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‘Overheating’ US Economy Sparks Buying Frenzy For Private Jets

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Nothing says “healthy middle class recovery” quite like the luxury private jet market catching fire, which is the phase where the global economy finds itself right now with private aircraft getting so “hot” that even used planes are difficult to find.

According to Bloomberg,  only a dozen pre-owned Falcon 7X planes are on the market currently, down from about 35 that were on sale a ayear and a half ago. As the market is tightening, buyers of luxury private aircraft are getting more aggressive, according to aircraft broker Steve Varsano.

Varsano found out that bidding aggressively in the luxury plane market doesn’t even work sometimes. He recently bid on a plane sight unseen for a client who wanted a Dassault Aviation SA aircraft in India. He lost the bid when three other buyers emerged, and commented to Bloomberg: “The tables have turned. Just last year, the person running the sale would have been calling me everyday saying, ‘Hey, when are you coming over?'”

Luxury jets had been in a glut for years, allowing buyers to call the shots. However, tax cuts in the United States have put sellers in control and companies like Emerson Electric and NextEra Energy Inc are helping the market rebound with recent purchases.

And it’s great news for companies that make these planes like Embraer SA, Textron Inc. and General Dynamics Corp.’s Gulfstream division. They are all in the process of rolling out new models and are expected to deliver 8% more aircraft next year than this year. That stat defies the trend of deliveries being flat or down since 2014.

The resurgence in the industry is coming mostly from the United States. About 70% of new plane deliveries have gone to the US, which already houses about 60% of the world’s private jets. The reduction of corporate taxes in the United States, from 35% to 21% has made companies flush with cash for large purchases. In addition, the rule change to allow for depreciation of capital investments has increased the incentive to buy aircraft.

According to Bloomberg, here are some of the new models that will be hitting the market soon:

  • Gulfstream, whose G650 is the current holder of the biggest-jet crown, delivered a somewhat smaller plane, the G500, in September. It expects another model, the G600 to begin service early next year.
  • Cessna, a unit of Textron, is awaiting certification of its Longitude. The midsize jet is bigger than the company’s existing Latitude plane.
  • Not to be outdone, Embraer is increasing the range and improving cockpit controls of its similarly-sized Legacy planes and giving them a new moniker: Praetor.
  • Switzerland’s Pilatus Aircraft began deliveries earlier this year of its first jet aircraft, the PC-24.

In addition, demand is also spiking for brand new planes that are based on older designs. For instance, Anadarko took delivery last month of a 2018 Gulfstream G550. This was the plane that Gulfstream made prior to the popular G650. Synovus Financial Corp. and NextEra Energy both recently purchased 2018 Embraer Legacy 500s. In September, Emerson purchased a used 2013 Falcon 7X. The company told Bloomberg: “Emerson is retiring an aging corporate aircraft. The 30-plus-year-old plane is significantly less efficient than the 2013 plane, which will offer better fuel efficiency and a much improved range to access global facilities.”

As a result of purchases like these, prices have stabilized in the industry and used jet inventory is depleted. 

According to Honeywell, pre-owned private jet inventory is down 13% from a year ago. For jets that are younger than 10 years, the number is more pronounced: inventory has decreased by 30%. The lowering of inventory in the used jet market foreshadows robust new jet sales. Honeywell estimates that 7,700 planes will be delivered over the next decade.

Barry Justice, president of Corporate Aviation Asset Professionals, told Bloomberg: “Inventory is getting picked over. Good airplanes with high-quality avionics and interiors in good condition are getting harder to come by.”

To be sure, the private jet market – which is reserved for the ultra high net worthy and corporations – is a bright spot in the US, where the stock market is just now starting to show some semblance of volatility. The recession, now nearly a decade ago, wound up throwing the jet market into turmoil at the time. Some in the industry haven’t lost sight of that. 

Brian Foley, a business-aircraft consultant who spent 20 years as marketing director for Dassault’s North American jet unit, stated: “There’s one bogeyman hanging out there and that’s how long can this U.S. expansion go.”

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