The Glut of Private Jets Means ‘Insane’ Bargains for Buyers …

Corporate-jet makers are flooding the market, spurring deep discounts for new aircraft and fueling a three-year slide in prices of used planes.

Most major manufacturers, including Gulfstream and Bombardier Inc. — which is also contending with rising hurdles in its commercial-jet business — have pared production somewhat in the last couple years as demand for private jets has sagged. But that hasn’t been enough to halt declines in aircraft values, say consultants, brokers and analysts in the $18 billion industry.

A Gulfstream G500

Gone is the optimism stoked by the election of President Donald Trump, a corporate-jet maven with his own Boeing 757, along with hopes for speedy tax cuts that would bolster plane purchases. Instead, the news has been full of setbacks. U.S. Health Secretary Tom Price resigned under fire for his frequent use of private planes at taxpayer expense. General Electric Co. is selling off its corporate fleet to cut costs.

“The Trump bump is over,” said Janine Iannarelli, a Houston-based plane broker.

The jet glut is one reason pre-owned prices were down 16 percent in August from a year earlier. With bargains aplenty on machines with few flight hours, manufacturers are cutting deals to entice buyers to purchase new planes. Meanwhile, they keep churning out aircraft and introducing new models.

“It’s a question of who wants to blink first,” said Rolland Vincent, a consultant who puts together the JetNet iQ industry forecast. “Nobody — because whoever blinks, loses share.”

A rise in demand for new company planes, which would help stabilize the market, isn’t in the cards. Corporate plane-buying plans have hit a 17-year low, according to an annual survey by Honeywell International Inc. of more than 1,500 flight departments. Companies expect to replace or add planes equivalent to 19 percent of their fleets on average over the next five years, down from 27 percent in last year’s survey.

Discounts Galore

The steep discounts on new aircraft are galling customers who paid closer to a full price, said Barry Justice, founder and chief executive officer of Corporate Aviation Analysis Planning Inc. General Dynamics Corp.’s Gulfstream unit slashed as much as 35 percent off the price of its G450, which is being phased out as the new G500 aircraft nears arrival, Vincent said. The G450 had a list price of about $43 million, according to the Business Commercial Aviation guide. 

Bombardier has offered discounts of as much as $7 million on the Challenger 350’s list price of about $26 million as it fends off competitors entering the super midsize space, he said. The weakness across the industry in private-jet sales is adding to the pressure on Bombardier, which is also struggling to sell its C Series commercial planes. The U.S. government slapped import duties of about 300 percent on the single-aisle jetliner in the last two weeks after a complaint by Boeing Co.

For corporate aircraft, the global market hasn’t fully recovered from the last U.S. recession, when plunging demand popped a bubble that had flooded the industry with more than 1,000 new jet deliveries in both 2007 and 2008. A nascent recovery in 2013 and 2014 fell apart after the price of oil and other commodities collapsed, drying up sales in emerging markets such as Russia and Brazil.

Deliveries Fall

Deliveries of new private jets are forecast to drop to 630 this year, from 657 last year and 689 in 2015, according to JPMorgan Chase Co. The number is forecast to rebound slightly to 640 next year.

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