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Could The Glut Of Private Jets Signal A Recession On The Horizon?

Could The Glut Of Private Jets Signal A Recession On The Horizon?

Ever wanted your own private jet? Now may be the best time to buy. But buyers beware, these “insane” bargains may mean trouble ahead.

Private jet makers are flooding the market with deep discounts on new aircrafts, and fueling a three-year decline in prices of used planes.

Most major manufacturers—including Gulfstream and Bombardier—have pared down production in the last couple of years as demand for private jets has sunk. But that hasn’t been enough to put an end to declines in jet values in the $18 billion industry.

So, where are the buyers?

The optimism surrounding the election of Donald Trump, along with the hopes of quick tax cuts that would bolster jet purchases is gone. Instead, the news has been full of setback after setback.

Tom Price, U.S. Health Secretary, resigned after he came under fire for his frequent use of private jets at the expense of taxpayers. General Electric is selling its corporate fleet of jets to cut costs.

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

Deliveries of new private jets have been forecasted to drop to 630 this year from 657 last year, and 689 in 2015, according to JP Morgan Chase. But the reduction in new deliveries has done little to relieve the glut of jets, creating a buyer’s market for used aircraft.

In 2012, a five-year-old jet retained 64% of its value, according to a report by plane broker Jetcraft. The value retention was as high as 91% in 2008. But in 2016, a five-year-old jet was only worth 56% of its original list price.

According to Barry Justice, founder and CEO of Corporate Aviation Analysis & Planning Inc., the prices for used jets right now are “insane,” and that some first-time buyers are buying pre-owned aircrafts because the bargains are just too good to pass up.

“There’s a vast overproduction of large-cabin airplanes and there are only so many people in the world who are going to step up and pay $60 million-plus,” Justice said.

But those buyers aren’t biting, and if they are, they’re looking for a bargain in the pre-owned market. This may be a sign that the smart money is holding on to their cash, signaling they may see a recession on the horizon.

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