Fully Fueled: Three Factors Driving Growth in Private Aviation

Growth is surging in private aviation, and, despite recent volatility in the public equity markets, the sector remains fundamentally well positioned for sustained multi-year upticks in flight hours. In the U.S., domestic private jet activity in Q1 2022 was 71% higher than Q1 2021 activity, and 12% higher than Q1 2019 levels.i

Here, senior bankers from the Harris Williams Aerospace, Defense & Government Services (ADG) Group discuss three of the top reasons for private aviation’s upward trajectory—and the opportunity for M&A investors.

More Visible Value

Since 2020, COVID-19-related travel considerations and limitations have enhanced private air travel’s value proposition, leading more flyers to adopt it as their preferred method of air travel. Key reasons include time efficiency, scheduling and route flexibility, comfort, privacy, and health and safety. These private aviation differentiators have proven highly resilient, positioning the sector for continued growth.

“Health and safety have become increasingly significant,” says Mike Rohman, a director in the Harris Williams ADG Group. “Previously, flexibility and privacy were two of the most important features of flying private. However, passengers have now prioritized health and safety within that value proposition.”

Convenience is another reason more travelers are choosing to fly private. Rohman adds: “With fewer direct flights to secondary and tertiary locations, it’s getting more difficult to fly from small market to small market. Airlines have likely cancelled some routes permanently. Private aviation provides passengers a faster, simpler, and more comfortable solution.”

Growing Addressable Market

Due to these advantages, a broadening range of consumers are now flying private more often, increasing the addressable opportunity for service providers.

Chris Rogers, a managing director in the Harris Williams ADG Group, explains: “During COVID-19, an influx of new consumers turned to private aviation and away from commercial air travel. Many of these first-time users are likely to remain loyal long-term customers. In fact, 96% of new private aviation users surveyed in 2021 said they plan to keep flying private.”ii

Beyond the new passengers who have already converted to flying private, there’s also considerable white space or vastly increased private aviation usage among global high-net-worth individuals. This group can afford to fly private regularly, and its flight hours are growing meaningfully at a 7.2% CAGR since 2012.iii

As Rogers points out, private aviation operators have a significant opportunity to grow by serving this expanding and still relatively underpenetrated consumer demographic. “There’s a historically low adoption rate among people who have the means to fly private, with only 10% out of around 2 million U.S. households with the financial capacity to fly private currently doing so.iv This means operators have substantial runway for sustainable growth.”

Rogers also noted continued optimism about the future of urban air mobility (“UAM”) and its effect on private aviation: “UAM initiatives could significantly expand the addressable market for private aviation as they introduce new aircraft, new infrastructure, new services, and hopefully new flyers to the private aviation ecosystem.”

More Accessible Models

Finally, new technology and operating models are making it easier and more affordable to fly private, appealing to a broader demographic of regular flyers.

“People can now quickly and conveniently book seats on private jets through a smartphone app, even sharing a plane with others to further lower their costs,” says Chris Smith, a managing director in the ADG Group at Harris Williams.

Lowering the barriers to entry is key, adds Rogers. “Disruptive digital platforms are coming online, expanding access to entry-level private flyers through lower costs and transparent pricing. They’re also simplifying flight scheduling with real-time direct booking. Meanwhile, established operators in the space are expanding into lower-cost private flying options to reach more consumers.”

“Great examples are jet cards and other plane-sharing arrangements,” notes Smith. “There are now more programs from a greater number of providers with reduced entry levels and fixed rates, providing the price transparency that flyers seek.”

Beyond these new business models, senior bankers within the Harris Williams ADG Group see several potential paradigms for investment within private aviation. Fixed-base operators, in spite of a recent round of consolidation, remain a highly fragmented market and predominantly privately owned, with substantial opportunity for new platform building. Similar opportunities exist in the aftermarket: A growing fleet coupled with higher utilization yields more demand for maintenance, repair and overhaul, as well as for supply chain services. Lastly, proprietary product providers, from software to avionics, will continue to be well positioned within both the OE market and aftermarket of private aviation.

As Smith notes, “All of these investment paradigms benefit from the strong outlook for sustained growth in private aviation flight hours.”

The Harris Williams Aerospace, Defense & Government Services Group recently completed transactions for three private aviation companies, including Ross Aviation, West Star Aviation, and Lynx. In addition to private aviation, Harris Williams’ ADG professionals have deep expertise in a wide range of subsectors.

To learn more, please contact our senior bankers.

Recent Harris Williams Activity in the Space
 

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iFAA U.S. Department of Transportation: https://aspm.faa.gov/apmd/sys/bj-intro.asp
iiPrivate Jet Card Comparisons, Robb Report, Company reports: https://privatejetcardcomparisons.com/2021/01/14/new-research-shows-more...
iiiWorld Wealth Report 2020, CapGemini: https://worldwealthreport.com/reports/population/global/
ivMcKinsey & Company

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