Industry’s Image is Key Theme at Isle of Man Conference

For over ten years now, with a two-year pandemic gap, the Isle of Man has held an aviation conference to bring together the business aviation community on this ancient isle in the Irish Sea. Not part of the UK or the EU (it never has been), the island is a fiercely proud part of the British Isles with its own parliament, ‘The House of Keys’/Tynwald, laws and traditions.

In 2007 the Isle of Man Aircraft Registry was established and the ‘M-Reg’ quickly became popular with business aircraft owners around the world. It is dedicated to private aircraft so has no commercial aircraft, and does not administer AOCs, as part of its arrangement with the UK CAA.

With its independent tax code, the Isle of Man has long been popular for offshore companies and the financial sector. They have developed an aviation specialism centered on the registry, with a cottage industry in ‘special-purpose companies’ growing up around managing private aircraft.

In the first few years the conference, which was the brainchild of Mark Byrne, Director of what is now Martyn Fiddler Aviation, focused on financial and tax matters. But increasingly the order of play has turned to issues affecting the industry, and 2023 was no exception.

Following hot on the heels of EBACE in May, which saw an invasion by climate protesters, this was a major theme and also raised the security level at the event, which was held at the Villa Marina in the island’s capital, Douglas. But, having been opened by the island’s director of civil aviation (DCA) Simon Williams, the conference started on a safety note with a review of new Isle of Man laws to counter illegal charter by clarifying what can and can not be flown under the banner of private aviation.

Tackling ‘Grey’ Charter

Colin Gill, deputy DCA, explained that the Aircraft Registry’s legislative program was part of its “constant striving for improvement,” including being able to offer a more personal form of customer service than the big national registries. The legislation, which came into force on August 1 last year but has not yet received wide publicity, includes a recognition that ‘reasonable costs and expenses’ should be allowed without being counted as ‘valuable consideration or renumeration’ under the ICAO definition of Commercial Air Transport – which of course places an operation in a higher level of bureaucracy and safety oversight compared to the already heavily-regulated world of private aviation.

‘Valuable consideration’ is defined as ‘a right, interest, profit or benefit, forbearance, detriment, loss or responsibility accruing, given, suffered or undertaken under an agreement…’, so is designed to be all-encapsulating in terms of preventing illegal CAT flights.

“We’ve replaced the very complex and confusing wording [inherited from the UK],” stated Gill.

 Several delegates commented that the Isle of Man had led the way in this legislation, acting ahead of the likes of CAA and EASA. Since the infamous accident where a ‘grey charter’ flight ended in the tragic loss of footballer Emiliano Sala, the CAA and other regulators have been considering how to act. It was an accident that added to a growing call from AOC-holding operators to clamp down on private operators flying for remuneration or reward.

To that end the IOM’s new legislation also clarifies cost sharing on private flights, ensuring it is only for light aircraft up to 5,700kg max. takeoff mass, not jets, and no more than six persons (including the pilot), “and not cost-sharing arranged through online platforms available to the public.” Platforms such as Wingly have been nervously watching regulators starting to consider changes to legislation and cost-sharing is something the UK CAA is soon to clarify in a similar way, while the FAA acted several years ago (Leading to platform Flitenow.com closing down).

“This was not accepted as we think it blurs the boundaries.” continued Gill.

 In addition, he said joint ownership for IOM-registered aircraft now meant each owner had to have at least a 20% share, something that was abandoned by EASA several years ago with any number of shares then being allowed (and the CAA kept this legislation after Brexit but is now reviewing it).

In further provisions, charity flights using M-registered aircraft can still be carried out, but the wording is clarified to ensure such flights are not exploited – it has to be for a registered charity, for example. Similarly with demo flights where Gill said there had been several examples of such flights being exploited for commercial gain. “It was from listening to the industry several years ago that we set out to define direct costs allowed for demo, pre-purchase and delivery flights, said Gill.

Significantly for business aviation, private dry leasing arrangements are subject to new limitations and as part of this fractional ownership is not allowed, “So charter on an AOC is the norm,” said Gill. Dry leasing has been of concern to regulators as it means an AOC is not required but the BBGA is concerned that those chartering aircraft this way are having to take on the responsibility of the operator, without necessarily understanding the implications should something go wrong.

Gill concluded by reiterating that aircraft registered in the Isle of Man before August 1, 2022, would still be subject to the old code but anyone wishing their aircraft to be subject to the new legislation could simply re-register their aircraft.

Full details of the new legislation are outlined in Isle of Man Registry Publication 68 – Remuneration and Valuable Consideration, available on the Registry’s website (www.iomaircraftregistry.com), the latest update of which was published in April 2023.

Future Aviation

David Hernandez, partner/shareholder at law firm Vedder Price, which he claimed has “the largest aircraft transactional practice in the world,” suggested that over the next five years steady growth could be expected in business aviation, partly due to the continued “accumulation of wealth by high net-worth individuals”. Also, for the first time in 30 years, there is significant investment going into industry and infrastructure in the US. “So, I expect to see aircraft sales increase.”

“Also eVTOLs, electrification, and the infrastructure explosion will be a very big deal. It will create a lot of eVTOL billionaires,” continued Hernandez, who believes Vedder Price will lead the way in financing these new craft, with the US marketing being the largest. “But we need increased foreign investment too, he urged,” while also wanting to see US industry benefit from “best practice” from overseas.

In the financial sector generally, he said securitization of leases was sweeping the sector so was something to look out for with aircraft. “Is this the housing crisis 2.0? Could be!” Other opportunities being eyed eagerly by venture capitalists and others includes the spares business, along with niche market opportunities such as air ambulances, fire-fighting aircraft, and special mission aircraft. “The cost to rent a fire-fighting aircraft has doubled over the past five years, from $7,000 an hour to $15,000 an hour.

Hernandez denied that companies such as Wheels Up were really in trouble just because their share prices had collapsed, saying “It doesn’t mean they’re not doing well.”

Going Green?

In the subsequent panel on ‘The State of the Industry’ attention turned to another huge, growing theme in business aviation in recent years – the perception of business aviation and the seeming inability of the sector to get its message out to counter this. The climate change challenge has exacerbated this.

EBAA chief operating officer Robert Baltus lamented that the industry “fails to get its message out” while Helen Stone-Ward, a lawyer with The Air Law Firm in London, said “We’re facing a Greenpeace [assertion that] aviation is massively polluting and pointless. We’re up against lots of negative words.”

Tim Barber from Duncan Aviation said: “Look at #banprivatejets on Twitter and you’ll be horrified what is being said about the industry.” He added that the media was all too ready to run stories based on misleading, unbalanced press releases that activists put out. Andrew Blundell, managing director of Close Brothers Aviation and Marine Finance, said: “I would like to see more appreciation of the facts and the actual of aviation on the environment.”

Dave Edwards concluded that the industry “needs to up its game on social media,” while Blundell suggested, “We need to be braver and make our case.” Edwards recognized that aviation is high-tech and highly regulated so “just can’t leapfrog ahead” but business aviation has often led the way in improving technology. Baltus said he believed “business aviation has been thrown under a bus by commercial aviation [the airlines]” in being part of the aviation green agenda, which could cause issues down the line with financing as banks could refuse to provide finance to business aviation.

The discussion moved on to Sustainable Aviation Fuel (SAF), Robert Baltus of EBAA warning that “there will be a mandate in Europe [the EU]” – it just hasn’t been announced yet by the European Commission. “In the next 18 months to two years, we’ll know where it’s going to go. What percentage it will be [biofuel] is still open to discussion… it is the best interim solution we have. At the moment it’s the only solution that works – and synthetic fuel will [eventually] be a game-changer.”

Stone-Ward commented: “It’s a dangerous route to mandate when you haven’t got the infrastructure.”

Sustainability and Attracting Talent

Heather Gordon, legal director at Martin Fiddler Aviation, the organizer of the Isle of Man Aviation Conference, said sustainability is “inextricably linked to perception, recruitment and retention.” She introduced the next panel session, looking at ‘the Next Generation and how to keep it.’

“We are struggling to attract talent into our industry at the moment,” said Gordon, a situation that was exacerbated by the pandemic as it gave employees a chance to evaluate their work-life balance. Gordon described this as a “power shift” with employees seemingly interviewing employers now, as the focus shifts to ‘Generation Z’. She also recognized work by the BBGA in highlighting the many different career paths available in business aviation. However, Simon Williams, Isle of Man DCA, said the sector is lacking when it comes to official qualifications and a career structure compared to many professions.

Gemma Downs, corporate counsel at Jetcraft, said it was “tough” coming into business aviation recently, as a newly qualified lawyer with little previous experience in the sector. “Nobody’s spent the time to do a chart of how everything is interconnected – I’ve done a chart, which is nice for the next person.”

Dave Edwards said securing and training talent is an “existential crisis” for aviation. “We have to put the time” to attracting the next generation.

Patrick Edmond, managing director of Shannon, Ireland-based Altair Advisory, recognized that business aviation is “very much in the cross-hairs” as a high-emitting industry, as stated by Willie Walsh at the recent IATA annual conference in Istanbul. “And still only 20% of the world’s population has ever set foot on an aeroplane.”

He said SAF “will take time – so there is very little the airlines can say, and they can easily fall into the ‘greenwashing’ trap.”

“Business aviation currently accounts for only 2% of [overall] aviation emissions so why is it such a target? Protesters see it as a useful lever to put pressure on commercial aviation, as business aviation is the most emissions-intensive part of the industry. It’s easy for them to highlight this and the use of aircraft by celebrities etc for very short flights [presents easy targets].”

So, what can the industry do? asked Edmonds. “The industry faces a huge challenge to change; being seen to make a sincere effort to change is essential to retain ‘social license’… the concern is that aviation could go in the same direction as Big Oil and become even more of a target.”

However, he did suggest that “business aviation in a way is in a better position [than airlines] as it hasn’t blotted its copybook.” It could also be an early adopter of new technology such as hybrid aircraft. Edmonds postulated a hypothetical ‘ECOJET’ scheme as an example of a “positive path” forward for the sector. “Imagine we commit to 20% SAF by 2030…100% SAF by 2050, it would be a very strong message. And maybe we will invest in SAF production too. Airports and ANSPs could be encouraged to offer discounts to ECOJET participants, and work with the electric aircraft OEMs.”

The alternative is a dangerous defensive path where business aviation tags along with commercial aviation with its 2050 targets. “Bizav can change the narrative and get on the front foot,” suggested Edmonds. “The current path, in my opinion, is unlikely to lead to a good outcome.”

He then presented a JETNET iQ survey which asked what people thought was the biggest challenge facing business aviation over the next five years. Respondents in Europe put sustainability far higher than in the rest of the world. “In Europe, it is very much bigger and we need to understand this,” said Edmonds.

Andy Hodgson, commercial director at ACASS, noted that “the general perception is that the industry is run by James Bond baddies [who didn’t care], but this couldn’t be further from the truth.”

He said with most charters coming through brokers, it was clear that operators don’t want to put themselves at a disadvantage by using SAF - passing on the much higher costs could lose them business. On the other hand, he said, business aviation customers are “much better positioned” than airline passengers to afford a price increase of say 5%. He also suggested it would be “much quicker to move as an industry”, perhaps working through Avinode as most charters are sold through that platform. Hodgson also suggested that once “one or two” of the main business aviation operators switched to SAF, “the others will soon follow.”

Lindsey Oliver, managing director of BBGA, said that at the end of the EBACE show in Geneva, which had seen protesters breaking into the static display and chaining themselves to aircraft, there was a meeting of IBAC (the International Business Aviation Council) which discussed the issue at length. Oliver’s main message from this was that whatever messaging is put out, it will need to be different depending on location/region. For example, “What would work for the NBAA may not necessarily work for us.”

An e-poll of the conference audience in the Isle of Man which asked, ‘What will bizav look like in 5 years’ time?’ resulted in 45% saying the industry would be “under siege, and on the defensive”; 42% said the industry would be “leading the way on sustainability, showing up the airlines”; and 12% said it would be the same situation as today… “the current fuss is a storm in a teacup.”

James Moreton, client executive director at Gallagher Insurance (Hayward’s Aviation), said “Aviation is always useful when the world’s hurting – e.g., air ambulances, disaster relief, fire-fighting, oil spill recovery etc – but this doesn’t get out to the general public enough.”