Billionaires and larger corporates have had tens of millions of dollars wiped off the value of their business jets, as massive oversupply in the run-up to the 2008-2009 credit crisis in Europe has left the industry awash with pre-owned aircraft.
Prices for second-hand private jets, many of which have barely been flown, have dropped as much as 35 per cent over three years to the end of April. The average price of a pre-owned business jet has fallen from $13.7m in April 2014 to $8.9m, according to research by Colibri Aircraft, which specialises in the marketing, resale and purchase of pre-owned private aircraft.
Owners have lost millions of dollars on the value of their existing business jets as a glut of planes came on to the market in the wake of the economic downturn. The resale price of a Bombardier Global XRS, which sold for $50m, has dropped from $31.3m to $20.4m — down just under 35 per cent, according to Colibri’s figures.
Bombardier said it did not comment on specific pricing of its aircraft, but it said the company had realigned its production in the light of market demand.
Newer models coming on to the market had also caused prices to fall further, said Oliver Stone, managing director of Colibri. “Customers are selling their current jets to upgrade to the new one,” he said. “Supply is increasing, but not demand.”
Yet even with the release of new aircraft, with many manufacturers targeting the larger cabin market, the delivery of new business jets has fallen dramatically over the past decade. In 2008, 1,313 business jets were delivered, compared with just 661 last year.
“Pre-2008, the jet market was in a massive bubble and prices have been decreasing ever since,” said Mr. Stone.
Repossessions also grew between 2009 and 2012, added Edwin Brenninkmeyer, chief executive of Biggin Hill-based Oriens Aviation, which distributes the Pilatus PC-12 turboprop in the UK and Ireland. “To keep pace with sales volume, manufacturers increased discounts to continue the high delivery volumes, often with 30 per cent discounts which became the ‘industry norm’.”
But while owners may be suffering, the private jet charter industry could benefit, as more owners decide to tender their aircraft for charter rather than put them up for sale. Charter flights account for almost 60 per cent of private jet flights across Europe, according to Victor, the private jet charter company.
“The 2008-9 recession caused many companies, and high net-worth individuals to reassess the true costs of ownership of business aircraft, including fractional,” said Brad Stewart, chief executive of XOJET. “This has also been precipitated by . . . a shift into shared ownership, on-demand and subscription platforms.”
However, hopes that additional aircraft might lead to a reduction in the cost of the “charter hour” were dashed by industry professionals. “It has been exactly the same price to charter a private jet for the past 10 years,” said Adam Twidell, chief executive of PrivateFly, a global booking service for private aircraft hire. “However, I think prices falling is over-optimistic — but they are likely to remain at this 10-year low.”