Home Business Business Jets: Could This Time Really Be Different? – The Wall Street...

Business Jets: Could This Time Really Be Different? – The Wall Street Journal



The prospect of long waits at germ-filled airports makes owning a business jet an attractive proposition right now for executives. At the same time, a sharp recession could drain the corporate treasury of funds to buy one.

The private-aviation industry is now stuck in this tug of war unleashed by the Covid-19 crisis.

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Short term, the pandemic has been quite damaging. Earlier this month, Ohio-based NetJets—the world’s largest private-plane operator—more than halved the number of aircraft it plans to receive this year to 25 from around 60, and announced job cuts in the U.S. and Europe. This is in part a result of business-jet makers being forced to furlough employees, affecting production.

Private planes occupy an infamously cyclical niche within the aviation industry. During the global financial crisis, as corporations slashed budgets and sought to appear less opulent to the public, the number of business jets shipped world-wide fell from over 1,300 in 2008 to under 700 in 2011, according to the General Aviation Manufacturers Association. Demand didn’t edge up until 2018 and 2019, when new aircraft models sparked fresh interest.

Without face-to-face negotiations, transactions have now frozen. As Scott Connelly, chief executive of Cessna-owner


put it in a recent call with analysts, developing new customers is very difficult unless “folks can do demo rides.”

As lockdowns ease, though, this time could really be different—at least up to a point.

Back in 2008, roughly a fifth of business aircraft were up for sale. This time, owners are hanging on to them. The latest quarterly report by data provider Amstat shows only a small uptick in the share of business jets on the market in March and April, and only older, heavier models are affected. Younger planes are keeping their resale value.

Brokers appear optimistic about a summer comeback. MySky, a spend-management platform for private-plane owners and operators, reports a jump in interest from corporations, especially among prospective first-time jet users looking for secondhand models. Executives are actively seeking ways to avoid cumbersome temperature checks at airports, not to mention protect their own health.

Investors are also somewhat more upbeat about business jets than they are about aviation more generally. The shares of Textron and Dassault—the subsector’s most representative stocks—are down about 40% this year. Those of airlines, commercial-jet makers and engine manufacturers have fallen close to 60% on average.

None of this heralds a new golden age for the makers of business aircraft. Many companies will inevitably be cash-strapped in the post-lockdown economy.

Workers prepare a red carpet in front of the Gulfstream G650 aircraft.


aly song/Reuters

Also, any new demand that does emerge will probably come in the form of chartering planes or so-called fractional ownership—benefiting the likes of NetJets and Flexjet—rather than companies looking to buy their own jets.

Buyers may also gravitate toward cheaper, smaller planes rather than the traditionally popular long-range models where manufacturers make big margins, such as the Dassault Falcon 7X, the Gulfstream G650 or Bombardier’s state-of-the-art Global 7500. This is on top of a structural economic slowdown in China and other emerging markets, which was a challenge for these long-range aircraft well before Covid-19, and mounting environmental concerns.

Yet business jets may fly through a recession caused by a pandemic better than they did through one caused by a financial crisis. And if they do, it will say as much about the financial health of corporate America as the health concerns of its executives. This is a market all investors might benefit from watching.

Write to Jon Sindreu at jon.sindreu@wsj.com

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