Transcript 0:00 Good morning and welcome back to the VIP Seat. Today is July 15th. Your co-hosts, as usual, are Jesse Neor and Preston Holland. Welcome back to the show. Preston, how's your week been? Jesse, it's been crazy. 0:11 Bonus depreciation has made the transaction market on fire. 0:16 So I am glad that you had to push back our recording time by an hour because it gave me a little bit of time to get prepped for the show and, uh, get a few things done. So... Yeah. 0:27 As much as we thought that, you know, there weren't-- there wasn't gonna be a lot of news happening 'cause it's summer, endless news is happening. 0:32 We've got tariffs, we've got bonus depreciation, we have some drama on LinkedIn. So this will be a great episode today. But that's why you come here, listener, because we bring you all the drama from social media. 0:42 So let's jump right in. The top story is a doozy. Yes. So this literally made headlines last week. 0:49 The Wall Street Journal is reporting on the WhatsApp groups that are out there where people are selling seats with each other. Um, and this is bringing up all sorts of things from the past. 0:59 Uh, we all remember the Blackbirds, the JetSmarter incidents, all the flight sharing democratization of private aviation is now occurring, but with individuals. 1:11 So it's kind of a little different, but people are going on these WhatsApp chats, um, sharing their availability and pricing and seats, which I believe is highly illegal. 1:20 But, uh, I don't know, Preston, what are you hearing out there? You know, these groups have existed for a while. I had heard about them originally last year. 1:28 Somebody had reached out and asked me what I thought about them, and I said, "Huh, let me do a little bit of digging." And I started reading. I mean, look, I get, I get the concept. The concept totally makes sense. 1:41 I don't see anybody who would say, "No, I don't want that." Right? Like everybody says, "Oh, that sounds great. That sounds excellent." 1:48 I have had more people tell me they miss JetSmarter than any other application or service that has ever been, uh, around in private aviation. 1:59 So people love this concept, and there's been a lot of people that have tried to hack it and figure it out. 2:04 But it gets into what we would call the gray area of charter one thirty-four and a half for those that are in the industry. It is not quite charter, but it's almost there. Yeah. And it starts to get really complex. 2:18 Private Jet Card Comparisons, they did a deep dive yesterday. I did a deep dive at Private Aviation Safety Alliance, kind of trying to explain to people, you know, what's legal, what's not legal, what are the risks. 2:30 I'll give people in a nutshell. Basically, cost sharing is permitted. 2:34 If you own a private jet and it's not for one thirty-five charter, the pilot and his friends or her friends can share the cost of a flight under part ninety-one. That's totally fine. 2:43 Problem starts to come in when it's commercial carriage, when there are-- when someone's selling you something, there should be responsibilities for refunds, delays, cancellations, safety issues, disclosures. 2:56 Like there's all this stuff that gets involved. And it's not only the platform that you have to be concerned about. 3:02 So it's not only like the person who's administrating the JetSmarter app or who's the head of the WhatsApp group, also the passenger that's actually selling that seat, they now start to get into legal issues because they're selling a commercial aviation product to another passenger. 3:19 So it just starts to unravel a whole bunch of risks that I don't think people realize they're getting into when they're trying to save like two grand on their flight to Florida next week. 3:27 So my advice, do your research and probably just stay away. Maybe in some limited cases it is allowed. There is some DOT like carve-outs for self-aggregation, but it's very, very tricky. 3:39 And the DOT actually, you know, they'll rule on each case individually. It's not like a straightforward thing at all. 3:45 Yeah, I think-- so I've talked to a couple of people who have actually used the service and, um, or who have, who have bought seats and sold seats on these WhatsApp groups for purpose of anonymity and avoiding any sort of inquiries. 3:58 I will let them remain nameless. But the thing is, is that people genuinely like this service. 4:04 I talked to somebody and they said, "Yeah, I was sitting next to a person who was the lead passenger on the flight, and he asked, 'Hey...'" They didn't know each other. 4:11 They were kind of brought together via one of these groups, and they said, "Well, how much are you paying for your seat?" Just asking a question. And they said they winked at him and said, "I'm flying for free." 4:20 And so, you know, they had aggregated out all of their costs across the other seats and provided a service to the other people who were able to take the flight for a lot cheaper. 4:30 So the problem I think here is that the FAA does not have a clear guideline and a clear regulation around this concept. I think a few suggestions. Now, this is not legal advice. This is not tax advice. 4:42 This is all of the not advices. This is one dude's opinion, and I actually have really very small grounding to have this opinion. But here's my opinion. 4:49 The FAA needs to create some sort of a framework for brokers or for operators to do this because the problem is, is that this exists in the market and the market is demanding this. And here's kind of my hot take. 5:01 The market wants this. This is happening whether the FAA is okay with it or not, it is happening and it's going to continue to happen. 5:09 I think Doug Gollan actually pointed out that this has been happening for a really long time. This is not a new concept. It's something that's being created inside of these groups and inside of these apps. 5:19 I think that the FAA needs to come out with a framework and say, "Look, here's the deal. We know this is gonna happen. We're gonna bust the people that are doing this illegally. Don't do things that are unsafe." 5:29 But you can't just say, "Don't do this," and then don't have any other option that says, "But if you're going to do this, here's how we expect for you to act." 5:39 I think that the FAA needs to come out with a framework because obviously this is happening. It's made it to The Wall Street Journal. 5:45 Like this is stuff that you have to create a framework for or else it's gonna continue to happen. 5:51 You may infiltrate the WhatsApp group and you may blow things up in there, but then it's gonna go to Signal or it's gonna go to whatever, right? 5:58 There has to be a framework that's created for this concept or else it's gonna continue to happen. That's my hot take. That's my opinion. You know, take that or leave itNo, I, I think that's fair. 6:07 The problem is the FAA moves slow, and some of this is DOT as well, so it's like not only the, the DOT and the FAA have to get together on this and figure out, "Okay, how do we actually do this and protect consumers in the process?" 6:18 I think there should be some pretty e- easy ways to do it. Wheels Up had a version, uh, where they were running it through their Part 380 DOT authorization. They were allowing their members to self-aggregate. 6:29 They're not doing that anymore, so I don't know if they decided it was also a gray area they really couldn't play in or not. Don't quote me on that. That's just-- I'm just guessing as to why they abandoned the program. 6:41 Um, but I would think there's gotta be some path for 380 that can give consumers the disclosures they need, can ensure you're not, you know, on an illegal charter. 6:49 'Cause I mean, just 'cause someone's selling a seat, you don't even know if that's a charter, you know, certificate or aircraft that's even allowed to do commercial carriage. 6:57 But, you know, for anyone out there selling their seats, just keep in mind, you may face insurance claims if there's an accident. 7:04 Uh, you may get sued to death 'cause you are a wealthy person, and if you sold a seat for a couple thousand grand, you may not realize how much risk you're actually putting yourself in by doing this. But no, I agree. 7:13 I think there should be an option. A- aviation moves slow, and, uh, we haven't yet gotten to the point where we figured out how to do the Uber [chuckles] of the skies because it's a complicated area. 7:24 I also think, I mean, here's, here's my other kind of hot take. I, I've got a lot of opinions on this, and it's one person's opinion. 7:31 I think one of the main challenges is, so a Wheels Up, for instance, or an XO Jet or a JetSmarter, the problem is, is that they only control a very small segment of the market. So you have Doug Gollan. 7:43 Uh, if you haven't read Doug's deep dive, it is fantastically put together. Jessie gets quoted in there, to give a little shout-out. 7:51 But it is incredibly thoughtful in how it kind of progresses the, here is what's legal currently, and here's what's illegal currently. What's the difference? How do you kind of overcome that? 8:01 One of the things that he points out is that the, even the top 10 providers only control 20% of the market, and the, I think it's the top 30 providers only control 30% of the market. 8:12 So your big problem is, is that it's a very disparate, it's a very disparate market. 8:16 So you have tech guys, you have people that used to work for Uber, people that used to work for SpaceX or whoever, that say, "Oh, this is a technology problem, and this is a go-to-market problem, and, uh, we think that we can solve all of this." 8:26 Yes, I agree there is a go-to-market problem. The real issue is, is that there's a framework problem with the FAA that has yet to be solved for you to operate within. 8:35 Now, you think that you can be Uber and push the limit and just break the rules, and then all of a sudden you can bend-- You can get so much traction that you can bend the rules to your will. 8:47 If, if you don't know the history behind Uber, really interesting story to study because they just totally broke every rule in every city that they went into, said, "Well, all of your constituents want this, so therefore you need to pass it, pass this legally." 9:01 That's not gonna be the case here in private aviation because the FAA is such a s- Like, you're not dealing with the taxicab union in New York. You're dealing with the FAA. 9:10 They govern the skies across the board, period, no questions asked. My suggestion to the FAA, if anybody's listening, my suggestion would be create a framework for brokers to successfully perform Part 380 flights. 9:25 The transaction has to run through the broker, 'cause I think the really big problem comes when Jessie's going from Miami to New York and she says, "Hey, anybody wanna take this seat? 9:36 Buy this seat from you," Jessie the person. So Preston the person buys from Jessie the person, and all of a sudden that transaction throws all the red flags. 9:45 It's not Preston calling Jessie, "Hey, I need to go to New York at some point in the next couple days. Do you need to go too?" And you say, "Yes." And we say, "Well, you just wanna split the cost." 9:53 Like that, from my understanding, not legal advice, but especially from Doug's, uh, column, is okay according to the current framework. Where it becomes very gray is when you start advertising. 10:05 That's where you have to have the Part 380. That's how JSX- Holding out... exists. That's how Aero goes. Yeah. Holding out. Exactly. Yeah, that's specific. The holding out is the, the tricky legal part. Yeah. 10:15 So if the FAA were to create-- I, I think the, the, the easiest path to success here, in my opinion, is for the FAA to create framework around Part 380 that allows for more people than just JSX the monster to create a program in which the broker acts as the intermediary. 10:34 They also act in a 380 capacity, because 380 was created for travel agents to sell seats on large airliners. 10:43 If you don't know the history behind Part 380, that is like kind of what the whole roots came from, was Vegas trips from tertiary cities that were gonna sell by the seat, and they had some really gray areas around 121 and 135, and how does that work? 10:57 Create a framework that says, "Broker, if you wanna do this, that's fine, but here is the legal framework in which you can do it, and then you can suc- successfully do this." 11:06 Or else the FAA is gonna spend 10 times as much resources trying to go after these individuals, trying to get them. 11:13 It's gonna really hurt for those that get caught, but there's gonna be 70% of people that don't get caught, and it's gonna continue to happen. That's my opinion. Yeah. No, fair point. 11:21 I think, you know, the only, like, little wrinkle that I would throw in there, just 'cause I'm, like, the safety regulatory girl [chuckles], uh, more focused, is that I, I think this is what people fail to understand about Part 135 and the importance of vetting operators and understanding what you're getting into. 11:35 The reason you can go and buy a seat on a 121 carrier is because they meet 121 airline standards, which is the highest level of regulatory hurdle that you can overcome. 11:46 And that does not mean that 135 is not just as safe. They are not required in the same way from a regulatory perspective to meet the same standards. They are not overseen at the same level that the airlines are. 11:59 So I think that's been the rub between-Okay, how much do we let passengers who really should be doing their own due diligence on every single charter that they take, because it's not the same as airlines, versus how much do we let them self-aggregate and they feel like they're just getting on an air carrier? 12:16 So that's the complicated part, but I agree, like it's enough. You know, we've been doing the whack-a-mole thing now for like the last 15 years in this industry. 12:23 Let's just go ahead and get some sort of regulatory framework so that we can do it the right way. Yeah, exactly. The market is demanding this. 12:29 My ex DMs are full of by-the-seat requests, and I'm like, "I, I can't help you. It doesn't-- That's not what I do, first of all. 12:37 But second of all, like it's not legal, and even if I did, like I'm not gonna be the gray area person." Like it's just create black and white standards and then hold people to them is my opinion. 12:49 This currently lives in the gray zone. Like the, the whole, like truth in leasing's another great example of like there's gray area because we haven't clearly defined everything that happens with dry leasing. 13:00 It's more defined, I think, than this, but create clear delineations. It's happening. It got to The Wall Street Journal. 13:07 Like I don't know whose pet project this should be, but I would say come up with a framework so that it can happen or come straight out and say, "This cannot happen, and we're even closing the door on the gray zone." 13:19 Right? Like it's gonna be more strict than it is. But I think living in this kind of in between is really where people start to get in trouble. Yeah, for sure. 13:28 So this is a great segue to our Mile High Madness segment today because I had to bring up this oldie but goldie from JetSmarter. So let me play this for those who have not seen this beautiful video. 13:38 This is gonna be good. Our favorite part. He even allegedly threatened to kill the other passengers. Heads will be chopped off. Heads will be chopped off. 13:48 The video, obtained by CNBC, was shot on board a 12-passenger Gulfstream jet like this- I think we've seen enough. Did you see this back in the day? That's amazing. No. Why, how did I miss this? 14:00 You haven't seen that video? This is fantastic. Oh my goodness. That was a JetSmarter passenger from years ago. Um, so that kind of was like a press-- You know, at, at that video made national news. 14:12 The guy obviously was, you know, mentally ill, you know, not a mess. I don't know what was going on. 14:17 Um, but so he was one of the s-shared seat passengers that JetSmarter was flying, and that got the industry all in a ruffle, uh, a few years ago. So, oh man, that's a classic, Preston. You gotta watch the whole thing. 14:29 Oh, that's so good. We'll have to-- we'll link it in the newsletter. Here's a great time to plug the newsletter. We're gonna link that video. Be sure to watch it. 14:36 If you haven't subscribed, go to thevipseat.com to subscribe. So for those people that don't know, Jesse and I did not share our social media of the day this time, and they hilariously overlap in totally different ways. 14:49 So welcome to The VIP Seat, uh, where we have coincidences all of the time. This is Tiffany Gomas, uh, vacation mode on with the picture in front of a Gulfstream window. 15:02 If you don't know who that is, she was the girl who freaked out on the American Airlines flight, got kicked off because she was just having an absolutely bad day, and got kicked off an American Airlines flight freaking-- Not, not the one-- There was like a crazy one recently. 15:16 This was like one time before that. But she posted this flying on what is very clearly a Gulfstream window, dead giveaway, circle, circle window, vacay mode on with her passport. 15:31 So I don't know if she, if she's on a do not fly list or anything, but she apparently did not wanna fly American Airlines for this vacation. 15:39 And, uh, yeah, that was-- that's glorious that we kind of had our, our social media clips of the day rhyme. I mean, I'd be in a much better mood on a Gulfstream with some bubbly rosé, so I, I can't blame her. 15:51 Yeah, no, same here. I mean, I, I would be in the same boat, uh, if I, especially if I wasn't allowed back on a commercial airline of a certain brand. So, so yeah, that's, uh, that's funny. 16:00 It's both, both people freaking out on different, uh, types of Gulfstreams. You may have unlocked something here. That might be a perfect excuse for why, you know, I can only fly private. 16:09 I just need to act out on a plane and get myself kicked off of like commercial carriers, and then maybe I could go fly private. I will behave, I promise. That's an expensive, that's an expensive freak out there, Jesse. 16:20 Yeah, I guess it is. That's not really gonna work, is it? Oh, well, speaking of expensive things happening, we've got tariffs coming again. Tariffs are going to pay for our country. 16:30 We are not going to have to pay any more taxes. We're going to have everybody else pay our taxes. Here we are yet again, more tariff news. 16:37 There has been a increase in tariffs on, uh-- There's been a, a lot of talk around Canada. There has been talk around Brazil. There has been talk about a lot of countries that directly affect business aviation. 16:49 Germany, for instance, is where Rolls-Royce engines are made. Uh, so there's, there's a lot going on, and the components that go into those aircraft are also getting taxed. So it's, uh, it's kind of a mess out there. 17:02 Yeah, aluminum, as the Brits like to say, and I wish I could say without sounding weird, and it did sound weird, didn't it? 17:08 Um, but that one's getting cr- that one's getting tagged quite a bit already, which makes up a lot of our components. But obviously now we're looking at Canada getting a twenty-five percent tariff. 17:18 Hard to say if that will actually impact the Bombardiers, the CAE's. I think it would definitely impact Pratt & Whitney. 17:26 So the USMCA agreement, which replaced NAFTA, I had to do a little bit of a deep dive today 'cause I wanted to understand it better. I still don't understand it after reading it for an hour completely. 17:37 But you know, there's certain- I know M stands for Mexico, C stands for Canada. That's about it. There we go. 17:42 But there's a certain amount of like the com- the products that can be made in other areas as long as there's cert-a certain amount of, uh, materials or finishing that happens in the United States. 17:53 I think Bombardier and CAE, for the most part, all their products are US-USC, uh, CA-Approved. Pratt & Whitney not so much, but I don't know. 18:04 You, you gave me some other information today that says that maybe that won't be exempt from these. Yeah, so I went asking for Grok, if you use Grok. 18:12 I-- they tend to have-- I, I use different models for different reasons. Grok tends to be a little bit more on the front edge of, like, breaking news. 18:21 It did s- it said that basically the tariffs currently do not affect Bombardier or exports from Textron and Gulfstream into Canada. 18:30 But the big ripple effect that there is, is the parts and maintenance, kind of the, a lot of the stuff that kind of goes through between the two, steel, aluminum, um, things like that. 18:43 And then there's a whole lot of questions around what qualifies and what doesn't when you're trying to pass across the border. So there's parts that may or may not be taxed. No one's really 100% sure. 18:53 I know Bombardier was probably going to eat it if it came up, if for a short period of time, but Daher was not eating it, so, you know, from France. 19:03 So it, it just kind of depends on the manufacturer and, and what their stance is on, on paying for the tariffs. Sorry, Daher was, was covering a part but not all. 19:12 They were passing some onto the dealers, some onto the end consumers, and so it just really depends. 19:17 But President Trump, July 10th, 11th, said 35% effective August 1st, um, and we're waiting on Canada to figure out what they're gonna-- how they're gonna respond. But it's, it's not great. 19:30 It's not great, and I think, you know, the bigger one too, especially as a former Phenom 300 operator, Brazil is gonna be a problem. 19:38 So he's talking about slapping 50% tariffs on Brazil, and this is not about the United States making money. This is a pure geopolitical play. He's not happy, um, with their relationship with China and Russia. 19:52 Brazil's been trying to do the, uh, oh, we're friends with everybody thing, but in today's world, when we have global conflict and wars, Trump's kind of not having that right now. 20:00 Um, so they're gonna have to start picking a side, I think, for trading partners, and I don't know what's gonna happen to business aviation. 20:07 So I, the one silver lining is that the business jets are finished in Florida, Melbourne, and Embraer has recently expanded their facility down there, which is positive for them. Good foresight. 20:20 I think that the, like w- I think it's a 50% tariff from Brazil, um, and so from the commercial industry, I know that is gonna be really tough. I, I think that we're gonna have to wait and see how it actually shakes out. 20:37 I, I've talked to a lot of attorney friends, and they get-- they say, basically, "I have a really strong opinion today, and that is probably irrelevant tomorrow." 20:46 And so that's part of the problem is, like, you just have no cl- Yeah. Well, I mean, despite that, we, you know, we release this on Tuesday mornings, but we record this on Mondays. 20:56 Bombardier's stock price continued to go up today, so I think investors at least are confident on that side. It will be interesting. 21:03 I think Brazil is the tougher one, and also the materials and materials cost of these parts and things coming from Europe. I mean, the aviation supply chain is so interconnected. 21:12 No doubt maintenance costs are going up in some way. We haven't seen it that much yet, 'cause I think everyone was kind of like, "Well, we'll take it for now, and then we'll see what happens in a couple months." But 21:21 I don't know how this Brazil thing is gonna shake out. I think that one's a little more complicated. Big downstream issue is us exporting into Brazil. Brazil is a huge maturing market when it comes to business aviation. 21:34 They actually have recently released, I think I've talked about this in the podcast before, but they have recently instituted where if you understand kind of how lean positions from financiers work overseas, in the United States it's, there's the international registry. 21:48 This is kind of what everybody needs to know, that Brazil has kind of taken up that and then also made a lot of the repossession rights for financiers outside of the country the ability to basically, you call up as eas- Uh, they're trying to make it as easy it is with the FAA to repossess aircraft in Brazil to really open up their capital markets, which is gonna open up transactions into Brazil. 22:10 I know Epic announced a big Brazilian sale last year, um, of selling a lot of Epic E-1000. GX is now the AX. Um, Textron sees it as a large emerging market. Gulfstream sees it as a large emerging market. 22:24 So even it may not actually even be Embraer. That may not actually, in the Brazil question, it may not actually be Embraer w- with the risks that we're looking at. 22:33 We may actually be looking at export risks, and all of a sudden the, you know, book-to-build ratio kind of becomes weird because all your Brazilians are not gonna take the 50% tariff 'cause they haven't worked it out with President Trump. 22:45 So I think that those are almost a higher risk than our Embraer aircraft that are technically assembled in Florida, made with Canadian, American, and Mexican parts, going to be subject to the tariff of a Brazilian company. 22:59 I think it's more the other way around that creates a pretty big short-term and medium-term threat to American companies. Yeah. 23:06 It's gonna get spicy and interesting again for the next few months while we figure this thing out. 23:11 But I mean, hopefully it's like, you know, the last few months it's been these kind of big, bold statements and then action happens relatively quickly. But I don't know. 23:20 It keeps kind of popping its head up, so it's concerning. Yeah. I don't know. We'll see. Hopefully this thing gets resolved, but we, we need some sort of surety in the market. 23:28 Um, and I'm not sure how much more, how many more huge shocks the market can take. Yeah. Well, I mean, hopefully with bonus depreciation and this, at least it'll even out, maybe. Yeah, exactly. Exactly. 23:40 If I have to see another LinkedIn post about bonus depreciation, I'm like, every broker and dealer and everybody's like, "Bonus depreciation's back. Buy the airplane." I'm like, like, we get it. We get it. 23:51 So, um, in other news, s- staying international here, uh, kind of a, not a, not a great topic, but something that we have to talk about, um, BizAv, uh, global accidents are trending up this year. 24:04 Um, in a report by AIN, uh, who talked about the first half of 2025, biz jet accident fatalities soar in first half of 2025. 24:14 18 fatal turbine business aircraft accidents worldwide claimed 81 passengers and crew membersThe article goes into detail comparing the first half of twenty twenty-five to the first half of twenty twenty-four, and talking about how the first half was up from seventeen fatal accidents and fifty-four fatalities, um, up to that eighteen and eighty-one number. 24:37 It then goes on to outline the US registered aircraft. Nine people lost their lives. 24:45 First six months, US, uh, N-registered business jets were actually the only segment that was fewer fatalities, so that's good news for the US. 24:53 Nine people lost their lives in three US-registered business jet accidents last year versus eight who died, almost three this year. So we're down, down a little bit this year. Jessie, you're the safety gal. 25:04 Let's talk through the difference. I wanna hear your opinion on US versus non-US, and then ninety-one versus one thirty-five. Yeah. So there's a lot of different ways to slice the data. 25:15 Um, Private Aviation Safety Alliance, I-- we really focus on aggregated one thirty-five because one thirty-five is passenger-carrying operations. If you looked at just one thirty-five, the numbers are worse. 25:27 I mean, like, we're trending on a worse path for the US than we were last year. Um, and that's because there were some pretty bad ones, like in Alaska, it was a Caravan crash. 25:37 There was, there's, there were a lot of passengers' lives lost, but again, not in the business jet area. Um, so if you just wanna look at business jets, I think it's about par for the course last year. 25:47 But, you know, if we look at one thirty-five overall, it's not going well. And I think it's just reflective of all the hiring woes that everyone's experienced the last fr- few years. 25:56 You've got, you know, new people in aircraft, they haven't flown as often. But I, I don't think we're on a good trend. I-- really what you wanna see the trends coming down, right? 26:05 We have better technology, better aircraft, uh, supposedly better training, you know, and accidents shouldn't be going up, you know, and they shouldn't be really staying status quo. They should be decreasing. 26:14 So I find it concerning that it's not, and certainly too, I think the news coverage this year has been really tough for business aviation. You know, we keep seeing these very high-profile accidents in the news. 26:24 Even this weekend, you know, there was a, a crash in London, and the video from that is just devastating. I mean, it's, it's a fireball on the runway, closed down, um, the airport. It's a-- 26:36 it's not a good look for the industry. 26:39 I think we need to kinda get back to some of the basics here and start focusing, focusing on safety and safety culture specifically, um, because, uh, I don't, I don't like the trend that we're heading in. 26:49 Look, it's still very, very safe way to travel, but you know, our goal is zero. You know, we don't have any f-fatalities out there. Yeah, no, I completely agree. 26:58 I think, I think it's important to kind of double-click here and at the micro segments of the industry and who is most susceptible to these types of accidents. 27:09 One of the number one thing I get asked by end consumers who read my newsletter is safety, safety, safety, Argus, all, all of the kind of stuff about safety. 27:19 And I think it's important to double-click in here on this year. One accident on February 10th was a Learjet 35A that veered off the runway l- while landing in Scottsdale, killing the pilot. It's the only fatality. 27:32 It's unfortunate. It's very sad. It did kill the pilot, but it was a Learjet 35A. Technology is not there. It is not-- It's a, it is a lot of aircraft for one pilot to handle, so double-click there. 27:44 March 13th, a Cessna Citation CJ2 on a planned ferry flight made a right turn and climbed about nine hundred fifty feet after takeoff before it began a rapid descent into the ground. 27:54 Ferry flight, I'm not gonna make assumptions 'cause I don't know the finer details, but ferry flights typically there is some sort of maintenance event that has either previously happened or is about to happen. 28:06 So you have to think that potentially that that was the cause. Sole pilot on board died. May 22nd, a Citation S550 was destroyed when it crashed on approach near San Diego. The pilot and five passengers were killed. 28:19 All three accidents occurred under Part 91. 28:22 So all three accidents in the United States thus far this year that have fatalities were flown Part 91, and note they were all flown, unless there is a misrepresentation in this article, single pilot. 28:36 So when you're comparing single pilot old aircraft Part 91 operations versus dual crewed Part 135 US-based, uh, trips, the safety statistics are incredibly different. 28:52 And so if you're going to take an aggregate number, it's unfair to those groups that fly two pilot one thirty-five professionally flown, have excellent training, excellent safety management systems, and saying, "Well, look at all these accidents that have happened this year." 29:08 I think that that's a really unfair comparison if you're gonna look at it in the aggregate. Yeah, agreed, Matt. And again, it gets back to the culture and what kind of operation it is, and that's just stuff. 29:19 We have third-party audits, which unfortunately are paid for, um, so there is kind of-- there is an issue there with, you know, who's getting paid for what service to certify you. It's what we have. 29:30 [chuckles] We don't really have any other, other way to kind of figure out who's a good operator, who's a bad operator. 29:35 That's something we're trying to do at PASA is, you know, aggregating the safety data and the incidents that are occurring before there's an accident, so you can vet that operator. But it's tough. 29:44 Um, you know, I think a lot of times it's people rely on word of mouth, you know, knowing the culture of the company and do they push the boundaries? Do they have, you know, newer technology in the aircraft? 29:53 Do they have, you know, the f-flight risk assessments before every trip? That's just stuff that's hard for the average consumer to know. Yes, but I agree with some parts of this. 30:03 I wanna see the numbers go down, even if, you know, there's no passengers on board because it still represents issues. 30:09 You know, if, if things are increasing in general in one end of the spectrum, they could start to increase in others. 30:16 But totally agree with you, single pilot operations, older aircraft that don't have the same kind of technology on board. 30:22 Some can be upgraded, you know, so older planes that have a- the upgrades, that could be different. 30:26 But there's so many nuances to this and, um, feel, feel bad for the families and everyone who's having to deal with the situation. 30:33 But it's also not gonna be good for operators because your insurance ratesRegardless if it's, you know, industrial, medevac, whoever it is, you're all in the same bucket, and you're gonna get judged accordingly, and you're gonna pay the premiums accordingly as well. 30:46 Um, so more costs are going up. We need to, we need to get everybody going in the right direction. Yep. No, totally agree. Well, moving on to our next story 'cause I know we want to be conscious of the commute. 30:57 PHI has withdrawn from their IPO, and there's a little bit of M&A activity. Jessie, this is your world in helicopter IPO, so would love to get your take on this story. Yeah. 31:10 I'm really curious because it's like there's some, like, glints of good things happening, and then there's other areas where I'm still confused on. 31:17 So it looks like Gamma Aviation, they sold Jet East last year for $113 million, so they've got some cash in their pocket. 31:24 They're doing lots of operator acquisitions, and specifically in, like, the medevac space, which I find interesting because, you know, I came from some of that world, um, not pure medevac play, but we did the organ transport. 31:36 But you look back at, um, in 2017, both Air Methods and Global Medical Response, yes, you know, some of the biggest medevac operations in the world, they were both acquired by PE, American Securities and KKR. 31:49 They still hold those investments to this day. So when you talk about those very large companies trying to go public, the PHIs trying to go public, it just seems like they can't get there, and the business is growing. 32:02 I think there's some issues with the margins potentially, but it looks like Gamma's maybe investing in this for the long-term perspective because they see it's a growing market. Medevac is expanding all the time. 32:12 The margins, we don't know all the time how they're gonna be, but, uh, you know, I can't believe that private equity has held some of these investments for-- I mean, we're almost at a decade now. 32:20 That's well beyond their investment horizon. Yeah. The, um, I think we've talked a lot about on this program, not investment advice, past performance is not indicative of future performance, yada, yada. 32:31 But I think that we, we've talked about this, that public markets have a very hard time with private aviation. For instance, this is just, like, one example, and this is even private markets. 32:41 So helicopters specifically, if you don't understand the time life components versus the hour long components, even if you're a fixed-wing person, you don't exactly understand how that works, and you also probably don't understand how integrated the OEMs are in the maintenance cycles and in their programs. 32:59 It's far more intric-- like, interrelated in helicopters than it is even in fixed wing. There's not even really-- I mean, you could argue Safran, but, like, they're a engine manufacturer. 33:10 There's not a JSSI equivalent inside of helicopters. 33:15 Like, you can't privatize programs even inside of helicopters because they're so complicated, and the appraisals, for instance, there's, like, three people that do really good helicopter appraisals, and the rest of them have, like, tend to have, like, no idea. 33:30 And so there's a lot of nuances that come specifically with helicopters. Helicopters are used a lot in the medevac space. 33:37 There's also a need in private equity to-- there has to be time for a platform company and then all the bolt-ons that come around it. And in a world of private aviation, the integration periods are just so much longer. 33:52 You look at-- Like, you look at the Wheels Up and Airshare transaction just as an example. 33:58 The amount of time that it took for all of the operations to transfer from Wheels Up over to Airshare, kind of like officially, right, all of the stuff, or, you know, every time we see a one thirty-five certificate for sale, it's kind of the indication of, "Oh, the transition is finally over." 34:14 Like, that takes time. Like, the integration cycles, I think, take a lot longer, and then you go, "Okay, now how do we optimize, and how do we see synergies?" So I think that they're having to take a longer time horizon. 34:27 Um, you know, Gamma Aviation bought Capital Air Ambulance in the UK. Like, it's not, it's not-- They've, they've kind of bought the platform company, now they're bolting everybody on. 34:34 But, uh, it's just a, it's a different-- I think it's just a different sector, and, and markets don't really get it. Yeah. 34:41 I, I find the interesting thing too with PHI, I mean, they're medevac, but they do a lot of oil and gas, and given how much oil and gas activity is gonna increase in the United States, maybe this is a play to stay private or, you know, to look for private buyers separately because they know that the space is getting ready to ramp up a bit. 34:57 You know, maybe that's kind of why they're, you know, pulling this. Although, you know, to, to announce it, I mean, I think they announced it a year and a half ago, so to not get there in that time. 35:07 But again, markets have been depressed. It's been uncertainty with elections. Who knows where this is gonna go? I do see the medevac space, though. 35:15 I mean, at some point, you know, th- these companies have got to start ramping back up. I mean, that, that is a solid business. 35:21 I think it can be very competitive, um, and hospitals should take safety a little more seriously than they do sometimes. 35:28 Sometimes they just go with the biggest and not necessarily with those who have the best records, which you can see at PASA as well, so you should check that out. But it's, uh, it's a complicated space. 35:37 On top of transitioning just a regular private jet operation, now you're doing operations twenty-four/seven. You have patient lives involved. You have medical employees that you didn't have. 35:47 That horizon is a lot longer than just your standard aircraft operation. Yeah. It's, uh, medevac is hard, and you've, you've been there. Well, you've been in the organ transplant space. It's different. 35:57 I've got a couple of clients that are in the medevac space, and it's, it's just things-- and things just move slowly in that world too. So I think that it's important to understand that. 36:06 Uh, let's wrap it up with the last story today. Um, we have got some new data from Jetnet that we have gotten some access to. 36:14 So we are going to talk through the book-to-bill ratio, um, and what that means for kind of the health of the market right now. 36:22 You have tariffs, you have uncertainty, you have certifications being pushed back, all of this stuff that, like, you would think would probably create a lot of turbulence and stuff, but it's not necessarily- All right. 36:34 Well, yeah. So our new friends at Jetnet, who have graciously agreed to give us some of their data to share with you, our wonderful audienceThis was interesting. 36:44 So this was one of the pieces of information they sent over to us last week. Um, it's the book-to-bill ratios on the top manufacturers in our space. 36:53 Essentially, for those don't-- who don't understand, which, to be totally fair, I don't totally fully understand aircraft manufacturing, but book-to-bill is basically how much is being billed versus how much people want to buy. 37:04 Anything above a one is considered good. Anything below a one is, well, you're maybe behind the curve a little bit. But I find this chart so interesting just in the fact that look at Embraer and h- the 37:16 volatility of this company. I mean, we knew that there were supply chain issues, but I think this really outlines, 37:24 you know, th- there's a big mix m- mismatch between demand and supply for some, but then others, you know, like the Gulf Streams out there, they kinda hover just pretty consistently year to year, um, for a long time. 37:36 Yeah. I think it's the, it's the big swings that I would say are probably the hardest to fully grasp. There's so much information that ple- like, that pushes these numbers to be above and below the, the book-to-bill. 37:52 Um, I think it's also telling about lead times and are people getting impatient? Are there secondary sales of new, brand-new delivered aircraft? 38:03 You look back to-- So, so looking back on this chart, you can see in the beginning is, is 2009, right? So we all know what happened post-2008, what is lovely known as the white tails, right? 38:17 You would, you would basically speculate on an order in the future, which says that I'm gonna buy, I'm gonna place an order today, and then I believe in the future, I'm gonna be able to sell it at a premium. 38:29 If you're an executive at one of these large manufacturers, I hate to tell you, but it still happens. I've seen it happen a couple of times in the last two months. But the fact is that 38:43 this is a big KPI for these manufacturers to actually say, "Okay, our clients are placing the order, and then we are delivering, and then we are replacing that delivery order with another order for the future," right? 38:55 So it's like predictable cash flows, predictable business. Like, that's really what we're looking for, right? And so you look at Bombardier, for instance, in the black line, and it's also incredibly volatile. 39:06 If you remember back kind of to these time periods, you had a lot of uncertainty around the Bombardier viability as a business. You know, Canada had lockdowns a lot more severe than the US did, right? 39:21 And so, you know, the, the booking is, say, "I'm gonna sign a contract today for something in the future," and then billing is, "I'm collecting money to be able to fulfill these orders." And I-- the, the ratio 39:33 is a little bit-- It's not like, oh, here's a book to delivery, but the book to bill, right, it's a cash, it's a cash flow metric. And so Embraer being incredibly volatile, I think it may actually be 39:47 also skewed by, uh, 'cause it's a ratio, so large bookings versus not delivering, right? So can pull back a little bit of that, um, a little bit of that ratio because, you know, remember back to what happened in 2024, 40:03 book to bill, right? Uh, Flexjet puts in a giant order, um, in 2024, and so you kind of have all these levers that you're kind of pulling on. I think that, um, it's gonna be telling what happens. 40:17 What's really going to be interesting is to look at this in this time next year, because we're then gonna see a lot of the ripple throughs in a bigger picture of the tariffs, um, and kind of the health of what these different OEMs are, are having. 40:33 Yeah. But I mean, for one thing is for sure that I see in this chart as relevant today, I mean, it-- we're, we're softening. We, we've got definitely some softening in the new aircraft sales. 40:42 I think we're seeing the same thing in the used market. We've all been wondering, is it politics? Is it a timing thing, or is it that the market is actually softening? But I think only time will tell. 40:53 I think if nothing else, we've definitely gotten over our COVID highs, um, and that was a crazy market. I mean, you can see that peak right there in 2021. I mean, that was the insane, 41:05 everyone wants to fly private, the market is booming and going nuts. We're not there anymore, which is, which is good. That's not sustainable. 41:15 You know, if we kept doing that, everyone would burn out, and we just wouldn't, wouldn't do well. So it's a return to normalcy, if nothing else. 41:22 But it looks like most are hovering, you know, still in the one, one plus, and Embraer is definitely, even though there's that volatility is those spikes, like they're leading [chuckles] the whole pack on, on book-to-bill ratios today. 41:35 So it's holding up. They're holding their prices firm too. Yep. They are. They are. I mean, NetJets just started taking delivery of their Praetor 500, so those bill ratios get to go up, right? And so, um, yeah. 41:46 So, you know, leading the pack, the Phenom 300 is the most popular light business jet. I think it's the most popular business jet, period, for a couple years running. 41:54 We'll see what happens this year, but I don't see it slowing down- Like a decade or something...based on everybody I talk to, so. So yeah. So that wraps up the VIP seat this week. 42:03 Jessi, uh, if we want to connect with you, where should we go? Where should we find all your stuff? Here's your 30-second plug for whatever you've got working on. Thank you. 42:12 Well, if you're not following my LinkedIn, you definitely should, because not only do I post the fun content, I'm also constantly in that comment section. So make sure you're following me so you get those updates. 42:21 But for anyone who's looking for the safety stuff that I do, flyingprivate.org. Most of our dashboards are free. You can go and look on any operator and see what their, um, enforcement records are. 42:32 It's accidents, incidents, all that stuff for free at flyingprivate.org. Thanks for the plug, Preston. Yeah, absolutely. If you wanna find me, I am on Twitter, @prestonholland6, also on LinkedIn. 42:43 Just posted a new article, "The Not So Private Private Jet," so go give that a read. Did a-- It was a d-- It's basically a deep dive of the history of jet tracking and Jack Sweeney. My day job, Prestige Aircraft Finance. 42:53 You can find that at prestigefinance.com. Drop me a note on LinkedIn, Twitter, Pigeon, however you wanna get in contact with me. I'll probably reply. 43:01 Um, and other than that, I'm sure I'll see some of you guys at the next big business aviation event. I'm going to Oshkosh. 43:08 I know Jessi doesn't, but I'm going to Oshkosh, so if you're gonna be there, let me know, and we will see you next week. Like, subscribe, hit the bell, share it with your friends, all the good pluggy plug stuff. 43:19 We will see you next week.
