Mega Bubble: Why it's never been harder to buy a large private jet
Amidst a steady rise of jet-sharing startups throughout the sector, recent industry talks suggest it has, however, been over a decade since buying a top-end private jet has been this difficult. Indeed, nearly half of the jets currently for sale are over 20 years old, with newer ones often selling even before they get listed on the market.
This follows from a stellar year for the private aviation space in 2017, which saw over 2,700 business jet sales on the second-hand market, up 9% from 2016. Whilst jet sales are down 4% so far in 2018, there are currently only 2,350 business jets for sale on the market, ie 13% less than what was sold last year alone.
As demand starts to outstrip supply in a sector that is still burdened with high manufacturing costs for producers and multibillion-dollar barriers to entry in development, the more prestigious, newer jets are the first to go. In the past five years, only 1 new Falcon 7X was listed for sale and just 3 Gulfstream G550 sit in the market out of over 500 manufactured.
Industry players are now mostly in agreement that the sector is past its low point, with customers starting to not only look in their backyard for good deals but fly internationally to examine good acquisition opportunities. Priced in the $70 million range, ultra long range aircrafts such as the Global 7500 now feature long waiting lists for UHNWIs to get access to these aircrafts, not many of which are available for charter.
Fueled by a recovered US economy, the larger business jet market by far, private jet purchases have also been on the rise following a sharp decline in fractional ownership schemes, which dropped nearly 22% in flight activity according to analysts. This drop was further aggravated by the success of flight-sharing tech and an optimization of regular charter flight bookings.
Pushed by a demand that has sent prices for quality private jets flying high, new startup manufacturers have started to leverage this interest to compete in the aerospace sector. Aerion, a company backed by US billionaire, Robert Bass, recently started signing letters of intent for a supersonic business jet it aims to deliver in 2025 with a $120 million price tag.
Yet, despite this jump in jet prices, the market has split into two, with pedigree jets commanding strong premiums and appreciating in value, and cheaper alternatives being left on the market until they reach bargain prices. The same holds true for smaller business jets that have become too small for today's elites, leading to a fall of deliveries for Embraer Phenom 300s and Cessna Citation CJ4s in 2018 for the second year running.
In a market where the middle seems to have fallen out, replaced by growing VVIP and lower-end sectors, Boeing, the US aerospace behemoth, has moved to acquire Embraer earlier this week valuing at $4.5 billion (2% of Boeing's market cap). Whereas Boeing produced some of the largest aircrafts in the space, Brazil-based Embraer focused on smaller, regional aircrafts.