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 pre-owned Falcon 7X planes are on the market now, down from about 35 a year and a half ago, says 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 sight-unseen 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 plane makers 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 private-aircraft unit, said Monday at an industry conference in Orlando, Fla. "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.
"Inventory is getting picked over," said Barry Justice, president of Corporate Aviation Asset Professionals, a consultant near Dallas. "Good airplanes with high-quality avionics and interiors in good condition are getting harder to come by."
The increase in sales of new planes will, in turn, help restore used inventories as buyers trade in older jets, Justice said.
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.
But for now, with the used market tightening, buyers are adjusting their expectations, said Janine Iannarelli, founder of Par Avion, a plane brokerage in Houston. They have to wait longer for the plane they want to become available or consider buying a fixer-upper jet.
"There are plenty of airplanes out there that are projects," she said. "Now, you have to help your client rethink. Let's go buy that airplane that requires upgrades."
Business on 10/16/2018