When the bosses of General Motors,Ford and Chrysler flew in their corporate jets to Washington,DC,to beg for financial aid in November,they encountered some stormy weather. Outraged politicians lambasted them for their extravagance,and commentators noted the incongruity of travelling by luxury jet to ask for money. On their next visit to Washington the chastened executives travelled by car.
This time it was those in the business-jet industry who cringed. The car bosses could have stood up for their corporate jets,defending them as time-saving tools. But because they “didn’t have the guts to defend their actions”,says Michael Boyd of the Boyd Group,a consultancy that studies aviation trends,business jets are now regarded as evil,”right up there with Saddam Hussein”. Companies are now racing to unload these symbols of corporate greed,and sales could fall by as much as 80%,says Mr Boyd.
General Motors and Ford have put jets up for sale,as have other companies including Citigroup,AT&T and Time Warner. According to a report from UBS,a Swiss bank,the number of used business jets available worldwide for sale at the end of November had risen by 62% compared with a year earlier,to reach an all-time high. The report includes many gloomy quotes from people in the business-jet industry. “The market is dead,” says one. “Possibly the worst market since 1970,” says another.
If the car executives are to blame,so too is the dire state of the economy. Struggling companies agree with Congress: in hard times an obvious way to save money is to sell the odd jet. (A new one costs $10m-50m to buy and at least $2,000 an hour to run.) Other firms are cancelling orders for new jets because they cannot secure financing for them,making dozens of once-coveted delivery slots available. There are few takers.
But not all companies that have put their jets up for sale are cash-strapped. And according to analysts at JPMorgan,asking prices for used jets actually rose by 3.4% in the year to November. Jonathan Breeze,chief executive of Jet Republic,a private-jet operator,suggests that some announcements that firms are selling their jets are “elaborate window dressing”. By putting jets up for sale at a high price that ensures nobody will buy,companies can appear frugal-even as their bosses continue to fly as usual.
© The Economist Newspaper Limited 2008