‘Huge party for private aviation’ as wealthy buyers buy planes

The coronavirus pandemic has created a surplus of pent-up travel demand and left unspent money burning holes in the pockets of the rich. Put the two together and the result is a craving for private jets.

Buyers have picked up so many good used jets that they are now on waiting lists to buy new jets, bankers said at this week’s Corporate Jet Investor conference.

“There has been quite a celebration in the private aviation industry over the past 18 months,” said Jim Simpson, senior managing director of First Republic Bank, responsible for financing planes and yachts, on Thursday. “We had a fabulous year.

At Citigroup, customers have so much cash that many who have never owned an aircraft are considering taking the plunge, said Ford von Weise, who heads global aircraft financing at the lender’s private bank. Sometimes, he said, he sees a duty to dissuade them.

“It behooves us – they are good customers – to convince them not to buy the plane,” he said. “I did this about a month ago and someone called me from the bank and said, ‘The customer just wanted to let you know, thank you, you were right, and they are very grateful to you for having scared them away. “

Candice Nakagawa, senior wealth advisor at MUFG Union Bank, also urged caution to her clients looking to own a plane for the first time. They need to factor in the cost of maintenance and upkeep beyond the purchase price, she said. Still, that didn’t stop them from splurging on planes.

“They can’t wait to get out. They have excess cash. They have a pent-up demand, ”she said. “They want to buy something neat, sexy, and it’s usually a jet or a yacht.”

The pick-up in demand is a welcome boon for an industry that was hammered at the start of the pandemic as executives flew less. Private jet deliveries fell last year for major manufacturers, and U.S. business jet flight operations fell 23%, mostly due to a sharp drop at the start of lockdowns .

Those thefts have since rebounded to exceed 2019 monthly levels, although business executives have yet to start flying as much as before. Jet deliveries increased for Textron and General Dynamics’ Gulfstream unit in the first quarter. And orders are expected to strengthen further when travel restrictions are relaxed, the manufacturers said.

Even now, the rebound isn’t spreading much outside the United States, said Chris Partridge, head of private jet finance at Deutsche Bank AG. Travel restrictions in Asia and Europe have made it more difficult to travel, even by private jet. Pandemic lockdowns have also increased the time it takes to complete a plane purchase to six months instead of six weeks, he said.

“We haven’t seen the same dynamic as the US market,” he said. “The problem of cross-border travel has been a much, much bigger problem in Europe, the Middle East and Asia than in the United States and that in itself has stopped or delayed people.”

Simpson of First Republic said he has been through several cycles of boom and bust in the private aviation industry, and the market scum makes him a bit suspicious. He told conference attendees that his comments were based on his own opinions and not those of his company.

“I’m glad business is good at the moment,” he said. “But, again, I’m like, ‘Hmmm, is this going to continue?'”

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