As I’ve written before, a plane would come on the market in the morning and by lunchtime there would be five full price offers. Then the seller would revert to a bidding war. Not only for the highest price but also for how scaled back the due diligence was being discussed. I often said we should run an ad that says: ‘Hire Mesinger Jet Sales and let us manage your greed.’

We paired down significantly the number of transactions we would be involved in for the fourth quarter of 2021 and 2022 based on the frustration that our clients would suffer trying to keep up with a process that was so seller centric. It started to feel good in 2023 when the market began to shift back to more balance, with increased inventory and greater opportunity to negotiate a more usual and customary transaction.

As we make our way into the second half of 2024 and quickly Q4, I am starting to hear a familiar chant again. If we thought getting pre-buy slots was difficult during the pandemic, just hold on, it is beginning to look a lot like that again. We are getting back to needing a slot booked two and three months out.

This will initiate conversations from our clients of paired down due diligence that we must be very wary about. Don’t be fooled into contemplating a very scaled back pre-buy to allow for a better chance of completing a transaction in a shorter more predictable timeline for year-end tax purposes. There is no such thing given the continued supply chain issues and labour issues of a totally predictable timeline. What can be totally predictable is the expectation of a close within a reasonable period, but not a year-end close.

We are getting to that time of the year when we all are going to start getting calls from buyers who say they want to buy a plane and must close by year end. It might seem early enough for that call and the ability to get closed in time. However, one silly discrepancy – like a piece of skin for a repair that may take six months to manufacture – and the deal is stalled. That of course is an extreme case, which more than likely would hamper the transaction anyway, however, don’t underestimate the timing for rectification.

So, I am starting to hear the old mantra, let’s just pick a number that seems reasonable and reduce the price of the plane and perform very minor views then close. Seems simple but what if…?

We as an industry literally clawed our way back to the opportunity to perform the right, smart due diligence, let’s not slip backwards.

I wrote an article once about manufactured tensions. As if we don’t have enough tensions without manufactured tensions. As a good friend of mine who is a fellow sales professional said to me a few weeks ago: “We need to all work now to help our clients have the right adjusted expectations as we take them into the end-of-year transaction arena”.  Read the previous Mesinger Pulse article here.

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The private aviation company saw an 8% increase in flight service revenue to $163.6m, offset by declines in other areas such as membership and aircraft management.

“Since the strategic investment, we have made strong progress on a number of key fronts. Revenues have stabilised after a long period of time as we continue to make changes across the board,” said George Mattson, the company’s CEO while talking to Corporate Jet Investor.

CEO George Mattson emphasised the company’s focus on rebuilding sales and improving overall performance.

“We made significant progress over the past quarter to improve our business for a sustainable future,” said Todd Smith, Wheels Up CFO.

“We are continuing to optimise our cost structure and fleet to focus on profitability. With improving liquidity in the fourth quarter and our partnership with Delta, we believe we are well positioned to continue to invest in our business for the long term.”

Operational losses narrowed from $82.6m in Q1 to $79m in Q2, driven by belt tightening in the form of reduced general and administrative expenses. The company’s contribution margin also improved significantly, reaching 7.8% compared to 1% in the previous quarter.

Wheels Up’s cash burn decreased substantially to $27m in Q2 from $73.8m in Q1, with cash reserves standing at $141m as of June 30.

The company expressed confidence in its ability to invest in future growth, supported by improved liquidity and its partnership with Delta.

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The award reflects the firm’s voluntary measures to reduce aircraft noise to surrounding communities, said Clay Lacy’s Dondi Pangalangan, Senior Vice President, Strategic Initiatives.

“Being a ‘Friendly Flyer’ aligns with our overall, thoughtfully better approach to private aviation services and our continued efforts to work with communities to reduce noise and our environmental footprint,” said Pangalangan. “We are committed to being a good neighbour to our communities and to intentionally consider and implement sustainability strategies into all aspects of operations and facilities.”

The Fly Friendly Program recognises jet operators that go beyond mandatory noise regulations to further reduce noise disruptions at Van Nuys. Some of the criteria considered include increasing southbound jet departures, avoiding overnight flights and achieving compliance at 99% or greater on No Early Turn and the Quiet Jet Departure programmes.

“Clay Lacy reaching these voluntary heights demonstrates the company’s continued efforts to be a great partner with the Van Nuys Airport community,” said David Reich, Los Angeles World Airports’s deputy executive director for Mobility Planning and Strategy. “These programmes help our city to appeal to residents and businesses alike, and help make us stronger economically.”

LA City Councilmember Imelda Padilla was on hand with Los Angeles World Airports CEO John Ackerman, and Los Angeles Board of Airport Commissioners President Karim Webb, and Van Nuys Airport Director Paul Herrera to present the Friendly Flyer Award to Clay Lacy Aviation.

Throughout Clay Lacy facilities, including Orange County, California, and Waterbury-Oxford, Connecticut, it has:

• Sourced one-third of electricity from renewable sources.
• Transitioned 100% of ground equipment to electric or renewable diesel.
• Prevented 65,000lbs of carbon emissions through e-recycling program.
• Avoided 6.7t of carbon emissions through EV charging network.
• Sold more than 200,000 gallons of Sustainable Aviation Fuel (SAF).

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The deal, which will improve company’s liquidity position, is an extension of a $650m syndicated credit operation announced in October 2022.

The Brazilian firm obtained a revolving credit facility of $650m in October of 2022, as well as a credit transaction guarantee of $100m by JP Morgan and UK Export Finance to finance suppliers.

“The extension of a significant syndicated credit line reinforces Embraer’s liquidity for the next five years, providing important support for our long-term strategy. Our partnership with strong and marquee financial institutions reinforces Embraer’s credit quality,” highlighted Antonio Carlos Garcia, CFO, Embraer.

The syndication was led by PNC Bank, Crédit Agricole, Citibank, and with the participation BNP Paribas, Mizuho, Bank of America, Sumitomo Mitsui Bank Corporation, Natixis, JP Morgan, MUFG, Santander, Banco do Brasil, Commerzbank, Morgan Stanley, Bradesco, and Goldman Sachs.

The company said the extension of the credit line will be used by Embraer’s subsidiaries in the US and the Netherlands.

Earlier this year, S&P Global Ratings raised Embraer’s rating from “BB+” to “BBB-” and maintained a stable outlook citing the company’s strong cash generation amid higher aircraft deliveries. 

Embraer delivered 27 executive jets in the second quarter of 2024 up from 18 in the first quarter of 2024 but lower than 30 in the same period last year. The company’s backlog stayed flat at $4.6bn in comparison with the first quarter of 2024.

Embraer’s average loan maturity at the end of first quarter of 2024 decreased to 4.4 years compared to 4.6 years in the preceding quarter of last year. The term structure of loans was 96% in long-term contracts and only 4% in short-term ones.

In terms of cost of loans, the company’s cost of USD denominated loans decreased to 6.19% per annum in 1Q24 from 6.33%pa in 4Q23, while the cost of Brazilian real-denominated loans decreased to 6.69% compared to 7.11%, respectively.

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Brian Foley, the well-respected business aviation consultant, this week published a piece saying that Wheels Up needs to speed up getting to a profit to help Delta Air Lines, its largest investor. Delta’s profit fell 29% in the last quarter (it was not the only airline having a disappointing six months) and Foley says that Wheels Up needs to change quickly.

But, on paper at least, Delta’s investment in Wheels Up has not been a disaster. It is one of the few early investors who can say this. 

The airline was given 21% of Wheels Up in return for merging its business jet subsidiary Delta Private Jets with the membership company in 2020. In December 2022, according to its quarterly reports, Delta valued its stake at $257m. At the end of June 2023, when Wheels Up looked like it could file for bankruptcy protection, Delta cut this to $6m.

You know what happened next. In return for 95% of the company Delta, Certares, Knighthead and Cox lent the company $350m in September 2023. Delta also arranged an extra $100m loan. Before they invested, Wheels Up’s market capitalisation (number of shares multiplied by stock price) was just $69m.

This was a long way from when it went public in June 2021 at $2.83bn. On August 11, 2023 – when a Chapter 7 bankruptcy was possible – it hit $28.2m. Wheels Up’s market capitalisation today is $1.6bn.

On June 30 2024 Delta valued its 38% stake at $498m.

There are a few disclaimers here. Only 5% of the stock is still trading and if you were an early investor you are still very much in the red. But, so far at least, it has turned out to be a decent investment for Delta – especially compared to so many airline deals. It has been a fantastic one for Certares, Knighthead and Cox.

Like any financial investors, Certares, Knighthead and Cox are likely to want to exit one day. Delta is the obvious future buyer of their stakes. If Wheels Up does get to profit soon – and we will find out more next week – Ed Bastian, Delta’s CEO, may actually regret not buying more of the company in 2023.

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The research, which surveyed 1,000 full-time c-suite executives and senior management, revealed a significant increase in private flight usage due to its flexibility, efficiency, and peace of mind for travellers. 37% of respondents reported traveling monthly for business, with 77% using commercial flights as their main mode of transport. 

More than one third of respondents identified a significant desire for peace of mind when travelling. This was described as eliminating layovers, never losing bags, going straight to the plane, avoiding cancellations and delays. 

However, 75% of respondents identified cost as the main deterrent preventing them from using private aviation for travel. The second most important deterrent was a perceived lack of information on services and the industry, selected by about 41% of respondents.

“This survey was an opportunity to hear from folks who want to be our customers,” said Cory Bengtzen, CEO and founder,  SkyShare. “How can we meet them where they are? All business leaders would love to fly private, but there are still a multitude of hurdles to overcome, with cost being the most significant hurdle.” To address these concerns, travel solutions must cater specifically to the unique needs of today’s business leaders, he added.

“Approximately 62% of respondents indicated they are likely to consider private aviation for business travel needs, so the desire is absolutely there,” said Bengtzen. It is the industry’s responsibility to come up with new ways to provide a lower-cost option to help these leaders achieve their business’ goals, according to the company. SkyShare is doing that through flexible pricing plans and initiatives that lower the barriers to entry, said Bengtzen.

Since summer began, the appetite for private jet flying had been sharpened by the airline industry being “ravaged by a slew of technical malfunctions, emergency landings, and lost baggage woes”, claimed the company. So, it would not be surprising to see more business professionals considering and ultimately choosing the benefits of private aviation, it said. “For those who do fly private, reduced stress and hassle was a key factor in their decision to do so, which is why the commercial airline industry could soon see a significant shift in the sheer number of fliers,” predicted Skyshare.

Meanwhile, in May, SkyShare revealed a new financing programme for its fractional aircraft ownership plans aimed at lowering the entry barrier for small to medium-sized businesses. 

SkyShare survey results – at a glance

• 84% of C-suite exec and senior business leaders are interested in flying private

• 75% cite cost as the main barrier to adopting private aviation.
• 77% prioritise time-saving benefits, while 74% value increased scheduling flexibility.
• 69% appreciate reduced stress associated with private flights
• 35% highlight the importance of spending more time with family.

Source: SkyShare.

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Mosca joined the boutique acquisitions and brokerage firm in July after 20 years in leadership roles at General Electric, Textron Aviation, General Motors and other technology ventures.

 He joined Textron Aviation in 2012 as regional sales director for South America where he was responsible for sales of Citation and Beechcraft aircraft.

In 2016 he joined General Motors in South America to lead the automotive connectivity business in the region.

READ: IADA foundation awards 10 industry scholarships

As an entrepreneur he has invested in and advised start-ups in disruptive technologies with a focus on advanced air mobility and zero emissions.

SOLJETS, headquartered in Park City, Utah was founded in 2015 by Matt Stringfellow, Greg Oswald and David Lee.

It claims to have closed more than 400 aircraft transactions in more than 30 countries.

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Wortmann said: “I am very pleased to be taking over as managing director of the DC Aviation Group and to be continuing the company’s success story together with Marc Ambrosius and the entire DC Aviation team.” The business continue to offer customers “first-class services and actively shape the future of business aviation,“ she said.

Ambrosius added: “It is a great pleasure for us to welcome Svenja Wortmann as a new member of the Management Board. Her extensive knowledge and passion for the industry make her the ideal candidate for this important position.” Wortmann’s commitment to excellence and innovation will be “instrumental in driving the growth strategy of the DC Aviation Group”, he said.

Joining the company in 2007, Wortmann has held various management and sales positions within the group most recently as authorised signatory.

Meanwhile, Stuart Burrows, authorised signatory and member of the Extended Executive Committee will continue in the role of accountable manager.

The company was formed out of DaimlerChrysler Aviation in 2007, a subsidiary of DaimlerChrysler AG founded in 1998. Offering aircraft management, maintenance, executive charter and FBO and handling services, the business covers the European region as well as the Middle East, India, Pakistan and Africa. Headquartered at Stuttgart Airport, Germany, the company also operates from locations in Dubai, Malta, Munich and Nice and San Marino.

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“This was a strong quarter overall, as reflected by solid growth in all key measures from a year ago. Our businesses continue to focus on disciplined execution of their programs, cost and schedule,” said Phebe N. Novakovic, chairman and chief executive officer.

“In the Aerospace segment, we are continuing to ramp up the pace of our G700 deliveries and our defense businesses continued to grow, reflecting increased demand in response to the threat environment.”

Despite sharp revenue growth, the aerospace segment’s operating margins slipped to 10.9% of the revenue from 12.1% in the preceding quarter of last year.

In absolute terms, the second quarter operating margin of the segment rose 35.2% YoY to $319m from $236m last year.

While the company secured $2.7bn in new orders during the quarter, its overall order backlog slightly dipped from $20.5bn in the first quarter of 2024 to $20bn during the period under review, resulting in a book-to-bill ratio of 0.9x.

Aircraft deliveries also increased, with 31 large-cabin and six mid-cabin aircraft delivered, compared to 18 and six respectively in the previous year.

On a cumulative basis, the company’s aerospace segment revenues during the six months ended June 30 grew by 30.7% YoY to $5bn from $3.8bn in the same period last year.

This translated in operating margin growth of 23.4%YoY in absolute terms to $574m from $465m last year while operating margin as a percentage of revenue declined 70 basis points to 11.4% of the revenue.

General Dynamics manufactures business jets through its subsidiary Gulfstream Aerospace.

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Revenue breakdown showed the manufacturing segment contributed $1.7bn (up $448m YoY) to the total revenue, while the remainder $507m (up $79m YoY) came from services segment.

The company delivered 20 medium and 19 large business aircraft during the 2Q 2024, up from 15 and 14 respectively in the second quarter of 2023. Overall, during the six months, the company has so far delivered 59 business jets (32 medium and 27 large) against a target of 150-155 announced at the start of 2024.

However, despite higher sales and deliveries, at the end of second quarter, the company’s backlog stayed flat at $14.9bn on unit book-to-bill ratio of 1.0x relative to first quarter.

“Revenue and deliveries for the second quarter saw impressive growth. We’re up for more than 30% year-over-year in both of those columns,” said Matti Lehmus, CEO, Bombardier. “We are very clearly outperforming our peers when it comes to consistency and predictability on aircraft deliveries.”

However, Lehmus warned that the ‘supply chain is still a headwind.’ But he said the company is working closely with engine makers to ensure production timelines still are within the targets.

“We’ve delivered impressive double-digit growth in deliveries, revenues, services, and profitability. We’re on track to meeting our full year guidance, and we have strong momentum as we enter the second half of the year,” added Bart Demosky, Bombardier’s chief financial officer.

“Our business is continuing to grow rapidly with Q2 revenues increasing by almost a third versus 2023. Our services revenues crossed above the $500m mark for the first time, and that’s a milestone that we’ve been talking about for the past three years, putting us in the right place to reach our 2025 services revenue objective of $2bn, but doing it one year early.”

Despite better prices and higher sales supporting topline growth, the company’s gross margin shrunk by 190 basis points to 20.2% during the second quarter. In addition, the company’s EBIT margin also declined 590bps to 8.7%.

On the liquidity front, the company has no long-term debt maturing until 2026. However, it does have a large debt repayment of $983m due in 2027.

However, the company said that its current liquidity of $1.3bn is adequate in the short-term. But it added that it will “continue to opportunistically refinance or deploy excess liquidity towards debt pay down.”

Bombardier is targeting 150-155 business jet deliveries while growing revenue by $400-600m to $8.6bn from 2023’s $8bn in 2024.

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