Private jets turn out to be a difficult habit to kick.
Although airlines have re-established routes to popular summer destinations, rich people are still paying to fly privately to places like Miami, Mexico, the Caribbean and even Europe. Vista Global, a Malta-based company that caters to this elite pocket of the aviation market, reported a record month in July, even after rapid growth in the first half.
Business-jet purchases are sensitive to economic downturns, and never quite recovered from the 2008 crisis. During the pandemic, executives have stopped traveling, and the Delta variant of the coronavirus is putting a wrench in carriers’ plans to lure them back.
Yet the Covid-19 crisis isn’t like past recessions. The rich didn’t rush to sell their planes and, in fact, more people turned to light aircraft to go on vacation and sidestep airports. Vista Global’s pay-by-the-hour subscription service, VistaJet, said 71% of incoming requests are from customers who haven’t regularly used business aircraft before. Many first-time users also opt for semiprivate services such as Vista Global’s Uber-like ride-sharing operation XO, or the fractional aircraft ownership model offered by
With brokers focused on optimizing the use of existing fleets, the companies that make private jets have yet to really benefit from the trend. What investors want to see is a permanent increase in demand for new planes, particularly the large top-of-the-range models that have eaten up manufacturers’ investment budgets in recent years.
Bombardier’s Global 7500,
’ Gulfstream G650ER and
Falcon 6X—as well as the in-development Falcon 10X—all have ranges above 6,000 miles and price tags north of $50 million. They were built to benefit from a much-touted boom in Chinese private aviation that never lived up to expectations.
Now, though, it looks like part of the extra demand for private flying caused by the pandemic will stick around, prompting plane orders. Despite higher utilization, private jets seem to be an increasingly scarce commodity. The good news extends to big models: According to the latest survey by Jefferies, private-jet brokers now expect heavy and medium-size jets to experience the strongest post-Covid recovery—a U-turn from their responses in January. Shares of Canada’s Bombardier, the only pure-play manufacturer, have gained almost fivefold over the past year.
“Our four Global 7500s have made us extremely popular. They are always full and the yields per hour they are giving us are far above the rest of the fleet,” said
chief commercial officer at VistaJet, which will now buy at least eight more.
To be sure, long-range luxury models need a lot of traffic to make them profitable, and much of their current mileage is on restricted international routes that will eventually reopen to commercial traffic. But private jets could capture a bigger share of business travel when it returns too. NetJets and Jet Edge also announced further plane purchases in August.
Another firm engaged in breakneck fleet expansion is New York-based Wheels Up. Its shares are publicly traded following a merger with a blank-check vehicle that completed in July. This means investors finally have a straightforward way to bet on the “Uber of private jets” strategy. Wheels Up stock is down 25% since the listing, which could be an attractive entry point. The company is still losing money, but its revenues rose 88% in the first half.
Investors who aren’t wealthy enough to fly private may still want to consider booking a ride on the market trend.
Write to Jon Sindreu at [email protected]
Corrections & Amplifications
General Dynamics makes the Gulfstream G650ER. An earlier version of this article incorrectly said it was made by
(Corrected on Sept. 3)
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