Bankers See Private-Jet ‘Party’ as Rich Clients Snap Up Planes

(Bloomberg) — The coronavirus pandemic has created an overhang of pent-up travel demand and left unspent money burning holes in the pockets of the well-to-do. Put the two together and the result is a hunger for private jets.

Buyers have scooped up so many of the good used planes out there that they’re now getting on waiting lists to purchase new aircraft, said bankers at this week’s Corporate Jet Investor conference.

“There’s been quite a party in the private aviation business in the last 18 months,” Jim Simpson, a senior managing director at First Republic Bank who’s in charge of aircraft and yacht financing, said Thursday. “We had a fabulous year.”

At Citigroup Inc., clients are so flush with cash that many who have never owned an aircraft are thinking of taking the plunge, said Ford von Weise, who heads global aircraft finance at the lender’s private bank. At times, he said, he sees a duty to talk them out of it.

“It’s incumbent upon us — they’re good clients — to convince them actually to not buy the airplane,” he said. “I did that about a month ago and somebody called me up from the bank and said, ‘The client just wanted to let you know, thank you, you were right, and they’re very appreciative of you scaring them away.’”

‘Excess Cash’

Candice Nakagawa, a senior wealth adviser at MUFG Union Bank, has also preached caution to her clients who are looking to own an aircraft for the first time. They have to take into account the cost of maintenance and upkeep beyond the purchase price, she said. Still, that hasn’t stopped them from splurging on planes.

“They’re itching to get out there. They’ve got excess cash. They have pent-up demand,” she said. “They want to buy something neat, sexy, and that typically is a jet or a yacht.”

The revival in demand is a welcome boon for an industry that got hammered at the beginning of the pandemic as executives flew less. Private-aircraft deliveries fell last year for major manufacturers, and U.S. business-jet flight operations dropped 23%, mostly because of a steep decline at the outset of lockdowns.

Those flights have since bounced back to surpass 2019 monthly levels, even as corporate executives haven’t yet begun to fly as much as before. Jet deliveries rose for Textron Inc. and General Dynamics Corp.’s Gulfstream unit in the first quarter. And orders are poised to strengthen even more when travel restrictions are eased, the manufacturers said.

Even now, the rebound doesn’t extend much outside the U.S., said Chris Partridge, head of private aircraft finance at Deutsche Bank AG. Travel restrictions in Asia and Europe have made it more difficult to get around, even in a private jet. The pandemic lockdowns have also boosted the time to complete a an aircraft purchase to as much as six months from six weeks, he said.

“We have not seen the same dynamic as the U.S. market has,” he said. “The issue of cross-border travel has been a much, much bigger problem across Europe, the Middle East and Asia than it has in the U.S. and that in itself has either stopped or delayed people.”

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

“I’m glad the business is good right now,” he said. “But, again, I’m a little like, ‘Hmmm, is this going to continue?’”

Western Aviation Team

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