Wealthy switch to private jets to avoid coronavirus
Sector recovers some lost ground as passengers opt for seclusion of charter planes
In April, John Matthews’ private jet business, AirX, went into a terrifying nosedive. After coronavirus lockdowns, monthly charter requests fell from almost €100m to just €200,000.
“There was pretty much nothing. Terrifying may be an understatement,” said Mr Matthews, chairman of the Malta-based private jet operator. His company faced a grave threat to its survival from the spread of travel restrictions across the world.
But since then, a rebound in demand has given hope to Mr Matthews and his competitors. Although their sector styles itself as “business aviation”, little of the new demand has come from corporate travel, which is still largely frozen after conferences were cancelled and meetings migrated online.
Instead, it is an influx of leisure customers — unable to travel commercially or unwilling to risk mixing with crowds — that has helped pick up the slack and allowed the private jet market to avoid the worst of the crisis afflicting large airlines.
June figures for the commercial sector are yet to be published but airline trade body Iata expects them to be grim. In May, commercial passenger demand was down 91.3 per cent compared with a year ago.
By contrast, private flights dropped 70 per cent year on year in April but were down only 28 per cent in June, said aviation business monitoring group WingX.
The recovery has continued into the first three weeks of July, with global private aviation down just 19 per cent from its pre-Covid levels as more European countries lifted travel restrictions.
NetJets, one of the biggest private jet companies and a subsidiary of Berkshire Hathaway, said demand was back to 85 per cent of normal flying levels by late June after dropping to 20 per cent in late April.
“Business travel has not returned in any material way,” said Patrick Gallagher, president of sales and marketing at NetJets. “But the personal travel, to have brought us back to 85 per cent of demand, really shows a shift.”
The trend has brought a change in private jet routes. While arrivals to New York were still down 32 per cent in the first three weeks of July compared with the same period a year earlier, according to WingX, the Spanish island of Majorca saw a 20 per cent increase, representing an additional six flights a day.
AirX has partnered with hotels in the Maldives to shuttle wealthy tourists to the islands using its largest jet, an Airbus A340 with 100 lie-flat business class seats. “I always said, if we can get one charter a month on this plane we’re doing really well, but I never thought this was possible,” said Mr Matthews.
Shuhan Ahmed, general manager of Milaidhoo Island hotel in the Maldives, said his company realised booking a long-haul trip this summer could be “daunting” for many travellers. “Flying on a private jet should give them the confidence to know their personal space will be respected at all times,” he said. However, the AirX flights are on hold as the UK’s Foreign and Commonwealth Office has yet to clear the islands for quarantine-free travel to the UK.
Crucially, flying on a private jet avoids hundreds of so-called touch points that could be contaminated by coronavirus, such as busy airport terminals and baggage check-ins.
“If you want to reduce your number of touch points with people and you are having to fly in and out of a hub, then private aviation gives you that ability to reduce that contact,” said Justin Bowman, chief executive of Air Charter Service, a broker for chartered jets.
“It’s changed commercial travel,” said Sentient Jet chief executive Andrew Collins, referring to coronavirus. “People are very much going to be looking to avoid crowds.”
US-based Sentient, which sells cards from $137,000 that give customers access to private jet flights, experienced a 90 per cent fall in volume in April compared with a year earlier. In June, it was down less than 30 per cent compared with the previous year.
Mr Collins added that people who had never flown privately before were contacting the business. He cited a couple who routinely shuttled between Detroit and Scottsdale in Arizona, where the husband no longer wanted to take his wife, a cancer survivor with a weakened immune system, on commercial flights.
NetJets’ Mr Gallagher said the truncated schedules of commercial airlines would provide a sustained boost to private jets. “The issue today is there is not a nonstop flight between Miami, Florida and Columbus, Ohio, and there used to be several,” he said. “Flight schedules are operating 65 per cent down from pre-pandemic. It makes it much harder to get between cities nonstop and on the schedule you want to fly.”
The additional hope for private jet operators is that business travel will start to return but with executives reluctant to travel on commercial flights.
Despite growing optimism in some parts of the business, much of the industry remains cautious because of fears of another coronavirus wave and continuing quarantine measures.
For some companies, it is already too late. Texas-based JetSuite, which had revenues of $50m in 2019 and backers including JetBlue Airways and Qatar Airways, filed for Chapter 11 bankruptcy on April 28, citing debts of $68m.
“Let’s be really clear, there’s still a long way to go and there’s still so much uncertainty,” said Mark Briffa, chief executive of UK-based Air Partner, a private jet broker. “The aviation industry is going to shrink. There’s absolutely no doubt about it, the consumer is going to change its habits.”
UK tells people returning from Spain to isolate for two weeks
Move comes as country struggles with new wave of coronavirus infections>
Britons returning from Spain will be required to self-isolate for two weeks after the country has seen a spike in cases in three of its regions.
“Spain has been removed from the list of countries where people do not have to self-isolate when arriving into to the UK,” the government said in a statement on Saturday night.
It also advised “against all but essential travel to mainland Spain”.
And government officials confirmed that Grant Shapps, UK transport secretary, was among those on holiday in Spain.
The removal of Spain from the “travel corridors exemption list” comes as it struggles with a fresh wave of coronavirus infections. The country is the most popular tourist destination for Britons, with about 18m visiting last year.
From midnight on Sunday those returning from Spain will need to enter a 14-day self-isolation period, which demands people remain at home, with even local walks prohibited.
Spain has been one of the countries hardest-hit by the pandemic, with more than 28,400 people having died due to the virus. Catalonia was the second-most affected region, after Madrid, and is now facing the highest number of new infections.
Britons returning from Spain will be required to self-isolate for two weeks after the country has seen a spike in cases in three of its regions.
“Spain has been removed from the list of countries where people do not have to self-isolate when arriving into to the UK,” the government said in a statement on Saturday night.
It also advised “against all but essential travel to mainland Spain”.
And government officials confirmed that Grant Shapps, UK transport secretary, was among those on holiday in Spain.
The removal of Spain from the “travel corridors exemption list” comes as it struggles with a fresh wave of coronavirus infections. The country is the most popular tourist destination for Britons, with about 18m visiting last year.
From midnight on Sunday those returning from Spain will need to enter a 14-day self-isolation period, which demands people remain at home, with even local walks prohibited.
Spain has been one of the countries hardest-hit by the pandemic, with more than 28,400 people having died due to the virus. Catalonia was the second-most affected region, after Madrid, and is now facing the highest number of new infections.
On Friday, Arancha González Laya, Spanish foreign minister, insisted the country was safe for visitors. In a television interview she said that while Spain had outbreaks, “the governments, both national and regional, are working to isolate cases as soon as they appear, trace the contacts and make sure we treat them”.
Also on Friday, Britain added five countries to its list that spares returning visitors from a 14-day quarantine but kept Portugal, Brazil, Sweden, Russia and the US off the list.
Estonia, Latvia, Slovakia, Slovenia and Caribbean archipelago of St Vincent and the Grenadines have been added to the list of more than 70 “travel corridors”, while Serbia was removed from the list with effect from July 11. The changes would take effect in England from July 28, the UK government said.
Barron’s Weekend Summary: Cover story asks whether electric-truck makers can duplicate TSLA’s success; Earnings season is off to a rough start for the tech sector
* Cover story: “The future looks bright for electric trucks, but it’s decidedly mixed for stocks of electric-truck companies”; Shares of NKLA and WKHS are up this year as investors increasingly believe in a gas-free future for trucking, and investors are hoping to get in on what could be the next TSLA—but its success “is more easily envied than duplicated.”
* Tech Trader: Earnings season for tech companies is off to a rough start, and two weeks in “the air is leaking from what had clearly become a tech bubble”; For NFLX, the pandemic boost is over, and even the cloud sector isn’t a “cure-all” for companies such as IBM; Major cloud players such as MSFT, AMZN, and GOOGL face challenges, as do chipmakers such as INTC, which is increasingly outsourcing production to companies such as TSM.
* Trader: Continued dollar weakness could have a big impact as investors rotate into other regions that had been left behind, including emerging markets, especially as global markets stop moving in tandem; Positive on MCD: Though the company was hard-hit during the early days of the pandemic, with a quarter of its stores closing and sales falling, signs point to big improvements in the fast-food sector and at McDonald’s in particular, and it may well be on the road to recovery.
* Profile: Daniel Shaykevich, lead manager of the Vanguard Emerging Markets Bond fund and the emerging market portions of other Vanguard bond funds, focuses on macroeconomic country-specific risks and individual security credit risks, but also thinks holistically about the entire portfolio; He doesn’t seek to avoid risk, an impossible task, but does ensure that the fund is appropriately compensated for it (top 10 countries: Brazil, Panama, Mexico, Indonesia, Russia, Colombia, South Africa, Peru, Azerbajian, Urkaine).
* Interview: Joyce Chang, chair of global research at JPM, leads a team that identifies paradigm shifts affecting the global markets; she discusses four with big implications—the decline in market liquidity due to the change in market structure, the rise in unconventional monetary policies by central banks, the Great Power competition between China and the US, and de-globalization and the rise of populism.
* Features: 1) The pandemic has shaken the oil-and-gas industry, causing prices to crash and leading companies to shut down wells and postpone projects; Though at the outset analysts called for consolidation, companies remained focused on preserving capital—but the CVX–NBL deal could reverse the trend; Potential acquisition targets include MTDR, WPX, and LPI; 2) Cautious on PLUG, BLDP, BE: Green-energy projects and hydrogen-fueled trucks have raised the investment profile of all things connected to hydrogen, amid a growing consensus that element will provide green energy in places where solar and wind can’t, but the share prices of hydrogen fuel-cell companies “look priced to disappoint”; 3) Cautious on PFE, AZN: The Covid-19 pandemic muted the drug-pricing debate in Washington, one of the few areas where Democrats and Republicans agree, but the issue could be revived now that Pfizer and AstraZeneca have unveiled promising data on their vaccines—and how the drugmakers proceed could affect their long-term value; 4) Positive on CRSP, VRTX, BLUE: The companies’ genetic therapies for sickle cell could fetch annual revenue of several billion dollars for each, while a recent Bank of America Securities says new sickle cell treatments will surpass $6B in sales by 2028, a huge number for biotechs; 5) Cautious on PCG: The company, now out of bankruptcy protection “has monopoly power, a newly relaxed regulatory regime, reliable future revenue growth, and about $10B of potential future costs prepaid by its customers”—but while shares are cheap relative to peers, it’s difficult to assess how much of its discount is warranted.
* European Trader: Positive on Ørsted: The Danish energy giant is shifting from oil and gas to become the world’s biggest developer of wind farms and is set to become one of the few future renewables majors; Its shares could rise on the back of coronavirus as countries rebuild their economies in more environmentally focused ways.
* Emerging Markets: “If it wasn’t yet obvious that the US-China relationship was deteriorating, this past week crystallized the strain—less clear, however, is when it will matter to stock investors,” especially in companies such as AAPL and TSLA that rely heavily on China for growth, production, or both.
* Streetwise: PM chief Andre Calantzopoulos says the company’s voluminous ESG reporting is an effort to convince ethics-minded investors that tobacco companies aren’t all the same, and that it’s better to engage with Philip Morris than shun it.
Italian bank Intesa expects late surge in UBI bid take-up: sources2 MIN READMILAN (Reuters) - Italy’s second-biggest bank Intesa Sanpaolo (ISP.MI) expects investor take-up to soar in the last few days of its takeover bid for rival UBI Banca (UBI.MI), two sources close to the matter said on Friday, adding that acceptance could top 80%.FILE PHOTO: Intesa San Paolo bank headquaters is seen in Turin, Italy, November 7, 2018. REUTERS/Stefano RellandiniThe bid ends on July 28 and requires acceptance of 50% plus one share, though Intesa is targeting 66.67% take-up to guarantee control of extraordinary shareholder resolutions and to be able to subsume UBI within Intesa.As of Thursday investors had tendered shares representing 26.4% of UBI’s capital, which the sources said was three times the level recent takeover bids in Italy had achieved with three trading sessions left.The sources said that UBI’s retail clients accounted for about half of the 26.4% of shares tendered so far.ADVERTISEMENTA stake of 10% could be traced back to two local charitable banking foundations based in the cities of Cuneo and Pavia.The foundations announced last week that they would take up the offer after Intesa raised the bid by almost a fifth, adding 0.57 euros in cash for each UBI share tendered in addition to 1.7 new Intesa shares.UBI on Thursday rejected the improved bid, saying it was still too low.Intesa, which had previously ruled out the possibility of a higher bid, is spending up to 652 million euros ($755 million) to offer a 40% premium on UBI’s closing price when the offer was announced in mid-February, up from the initial 24%.ADVERTISEMENTThe sources said that most institutional investors had already given instructions to tender their shares but banks acting as their agents would wait until Monday to execute the orders.They said that the final take-up could be as high as 85% in a best-case scenario.The sources said that holdout investors would not be offered the same premium were Intesa to launch another bid on the residual UBI shares before it is merged into Intesa.
Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- EHTH -21.5%, INTC -13.3% (also downgraded by multiple analysts), VOD -3.7%, SWKS -3.2%, RHI -1.6%, PSO -1.3%, TR -1.2%, PBCT -1.1%, AXP -0.9%
Several semiconductors are lower following Intel (INTC) earnings/delays: AMAT -2.6%, KLAC -2.4%, ASML -2%, LRCX -0.5%, ETFs SMH -0.4%
Battery and EV related names are pulling back with Tesla (TSLA -4.2%): BLDP -6%, FCEL -5.3%, PLUG -4.9%, NIO -3.9%
Social media names are pointing to lower open: SNAP -1%, FB -0.8%, TWTR -0.5%
Airlines and cruise line names are lower across the board:
- ALK -1.8%, UAL -1.3%, LUV -1.2%, AAL -1.1%, HA -0.8%, SAVE -0.8%, ETF: JETS -0.7%, DAL -0.7%
- CUK -2.4%, NCLH -2%, CCL -1.8%, RCL -1.1%
Other news:
- MIST -8.5% (following yesterday's 160%+ surge higher)
- MRNA -4.8% (continued weakness on unfavorable patent ruling)
- DIS -1.9% (delays several movies, according to CNBC)
- NVAX -1.9% (co and FUJIFILM announce deal for large-scale manufacturing of vaccine candidate)
- EVR -1.5% (announces strategic alliance with Seneca Evercore in Brazil),
- SPCE -3.1% (ongoing volatility), LMND -1.4% (recent IPO -- ongoing volatility)
- CPRX -1.3% (files for $200 mln mixed securities shelf offering)
- DKNG -1% (announces platform deal with KAMBI on DKNG's planned migration to SBTech and iGaming), .
Analyst comments:
- HST -4.3% (downgraded to Sell from Hold at SunTrust)
- PK -3.5% (downgraded to Sell from Hold at SunTrust)
- H -2.1% (downgraded to Sell from Hold at SunTrust)
- RHP -1.5% (downgraded to Sell from Hold at SunTrust)
Gapping up
In reaction to strong earnings/guidance:
- SCPL +15.2%, CLFD +14.4%, BJRI +11.6%, ECOM +10.8%, LMAT +9.6%, SKX +7.9%, SGMS +5.3%, MXL +4.9%, EW +4.8%, TPH +4.1% (light volume), MANH +4%, MAT +3.4%, SAM +3.2%, BLMN +3%, FE +2.6%, FBNC +1.9%, AUY +1.7%, FWRD +1.5%
M&A news:
- SWIR +18.3% (to divest China-based automotive embedded module product line for US$165 mln)
Other news:
- THTX +24.2% (announces new data supporting the potential role of tesamorelin in the treatment of HIV-associated NASH)
- ABUS +17.1% (continued strength on favorable patent ruling; also downgraded to Neutral from Outperform at Robert W. Baird)
- RDUS +9.4% (announces license agreement with Menarini Group to develop/commercialize elacestrant)
- AMD +6.8% / TSM +3.3% (possible beneficiaries to Intel delay; also TSM was upgraded at Macquarie)
- ADAP +5.7% (European Medicines Agency grants access to PRIME initiative for ADP-A2M4 for synovial sarcoma)
- GS +1.6% (reaches agreement with Malaysia to drop all criminal charges in exchange for $3.9 bln in reparations, according to Bloomberg)
- CMCSA +1.4% (still checking; may be attributed reports of strong TV ad growth for streaming services)
- ARCT +1.1% (confirms binding term sheet with Israel to supply COVID-19 vaccine candidate),
- WABC +1% (approves plan to repurchase up to 1.75 mln shares),
- AZN +1% (Breztri Aerosphere approved in the US for the maintenance treatment of COPD)
- VSAT +0.9% (closes of $175 mln strategic common stock investment)
Analyst comments:
- COP +2.8% / CVX+0.3% (initiated with Buy at SunTrust)
- NCNA +2.3% (initiated with Outperform at Oppenheimer)
- HSY +0.6% (upgraded to Outperform at Evercore ISI)
- ADS +0.5% (upgraded to Buy at BofA Securities)
- JPM +0.5% (upgraded to Buy from Neutral at Goldman)
- CVS +0.2% (upgraded to Outperform from Sector Perform at RBC Capital)
Gapping up
In reaction to strong earnings/guidance:
- SCPL +15.2%, CLFD +14.4%, BJRI +11.6%, ECOM +10.8%, LMAT +9.6%, SKX +7.9%, SGMS +5.3%, MXL +4.9%, EW +4.8%, TPH +4.1% (light volume), MANH +4%, MAT +3.4%, SAM +3.2%, BLMN +3%, FE +2.6%, FBNC +1.9%, AUY +1.7%, FWRD +1.5%
M&A news:
- SWIR +18.3% (to divest China-based automotive embedded module product line for US$165 mln)
Other news:
- THTX +24.2% (announces new data supporting the potential role of tesamorelin in the treatment of HIV-associated NASH)
- ABUS +17.1% (continued strength on favorable patent ruling; also downgraded to Neutral from Outperform at Robert W. Baird)
- RDUS +9.4% (announces license agreement with Menarini Group to develop/commercialize elacestrant)
- AMD +6.8% / TSM +3.3% (possible beneficiaries to Intel delay; also TSM was upgraded at Macquarie)
- ADAP +5.7% (European Medicines Agency grants access to PRIME initiative for ADP-A2M4 for synovial sarcoma)
- GS +1.6% (reaches agreement with Malaysia to drop all criminal charges in exchange for $3.9 bln in reparations, according to Bloomberg)
- CMCSA +1.4% (still checking; may be attributed reports of strong TV ad growth for streaming services)
- ARCT +1.1% (confirms binding term sheet with Israel to supply COVID-19 vaccine candidate),
- WABC +1% (approves plan to repurchase up to 1.75 mln shares),
- AZN +1% (Breztri Aerosphere approved in the US for the maintenance treatment of COPD)
- VSAT +0.9% (closes of $175 mln strategic common stock investment)
Analyst comments:
- COP +2.8% / CVX+0.3% (initiated with Buy at SunTrust)
- NCNA +2.3% (initiated with Outperform at Oppenheimer)
- HSY +0.6% (upgraded to Outperform at Evercore ISI)
- ADS +0.5% (upgraded to Buy at BofA Securities)
- JPM +0.5% (upgraded to Buy from Neutral at Goldman)
- CVS +0.2% (upgraded to Outperform from Sector Perform at RBC Capital)
Early premarket gappers
- Gapping up: THTX +40.4%, ABUS +37.9%, SWIR +16.1%, SCPL +15.2%, CLFD +14.4%, BJRI +11.6%, LMAT +9.6%, RDUS +9.4%, SKX +7.9%, SGMS +6.4%, AMD +6.3%, EW +5.4%, SAM +5.3%, ARCT +4.4%, SIVB +4.1%, MANH +4%, MAT +3.9%, VICR +3.6%, AUY +3.3%, ADAP +3.1%, TSM +2.9%, COP +2.8%, MXL +2.4%, GTLS +2.3%, NCNA +2.3%, FBNC +1.9%, CMCSA +1.8%, FWRD +1.5%
- Gapping down: EHTH -19.3%, INTC -11.5%, MIST -6.6%, VOD -4.8%, MRNA -4.7%, BOOM -4.1%, AMAT -3.7%, NVAX -3.5%, PSO -3.5%, TSLA -3.3%, SWKS -3.2%, CUK -2.4%, DIS -2%, ASML -2%, NCLH -2%, CCL -1.6%, RHI -1.6%, EVR -1.5%, RCL -1.5%, LRCX -1.4%
