Doug Cameron THE WALL STREET JOURNAL
Business-Jet Market Starts to Rev Up
February 19, 2014
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  • The business-jet market is showing its first signs of life since the end of the financial crisis, as corporations and the ultra-rich resume buying one of the ultimate tokens of privileged convenience.

    Global deliveries of business jets edged up 1% in 2013 to 678 planes, the first increase since 2008, the General Aviation Manufacturer’s Association, a Washington-based trade group said Wednesday. The rise, while modest, points to a long-awaited turning point for an industry whose annual sales had fallen by half since their 2008 peak of 1,315 jets.

    “I see signs of a bottoming out,” Jordan Hansell, chief executive of NetJets Inc., said in a recent interview. The Columbus, Ohio-based unit of Warren Buffett’s Berkshire Hathaway Inc. BRKB -0.23% sells partial stakes in a fleet of more than 700 planes to companies and wealthy individuals. Over the past three years it has placed $17.6 billion in orders—before discounts—for new jets from Bombardier Inc., BBD.B.T 0.00% Textron Inc. TXT +3.38% ‘s Cessna Aircraft Co. unit, and others in anticipation of an industry recovery.

    Business-jet makers have been battling the twin challenges of tight corporate travel budgets over the past five years and the dim view of private-plane ownership promoted by some U.S. lawmakers during the financial crisis.

    The recovery is being driven largely by increased deliveries to U.S. buyers, as corporate balance sheets have stabilized and incomes rise among the wealthiest. Another key propellant is the arrival of new ultra-long-range aircraft able to hop between continents. Those appeal both to globe-trotting American executives and to the emerging-market magnates increasingly sought by business jet makers like Bombardier and Gulfstream Aerospace Corp., a unit of General Dynamics Corp. GD +2.37%

    One of the biggest-selling models recently is the Gulfstream G650, which lists for $64.5 million. The jet, deliveries of which started in 2012, can fly eight passengers and four crew nonstop more than 7,000 nautical miles, or about 14 hours—enough to reach New York from Dubai or Buenos Aires from London. On shorter hops, the G650 can near the speed of sound. Bombardier’s Global 6000, which costs slightly less, can fly up to 6,000 nautical miles without stopping.

    The shift toward such larger, pricier models helped push up global spending on business aircraft by 23% to $21.1 billion last year, compared with a peak of $21.9 billion in 2008.

    Gulfstream closely guards the identities of its buyers. But one of the earliest owners of the G650 was Las Vegas-based Wynn Resorts Ltd. WYNN +1.17% , which uses its jets to lure high rollers, many of them from China, into its casinos. With its globe-spanning range, the plane connects China’s biggest cities directly to the Las Vegas Strip.

    “If you have the faster and nicer plane, you’ve got a better chance that the customer will say, ‘I’ll come see you this weekend,’ ” a person familiar with operations of Wynn’s plane said in late 2012.

    A Wynn spokesman confirmed the Gulfstream jet is “used to transport guests from Asia, South America and Europe.”

    Other G650 buyers include heads of state in Saudi Arabia and Jordan, Starbucks Corp. SBUX +0.31% CEO Howard Schultz, Honeywell International Inc., HON +0.66% Walt Disney Co. DIS +0.41% , and Peter Jackson, the filmmaker behind the “Lord of the Rings” and “Hobbit” trilogies, according to Corporate Jet Investor, a trade magazine that tracks deliveries.

    Starbucks said Mr. Schultz leases his jet to the company “to add extra capacity for international business travel as our global growth continues to accelerate.” The other parties declined to comment or didn’t respond to request for comment.

    Executives from General Dynamics and Textron last month pointed to solid demand and a declining inventory of used aircraft, particularly the smaller jets that suffered the sharpest declines in sales. Still, they stopped short of calling a bottom in the five-year slide in jet sales.

    Another sign of the recovery is traffic at the New York-area Teterboro Airport, one of the world’s busiest for corporate aviation and a gateway for Wall Street’s elite. The airport’s business has returned to 2008 levels. Aircraft movements rose 5% in 2013, having fallen in four of the six previous years.

    Mr. Hansell, of NetJets, said its U.S. flying rose 9% to just shy of 335,000 hours last year, aided by gains in sales to individuals, small and medium-size businesses and large corporations.

    The biggest jump in sales last year came in North America, whose share of total deliveries rose to 52.4% from just under half in 2012. The U.S. still dominates the global market, with almost 11,500 private jets in service, according to data from Ascend, an aviation consulting firm.

    In the longer term, though, emerging markets are becoming far more important. The Asian-Pacific region, Latin America, and the Middle East and Africa collectively accounted for 32% of deliveries last year, nearly double their 17% share in 2007. Brazil has the second-most private jets in service, with 750, and mainland China crept into the top 10 last year, with 182, plus another 100 based in Hong Kong.

    Gulfstream, the world’s largest business-jet manufacturer by revenue, had its strongest quarterly performance in two years in the final three months of 2013, and expects revenue to rise 11% this year. Textron, which is more focused on the “light” jet segment that has suffered the largest sales declines, expects Cessna revenue to climb 19% this year as it rolls out more new and updated models.

    Bombardier and Embraer SA EMBR3.BR -1.81% also are rolling out new aircraft, some of them with more-advanced entertainment and communications systems than existing models, as well as quieter and more-spacious cabins.

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