008-09 recession.

Levaero has found its own niche with Pilatus aircraft. “Travellers can actually get closer to their final destination because they have access to a smaller airport or airstrip that’s near their meeting,” said Kuliavas.

Robert Kokonis, president of airline consulting firm AirTrav Inc., agreed that the prospects for continued growth in business aviation hinge on the global economy.

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“As the tides of the world’s economies ebb and flow, so too do the fortunes of business jets,” he said. “We’re on the cusp of a widespread slowdown, and that has to be a source of concern. If you’re in a deep recession, you’re not going to sell many jets.”

In Canada, the potential for languishing oil prices could mean an extended period of dampened demand for jets targeted at transporting workers to and from Alberta’s oil sands, said Kokonis.

While there is a strong case for executives to use business aircraft, some “marginal customers” may be spooked and drop private jets if there is a sharp economic downturn, he said.

The Canadian Business Aviation Association (CBAA) isn’t taking anything for granted, recommending to Ottawa that red tape should be cut without compromising safety.

“Business aviation is subject to a large number of regulatory requirements,” the CBAA said in a submission to the Treasury Board of Canada.

“We are now facing the unintended consequences of over-regulation,” association president Anthony Norejko said in his letter to the Treasury Board.

“We identify systemic issues, including staffing levels and bottlenecks within government, that if not addressed will continue to bog down our regulatory processes despite any other actions.”

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