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Private-Jet Deliveries Surge Just as Global Economy Cools Off

Oct. 21, 2019
Corporate jet sales are doing well, inspiring manufacturers to innovate further.

It’s all about that new plane smell.

Private jets that can fly faster and go longer distances are causing a surge in new corporate-jet deliveries from General Dynamic Corp.’s Gulfstream unit, Bombardier Inc. and Textron Inc.’s Cessna. Innovations that have spurred sales include better fuel-efficiency, roomier, quieter cabins and gadget-packed cockpits that can predict the weather and smooth out bumpy rides.

Business aircraft deliveries are expected to rise 9% this year to about 690, and will climb to about 740 planes next year, according to an annual report from Honeywell International Inc. released Sunday.

“Every time we have a wave of new products coming to the market, typically that’s positive for overall deliveries of business jets,” said Gaetan Handfield, senior manager of marketing analysis for Honeywell’s aerospace unit. “That’s what’s driving this.”

The rise in deliveries come as the U.S.-China trade war, the U.K.’s looming break from the European Union, and a shaky global economy threaten to cut the momentum short. Shipments of private jets will fall off slightly in 2021, according to Honeywell’s report, which is the broadest survey of private aircraft operators to gauge sale trends.

In the meantime, the current gains are a welcome boost for a $20 billion industry that has yet to return to the frothy heights preceding the 2008-2009 recession, when deliveries peaked at 1,300 aircraft. Corporate jets were a prominent casualty of the crash when companies focused on cutting costs and using their cash to buy back shares instead of renewing fleets.

The market got a lift in 2017 when the U.S. approved a new tax break that allowed the immediate write-off of a plane’s total cost, spurring buyers to scoop up used jets.

Used Market

Tight supplies of desirable pre-owned planes is limiting buyer options and propping up demand and prices in the used market, said Steve Varsano, founder of The Jet Business, a London-based plane brokerage whose offices are outfitted with a meeting room in an aircraft fuselage.

“I don’t see the slowdown in deal flow and I don’t see a drastic drop in prices on these airplanes,” he said.

The pre-owned scarcity, in turn, is helping underpin demand for new planes.

Bombardier is banking on the Global 7500, the largest purpose-built corporate jet that began deliveries in December, to bring in much needed cash. The Canadian company is also poised to start shipping its Global 5500 and 6500, which are basically older models refreshed with new engines and cockpit technology.

Gulfstream signaled it will reveal a new aircraft design on Oct. 21 at a private-jet conference in Las Vegas. The new model follows two other new planes already in service, the G500 and G600.

Pilatus Aircraft, a Swiss planemaker famous for its single-engine turboprop planes, began deliveries last year of its first jet aircraft. And Cessna just began deliveries this month for the Longitude, its largest-ever business plane.

Global turmoil is already taking a toll, though. Owners in the U.S. and Europe are using their jets less, based on take-off and landing data kept by aviation regulators. And some brokers are beginning to see used-aircraft sales cooling from last year.

Softening Orders

The strong U.S. dollar damps international demand, while political tensions and economic weakness around the world are expected to soften new-aircraft orders, said Rolland Vincent, a consultant in Plano, Texas, who produces the JetNet IQ market intelligence report with researcher JetNet.

That will translate to slowing deliveries as soon as 2021, he said. The U.S. accounts for about 60% of the world’s business aviation market.

“The pipeline of orders, we think, is about to slow down,” Vincent said. “If we had some kind of global recession, that’s going to take the wind out of the sails.”

Demand over the next decade should support 7,600 new business jets worth $248 billion, according to Honeywell’s report. That’s down from last year’s forecast of 7,700 aircraft valued at $251 billion. The survey showed purchasing plans in the next five years fell in Europe, which is facing slower growth and uncertainty over Brexit, and in the Middle East, which has been rocked by conflicts and political tensions, according to the report.

Cessna’s strategy of continually rolling out new designs has helped drive sales despite the growing economic and political noise, said Rob Scholl, senior vice president of sales and marketing at parent Textron Aviation.

“We’ve done really well over the last few years compared to the market because we’ve been investing in new products,” Scholl said. “We almost always have something new to be talking to customers about, and that drives activity.”

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