Business Jets Archives - Golf Hotel Whiskey

Why aren’t general aviation aircraft sales soaring with the Dow?

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?

Plane spotting Nigeria’s aircraft graveyards with Google Earth

The AP , BBC and Business Insider have all recently had stories about Nigeria’s aircraft graveyards where many aircraft that are no longer serviceable have been left to rust and rot by insolvent aviation companies or were impounded for smuggling. Apparently, the government is finally taking action and workers at the international airport in Lagos are dismantling abandoned aircraft in an area nicknamed the “graveyard” which contains aircraft ranging from small jets to a Boeing 747.

A quick look at the Lagos airport on Google Earth seems to indicate the aircraft graveyard being in the far upper right corner of the screenshot below:

Here is a close up revealing about a dozen abandoned aircraft:

The articles also reported aircraft graveyards at other Nigerian airports, including the airport at the capital of Abuja along with Kano, the main northern city. A quick look at the Airport in Abuja seems to indicate around half a dozen abandoned aircraft to the northeast of the airport and it appears the aircraft tails of some of the bigger aircraft are separated from the aircraft fuselages:

A look at Kano’s airport seems to indicate the two aircraft in the far left of this picture along with the one in the far right could be abandoned.

Despite the above problems, Nigeria has one of the world’s fastest growing business jet markets with a recent Forbes article reporting that wealthy Nigerians have spent an estimated $6.5 billion on private jets over the past five years. The article also cited a report by a Nigerian newspaper which estimated the number of privately-owned aircraft in the country has risen by 650% between 2007 and 2012 or from a total of 20 private jets to over 150 as of late last year.

Supersonic business jet concepts to be unveiled at the Farnborough Air Show

The Daily Mail has recently reported that Boeing, Gulfstream and Lockheed Martin (with help from NASA) will be unveiling concepts for supersonic business jets that will have the capability of flying 2,500 mph and fly from London to Sydney in just four hours at the upcoming Farnborough Air Show.

Moreover, all three companies believe they are close to reducing the sonic boom that such a jet would produce to a sound that is “closer to a puff or plop” according to a Gulfstream engineer but aircraft makers will still need to prove to skeptical politicians that such jets and the sonic booms they produce will be acceptable to the public. After all, it was the sonic booms produced by the Concorde that helped to make the aircraft less commercially viable as they were forced to fly routes away from land.

Nevertheless and from a technical standpoint, the new supersonic business jets would use lighter composite materials, smaller fuselages and more advanced engines than the Concorde which had flown at speeds of up to 1,358 mph. Hence, passengers on the new supersonic business jets will travel at speeds of more than 2,485mph on a 12,000 mile flight from London to Sydney. In contrast, the Gulfstream’s new G650, which is currently the fastest subsonic executive jet, flies 7,000 miles at a 646mph and has a top speed of only 704mph.

Hence, the proposed 12-seat aircraft, which are expected to cost as much as $80 million each, are being marketed to wealthy European and Middle East buyers with the slogan: “To the USA and back in a working day.”

Source: The Daily Mail

Convert a regional jet into a business jet

Mark Huber has written a lengthy article for the Business Jet Insider about how easy its getting to obtain relatively new large-cabin jets at near-turboprop prices. According to Mark, he lives in the upper Midwest of the US where regional airlines are pulling out of small airport markets as fast as the government will let them in the wake of $100-a-barrel oil where even government subsidies can’t make the routes profitable as they are often flown at low and gas-guzzling altitudes. Hence, many of the aircraft are being parked.

According to Mark, there were nearly 400 RJs were in storage in the US and many of them less than 10 years old. Specifically, he noted:

62 BAE 146/Avros.
122 Bombardier CRJ100s, 200s and 900s.
36 Dornier/Fairchild 328Jets.
66 Fokker twinjets.
93 Embraer ERJ 135/145s.

In addition, American Airlines, the latest major US carrier to file for bankruptcy, could be forced to park a couple of hundred more Embraers belonging to its American Eagle regional subsidiary.

However, converting a RJ into executive service is apparently a fairly straightforward proposition as it just involves gutting a 50-seat airliner-style interior, replacing it with a more plush VIP layout along with seats for 12 to 20 and then adding auxiliary fuel tanks for 600 gallons or more (generally in the baggage hold) with this entire process taking around six months. Mark did point out that converting a RJ will not mean you will have an aircraft that has business jet performance as they usually can’t fly as high or as fast or have the same range as a similar sized corporate jet.

Nevertheless, you can pick up a 33-seat airline configuration for around $2 million and then convert it for as little as $1.5 million while a lightly used, late-model RJ such as a Bombardier CRJ 100/200 can be bought for $5 million while another $5 million will buy new paint, newer avionics and a high-end interior.

Mark also mentioned five companies in the USA or Canada that can currently convert CRJs and he mentioned that most conversions to date have been for customers in Asia, the Middle East and Russia. Mark also mentioned a few British companies, including design house Design Q which has created a variety of “whiz-bang” interior concepts for executive conversions and Inflite Engineering which will install the designs.

Finally, Mark concluded that airline economics will mean there will be no shortage of parked RJs for years to come and if you are willing to trade a few knots of speed to save millions (that is, if you have a few million to spend in the first place…), a converted RJ may be your best ticket.

Asia’s tricked out private jets

The Wall Street Journal recently had a video segment about the booming private jet market in Asia and just what goes into a multi-million dollar luxury private jet for an Asian taipan. The video segment began with a tour of an exclusive Bombadier Global 6,000 that can seat up to 19 passengers for a quick jaunt from Hong Kong to London in a single hop at 50,000 feet (or 15,240 meters) and 590 mph (or 950 kmh). The aircraft itself is 48 feet or 14.6 meters long and contains a kitchen, dining room, bedroom, leather toilet and a full bar plus plenty of Swiss leather along with Italian marble and most important of all: A state of the art visual system to help land in the hazy skies of China. The cost of the aircraft: A mere $45 million plus another $20 million to customize the interior – no doubt pocket change for many an Asian taipan.

The video segment then had an interview with a Bombadier representative who pointed out that their customers tend to be everyone from oil traders to stock traders to CEOs. However, he also noted a few peculiarities about the Asian luxury private jet market, namely that:

Husband and wife purchases are actually common as the Chairman’s wife may have a big say about the interior – which can include everything from round tables for family style meals to karaoke bars with some thought being put in about an aircraft interior’s feng shui.
Everyone is price sensitive but there is still a preference for new aircraft with Asian customers usually wanting theirs right NOW.
There are an estimated 600 private jets in Asia with 150 to 200 private jets in China alone along with double digit growth rates.

The Bombadier representative also pointed out that their preference is to use leather coming from cows living at high altitudes (e.g. Switzerland) where there are no mosquitos or barbed wire to do any damage to it – an interesting factoid to bring up at your next cocktail party.

Otherwise, the reporter asked about rumors that having a private jet means you can jump the queue on the runway and fly out of China ahead of commercial airlines. And although the Bombadier representative would not confirm or deny such rumors, it would definitely be an added benefit for private jet ownership if its true!

The Super Bowl of private jet rentals

On Sunday, the Super Bowl for American football was held in Indianapolis (Indiana) and already before the game, there were predictions that this year’s Super Bowl would break all records – for the number of private jets arriving to ferry sports fans to the game. Specifically, the Wall Street Journal’s Wealth Report editor Robert Frank went on WSJ’s Mean Street to say that 600 private jets went to the Super Bowl two years ago, 700 last year and that 900 were expected to show up this year.

The reason? Besides the fact that there is limited commercial service to Indianapolis, the New York Giants were playing and of course, they would have an incredibly wealthy fan base of hedge fund managers and Wall Street types who can afford to take a private jet to the game.

However and with so many unused private jets lying around due to the recession along with plenty of anti-private jet sentiment, seat prices on a private jet to the Super Bowl could be purchased for the 1 1/2 hour flight from NYC for only $1,500 each way.

The catch? Since no Wall Streeter wants to be caught dead having to spend Sunday night in Indianapolis, there were predictions of at least 1 to 2 or even 3 hour delays on Sunday night to clear all those private jets for take-off. Hence, we wonder if the private jet companies (or those renting them) have factored that into prices!