Paul Bertorelli has written an interesting post for AVweb where he pointed out that from time to time, brokers and salesmen have suggested to him that aircraft sales are tightly linked to the Dow Jones average – which has been performing rather well for investors lately. That should not be a surprise to anyone as the sellers of any luxury good should have no trouble finding plenty of buyers in a bull market.
However, take a look at this chart Paul put together and notice the trend lines:
There appears to be an unmistakable correlation between the Dow and aircraft sales between 2003 and 2009; but since then, aircraft sales have been flat while the bull market has roared back.
So what in the world is going on here? While Paul did concede that perhaps general aviation sales might be more linked to something else, he concluded by saying it could signal a sea change with regard to where light airplanes fit into the general US economy.
Someone named Thomas posted a comment noting that general aviation has always comprised of two marketplaces: 1) Personal-use vehicles and 2) Business/commercial-use ones. He fears the collapse of the personal-use market reflects two irreversible trends:
the retirement (from flying) of the post-WW2 generation of pilots, and the dramatic increase of cost (real dollars) of piston vehicles. That’s a self-reinforcing feedback loop of higher cost and lowered demand.
On the business jet side, Thomas believes the continued “demonizing of corporate jet owners” might be keeping some corporate buyers out of that market.
Meanwhile, someone else named Paul commented about the stock market responding to all the free (and freshly printed) money the Fed is pumping out and into the economy – meaning the stock market no longer reflects the realities of the general economy.
Finally, other comments focused on the slow death of piston aircraft, the rise of homebuilt ones not being reflected in the sales data (a very interesting theory) and what one commenter called the “iPad effect” where physically moving people around to conduct business is “dying as an enterprise model” (meaning corporate jets aren’t needed any more).
With the above comments in mind, do any of our readers have any ideas to explain Paul’s chart trend lines or perhaps its just statistical noise?
I just found out that the sale of aircraft is related to the sale of shares. There are enough people who have this problem because they really do not understand this field.