February 28, 2022
PHNOM PENH – While Covid’s relentless strain on commercial travels has unwittingly forced a boom in private aviation, it has also pushed industry players to rethink ways to reboot the travel sector, cut emissions and expand customer base, all of which are revolutionising air travel like never before
Within a year of the pandemic, private aviation seems to have regained lost ground, recording strong growth with increased flight hours, take-offs and landings in the US and Europe, thanks to the rise of affluent travellers who opted for safer and exclusive, albeit costlier, passages.
This steady uptick is also reflected by the higher delivery of about 7,400 private jets valued at $238 billion for the industry between 2022 and 2031, according to an outlook on private aviation by aircraft component manufacturer Honeywell International Inc last year.
Unlike commercial aviation, which made $328 billion revenue in 2020 – about 40 per cent of the global turnover in 2019 – private flights per se rose 45.6 per cent year-on-year in 2021, US-based Federal Aviation Administration revealed this January. It includes domestic and international flights comprising both US and international flights.
“Commercial aviation went to very low loads during the pandemic, so did private aviation but it managed to pick up quite quickly. Private flight is at a level – not at the level before Covid-19 – but it is quickly reaching back to normal level because it’s more simple and has fewer contact points.
“For example, private flights have 20 to 30 touch points compared to commercial flights which have about 700 points of contact. It is much safer, hence why it is picking up faster than commercial [aviation],” said Singapore-registered Yugo Global Pte Ltd co-founder and CEO Jim Baldy, whose firm was set up at the outset of the pandemic in February 2020.
Catering to businesses and high net worth individuals, private aviation has come some way with renewed investments by private funders and via debt issuance, such as Vista Global Holding Ltd’s recent pricing of $1 billion of 6.375 per cent of senior unsecured notes due in 2030.
Vista Global, which operates VistaJet and XO, is one of the largest on-demand providers in the world based on hours flown. It saw a 68 per cent growth year-on-year in hours flown last year and the sale of 22,000 VistaJet programme hours in 2021, up 92 per cent over 2020. It also recorded a 26 per cent client growth in 2021 from a year ago.
According to Vista Global chief commercial officer Ian Moore, Asia Pacific has been a key focus to the group, although he noted that currently the region is still restrictive due to the pandemic.
“But, at any given point in time [and] in normal environment we have 10 to 15 aircrafts in Asia. More importantly, these are constantly flying in and out because the long-haul flights we do with our flagship [Bombardier] Global aircraft into the region and out of it, are happening on a daily basis,” he told The Post via email.
In Asia Pacific, growth-specific data on private aviation is minimal. Even more so for Southeast Asia, given its “rather primitive phase”, said Jiang Xin Yan, a Phnom Penh-based analyst covering commercial aviation in APAC and private equity in Southeast Asia. “Thus, any growth would be levered upon a low base, which is likely driven by new demand seeking alternative solutions to commercial flights.”
Tony Harrington, an aviation commentator in air transport, found that Asia Pacific has “always been strong for private aviation”, and that there is growing confidence that the market has started to return, particularly in Southeast Asia.
This was the “sentiment that was starting to show” in business aviation circles at the Singapore Airshow 2022 mid February.
“Confidence is reflected not just in the amount of travel booked during the pandemic but also the plans of a number of business aviation companies to expand their facilities in the Asia Pacific region, in readiness not just for recovery, but growth,” he told The Post.
Granted, the airline industry has been one of the worst affected, where airlines suspended or reduced operations due to border closures or travel restrictions, though demand for flights remained, particularly for business and urgent private travel.
Asia Pacific experienced widespread border closures and some of the “most severe travel restrictions anywhere”, leading to significant reductions in flights and paring back of airline networks, Harrington said.
Even when restrictions eased, in many cases, there was not enough assurance for airlines to reactivate operations or travellers to book scheduled flights with confidence.
“That presented opportunities for private aviation to serve those who have a real need to travel, particularly for business, either domestically or where international ‘travel bubbles’ have been established.
“Private aviation offers certainty. It comes at a price. But where border and health rules allow, and where customers are willing to pay, private air provides the flexibility for passengers to fly when they want, where they want, at short notice, and without the risk of flights being cancelled,” Harrington said.
Hong Kong-based L’Voyage Travel Co Ltd CEO and shareholder Jolie Howard concurred, noting that private aviation in Southeast Asia, albeit at “an early stage of development compared to the US and Europe” has gained “significant visibility” since the pandemic, with new entrants flying private jets for the first time.
Although border closure in most countries affected business momentum amid pent-up demand, she was certain that the growth potential for L’Voyage would materialise as countries open up to foreigners.
The bespoke private jet charter firm enables clients to choose from its network of over 5,000 aircrafts which are operated by its partners worldwide.
Interestingly, Yugo’s entry into the sector was timely, despite the pandemic, given its aim to solve a pain point that was critical then.
According to CEO Baldy, some segments of private aviation were not yet digitalised in Southeast Asia.
“We thought that it could be interesting for all actors in this industry to develop the platform to digitalise some aspects of booking … it would be good for operators to simplify bookings, to get new leads instead of [texting] helicopter operators to send photos,” he said.
The provision of “something simple” where the client only needs to choose an option and pay online was not widely available at that time.
“We saw a small gap and thought of working on it. It is during a crisis or pandemic where there are the best opportunities,” Baldy said.
While the platform possesses similar characteristics of a ride-hailing app, it is not the same, he stressed, adding that it does not own any of the aircrafts.
The start-up, established by two French-Cambodians and Baldy, a French national, in February 2020, raked $1.2 million revenue last year, its first year of operation, from flights in and around Asia and Europe.
In Cambodia, Yugo has arranged trips connecting Phnom Penh to Bangkok, Singapore and Hong Kong, as well as domestic flights in Sihanoukville, Shinta Mani (Siem Reap), Koh Kong and Koh Rong.
A rough estimate of an entire jet carrying eight passengers from Phnom Penh to Bangkok would commonly begin at $11,000 or $12,000. “This eight-passenger aircraft [comes up to] more or less $1,400 to $1,500 per passenger for the flight,” he said.
The company started with personal funds before it secured a pre-seed fund of $300,000 last July. They are in the midst of discussions with the board to raise $2 million in seed rounds in the first quarter of this year, to expand its capacity in Asia Pacific.
In the meantime, a shift towards urban air mobility has become more pronounced as industry players clamour to restart the travel sector whilst ensuring that carbon emissions are reduced. In that, commercial airlines, aircraft manufacturers and aircraft lessors are seeing value in offering electric vertical landing and take-off (eVTOL) service.
As it stands, agreements in the region have increased, a handful of them made during the Singapore Airshow, to speed up eVTOL activities to meet the needs of a promising market in the near to mid term.
Of the deals, AirAsia Aviation Group Ltd inked a non-binding memorandum of understanding (MoU) with Avolon Aerospace Leasing Ltd to lease 100 VX4 eVTOL to “advance air mobility to a whole new range of passengers”.
Brazilian manufacturer Embraer S.A’s subsidiary Eve UAM LLC signed with two Australian private charter firms to collectively deliver 90 eVTOL aircrafts to support the start of urban air mobility in 2026.
In addition, Eve and Skyports Pte Ltd, an eVTOL passenger and cargo vehicle infrastructure provider, agreed to support the development of a new “concept of operations for advanced air mobility”, including urban air mobility for the Japan Civil Aviation Bureau.
Earlier this month, Yugo too signed an MoU with Electra.aero Inc, a US-based sustainable aircraft developer, to expand air mobility services to “urban and underserved destinations” in Asia-Pacific.
It plans to acquire up to 12 Electra hybrid-electric, ultra-short takeoff and landing (eSTOL) aircrafts for use in its current and future envisioned air mobility network.
Given the potential for growth and recovery, analyst Jiang said new players are starting to enter the market with the support of private funds, citing examples like Yugo, AirAsia and Germany-based Volocopter’s Southeast Asia roadmap, which was launched in Singapore last week.
However, she cautioned that any supporting infrastructure and slot capacity for many of the markets in Southeast Asia is “still relatively weak”. “[As such] any private equity investment would continue to take that into consideration.”
Meanwhile, flying taxis are becoming a buzzword in the sector, where McKinsey & Co experts stated last year that it was no longer a question of “if” but “when”.
While the issue of “when” is being realised now with agreements firming up, the question remains as to whether air taxis are seen as private or commercial aviation, and if private aviation players are likely to be impacted by this service.
Howard of L’Voyage commented that flying taxis “will definitely” disrupt the private aviation sector “positively” but could still pose a risk, depending on the type of service providers.
Having said that, she felt there would be no impact to her company as it offered the “best options of aircrafts” to clients. This could be jets, helicopters and other machines that are operated safely and legally following rigorous audits by its safety team.
Vista Global’s Moore also somewhat dismissed any impact it might have on long haul private flights, saying that eVTOL aircrafts are designed for short-distance flying.
“When battery technology hits the next milestone, we might see electric helicopters. While this technology will provide many advantages in the future, it is still a long way before we see the technology on business aircraft – there is not an eVTOL solution for global travel currently.
“As of now, VistaJet is spearheading sustainability in aviation, committing to carbon neutrality by 2025 – 25 years ahead of current industry goals – and VistaJet’s sustainability commitment will become the blueprint for all Vista group companies. We focus on what we can have impact on now, today, while also advancing the possibilities for the future,” Moore said.
APAC to lead?
Circling back to the question of air taxis, per se, Harrington opined that technically, they would be considered ‘private aviation’, noting that what industry players are really adding is an entirely new dimension to not just air transport, but also urban transport.
“Mention private aviation and the most common image is usually a private jet. Air taxis will be very different [as] they’ll be flying ride share services, and will provide high-speed alternatives to surface transport, which is coming under increasing pressure in major cities.
“They’ll also provide easy links between major hubs and regional destinations. These ultra-short air services don’t exist right now, except perhaps for helicopter transfers, which again are predominantly private and enormously expensive,” he said.
Early model air taxis would carry up to four passengers and a pilot, and would be electrically powered, therefore zero emission, and be able to fly up to 160 kilometres at speeds of up to 240 kilometres per hour.
“This would mean far faster, more direct travel than could ever be achieved by surface modes. Even before the first ones have entered service, prospective operators are predicting that they’ll cost about the same per person as a road taxi does in a busy city – but will reach destinations in around one third of the time,” Harrington said.
They are expected to operate from vertiports, which are small, purpose-built terminals located all over metropolitan areas, at places like shopping centres, commercial precincts, medical centres, and transport hubs, including airports.
“AirAsia Group, the Malaysian company best known for its family of low-cost airlines, has just announced plans to lease at least 100 such aircraft for use in Southeast Asia, though it has yet to give any more details,” he said.
Japan Airlines is also leasing up to 100 eVTOLs, and there are plans by others in the market, like Singapore, Australia, France, UK, US and Brazil. These include major airlines such as American Airlines and Virgin Atlantic, as well as tourism and parcel freight companies.
Given the increased interest found in Japan and Singapore, Harrington opined that there is the likelihood of Asia Pacific becoming the world’s largest collective market for air taxis.
The prototypes of these aircraft are now being test-flown, or are about to take to the air – and there are “ambitious plans” to have them flying commercially in some markets as early as 2025.
“This concept was around well before the pandemic but has evolved from being something of a novel idea to a seriously-regarded, affordable to use, and zero emission transport mode.
“These crafts are expected to be flying commercially during both the 2024 Paris Olympics and the 2025 World Expo in Osaka, Japan,” he said.
Right now, frantic planning is underway to progress safety certification of the aircrafts, flight paths and vertiport locations, as well as secure community acceptance.
“But they’re on their way,” he stressed.