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Jan 6, 2021 | Rants
Predictions for 2021!
To all my Aerospace friends.
Many of the challenges of 2020 are behind us and many remain. Like a CAT 5 hurricane COVID proved devastating to the industry but like most communities who suffer through them, it is amazing how fast they rebound.
We are well into the back half of the storm and I’m optimistic for the future. With that some predictions for 2021.
- Airlines: Airlines rebound more rapidly than predicted. One of the unexpected consequences of COVID is that Americans have saved more than $2 Trillion during the past 10 months and are itching to travel. I suspect our friends in Europe can say the same. The end of 2Q 2021 will see demand for airline seats growing faster than airplanes can re-enter service. The Boeing MAX will continue to be added to fleets, with little fanfare, and will turn into a fantastic airliner.
- BizAv Ops: Part 135 / 91 / 91K business jet operators will see a significant uptick in demand, particularly in smaller and mid-sized cities where airline service will rebound at a slower pace. By necessity small $10-$100M revenue companies will be a significant source of “first time flyers” and will drive years of industry growth. Consolidation of Part 135 operators will continue at a dizzying pace and Flexjet, Netjets and WheelsUP will see continued influx of new members. Directional Aviation (Ken Ricci) and WheelsUp (Kenny Dichter) both IPO via SPAC.
- BizAv Sales: Cheap money, easy financing, and threats of Biden administration taxes will drive a large uptick in demand for pre-owned business jets and MRO modifications, which will give maintenance providers plenty of pricing power for their services. New OEM aircraft orders will stay stagnant in the early part of the year but will blossom in 3Q as the price differential between quality pre-owned jets and new OEM gets compressed.
- There Can Only be Four: Gulfstream, Dassault, Embraer, Bombardier and Textron are the five major business jet OEMs. Many analysts say the market can only sustain four! Your call…
- The Science Experiments: The development of the first Supersonic Business Jet will continue at a rapid pace. But the benefits of “supersonic” will start to be outweighed by “is it green?” This will become the SSBJ’s biggest development challenge. EVTOL development continues to entice copious amounts of venture capital, but the mathematical equation does not change: EVTOL = VLJ part two…
- China… 2021 is the year the industry FULLY realizes China is not a customer. Boeing and Airbus continue to see COMAC become a more formidable competitor as state run airlines sacrifice quality for “home grown.” It becomes more readily apparent that business aviation inside China was a fad.
- Pilots and Maintainers: COVID caused a few things to happen… First, the most senior (expensive) airline pilots were given golden tickets to retirement AND most (all) of the flight schools shut down, particularly for international students. i.e. the top and the bottom rungs evaporated. With senior pilots retired, new pilots slow to enter the industry aircraft operators (airlines and business jet) will see wage inflation and increased training costs. But the ability for airline CEOs to keep the vast majority of highly skilled flight crews employed will be recognized as genius… with a little help from their government friends.
- Domination of the Small Guy: The consolidation the industry continues as larger companies and private equity make vast moves in acquiring now struggling Tier 3 and 4 suppliers. One or more of the publicly traded Tier 1 suppliers is acquired by private equity and taken private.
- DOD: Under the Biden administration the DOD continues to struggle in developing a comprehensive, coherent spending plan to meet new world challenges. Spending for a 350 ship Navy and large, expensive programs get curtailed. The more urgent focus is placed on drones and cyber with continued emphasis on small, cheap systems that can be rapidly developed. Much like has happened in the pharma industry the speed of technology will entice large defense contractors to steer innovation responsibility to smaller, nimble start-ups who can act at silicone valley speed. The real challenge will be a lack of US technical talent who can get DOD security clearances.
- Most Popular Phrase of the Year: The most popular word and phrase in industry after June will not be COVID or “Gee, 2020 sucked.” It will be “Green” and “environmentally friendly.” The forces promoting a more environmentally friendly industry cannot be underestimated.
With all this being said, I hope 2021 is your best year ever!
Craig Picken is an executive recruiter and skilled builder of high-impact Manufacturing, Operations, Finance and Aftermarket Services leadership teams for the Aviation, Aerospace and Space industries.