Luxury airplanes are in demand again
Buying a used business jet is getting harder — and that’s a sign of a long-awaited shift in the market for luxury planes.
Only a dozen or so preowned Falcon 7X planes are on the market now, down from about 35 a year and a half ago, said Steve Varsano, an aircraft broker in London. When a client wanted to buy the Dassault Aviation SA model, the tightening market pushed him to bid sightunseen on a plane in India.
Going that far afield would have been unheard of until recently, so he was surprised to find three other bidders vying for the same plane. Varsano came up empty.
“The tables have turned,” said Varsano, founder of the Jet Business in London. Just last year, the person running the sale “would have been calling me everyday saying, ‘Hey, when are you coming over?’”
The private-plane market is finally tilting toward sellers after years in which a glut of used jets enabled buyers to call the shots. Bolstered by the strong economy and U.S. tax cuts, companies such as Emerson Electric Co., NextEra Energy Inc. and Anadarko Petroleum Corp. are fueling a rebound of purchases.
The timing couldn’t be better for planemakers including Bombardier Inc., Embraer SA, Textron Inc. and General Dynamics Corp.’s Gulfstream unit, which are all rolling out new models. New aircraft deliveries are poised to rise 8 percent next year after being flat or down since 2014, according to JetNet IQ, an advisory and forecasting service.
“People are flying, the economy is strong, corporate investments are taking place across the entire aerospace industry sector and for businesses that fly business jets,” Michael Amalfitano, head of Embraer’s privateaircraft unit, said Monday at an industry conference in Orlando, Florida. “These are all positive signs for growth in regards to the fundamentals of our business.’’
The U.S. is driving the rebound while demand from emerging markets has flagged, said Rolland Vincent, a consultant in Plano, Texas, who produces JetNet IQ in conjunction with researcher JetNet. About 70 percent of the new aircraft deliveries have gone to the U.S., which is home to about 60 percent of the world’s private-jet fleet.
In the U.S. the reduction of corporate-tax rates — to 21 percent from 35 percent — has given companies more cash. The fiscal overhaul also included a rule change to allow full depreciation of capital investments in the first year, which has increased the incentive to buy private aircraft, Vincent said.
New models always attract buyers, he said, and a lot of planes are making their debut.
Demand is also picking up for factory-fresh planes based on older designs. Anadarko, an oil driller, took delivery last month of a 2018 Gulfstream G550, according to Federal Aviation Administration registration records. That was a precursor of the G650 and is still prized for size and range.
Synovus Financial Corp., a regional bank in Columbus, Georgia, went in with a partner on a 2018 Embraer Legacy 500. NextEra Energy Inc., the owner of Florida Power & Light, acquired the same model.
Emerson, a maker of airconditioner compressors and automation equipment, purchased a pre-owned 2013 Falcon 7X in September.
There are still risks. Last week’s stock selloff served as a reminder that the market won’t rise forever. Moreover, the U.S. business cycle will eventually turn. The U.S. economy hasn’t been in a recession since the big one that ended in 2009, which threw the jet market into a downward spiral.
“There’s one bogeyman hanging out there, and that’s how long can this U.S. expansion go,” said Brian Foley, a business-aircraft consultant who spent 20 years as marketing director for Dassault’s North American jet unit.