As business jet sales continue to set new records, the lay press is beginning to notice. This publicity is partially fueled by the airline industry. They discovered after 9/11 that their first class cabins were occupied by a large number of non-paying passengers. These seats were filled with frequent fliers who suddenly found that that their, here-to-fore seldom used miles, could be cashed in or used to upgrade. Full paying business passengers were hard to find. It seems they had discovered the advantages of business jet travel.
Now the business jet industry is being vilified by the airlines for the long delays, missed connections, and long waits on the ramp for a gate. The irony is that you can watch the charade in ads paid for by the airline trade association on the CNN airport channel as you wait, sometimes hours, for the flight that was delayed or missed because of the airlines’ own doing.
In the upside down airline marketing mentality the first class cabin is now hard to find – paid for or not. The airlines have downsized to fleets of regional jets holding 50 to 70 passengers. "Regional" is an oxymoron as flights on these stretched business jets often exceed 3 hours and cover well over a thousand miles. It now takes 3 planes or more to take the same number of passengers to the same destination. USA Today’s Business Travel column spoke on The Curse of the Regional Jet. No wonder there is seldom an empty gate when my flight arrives, or I sit in a que on the ramp waiting for takeoff. Heaven help me if my flight is cancelled. An empty seat anywhere is rare, except perhaps on a red eye flight.
The beauty of private jet travel has been discovered. Fractional ownership and jet cards, a debit card for private jet travel, makes it affordable for many more. If you want to own your own jet, major financial institutions have formed divisions ready to lend or lease. The Wall Street Journal recently ran a story, Interest In Private Jets Takes Off. The WSJ points out that large banks - including Bank of America Corp., Citigroup Inc., Merrill Lynch & Co., PNC Financial Services Group Inc., and Wachovia Corp. - have in-house departments dedicated to helping individuals and corporations acquire and finance private jets.
So while the airlines and their passengers suffer, the business jet industry and all the related support businesses flourish.
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In the pursuit of fees, banks will provide new and lower cost ways of financing private jets, which will enhance demand.
ReplyDeleteWe found that wealth created by expanding stock markets was the key driver behind demand for small jets. There are other reasons as well, including a distaste for flying on major airlines. Rising interest rates and any pull back or cooling off of stock markets around the world will impact demand. Sales will continue to soar in other parts of the world that are moving toward more liberal government policies and market economies.
Wealth is magnified in the stock market - a dollar of earnings is typically worth 10-20 times - and it is the change in market capitalization that account for the bulk of the variability in private jet sales.
New ways to finance purchases, combined with greater competition from firms offering the financing, will spur greater sales. This should make the manufacturers happy.