Private Jets Rise Again: Annoying Executive Perk or a Sign of Economic Recovery?

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After years of growth, private business aviation went into a steep nosedive in 2008, the victim of the stumbling economy and tone-deaf corporate execs. But over the past year, the industry has made a sharp comeback as many executives have once again begun to rely on private jets for their trips around the world. But does the double-digit growth in private business aviation only signal a sunny future for the aircraft industry, or can it be taken as a sign that there are bright days ahead for the economy in general?

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Car Execs Paint Targets on Business Aviation

It isn't hard to see why business aviation got a bad name back in 2008. As the economy went into free-fall, tales of multimillion-dollar office renovations, insanely expensive business retreats, and billions of dollars in bonuses for the people who had demolished the economy helped transform an already-angry populace into a furious mob, baying for Wall Street blood. In a time when restraint was an inestimable virtue, the leaders of Detroit's "Big Three" threw caution to the winds, flying private jets to Washington D.C., where they begged Congress for bailout funds to save their ailing companies.

Compared to the billions of dollars that their companies had misused, the thousands that Detroit's top execs blew for the trip were chicken feed. However, as U.S. Rep. Gary Ackerman (D-N.Y.) put it at the time, "There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands, saying that they're going to be trimming down and streamlining their businesses ... It's almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious."

Eager for big business villains, Congress and the media jumped on the anti-jet bandwagon, noting the high cost of private planes, the comparative cheapness of commercial flights, and the outrageous sums that Detroit was demanding. For example, General Motors' (GM) CEO Rick Wagoner's company-owned Gulfstream (GIGIQ) jet cost roughly $36 million, and the price tag for his Washington jaunt topped $20,000. Next to the $10 billion to $12 billion that he was requesting from Congress, these numbers seem to be barely worth mentioning, but when compared to a $288 coach ticket from Detroit to D.C., his private flight was outrageous, and he was pilloried in the press.

A Leading (Or Flying?) Indicator

While Detroit's shortsightedness was devastating, it was hardly the only problem facing private business aviation. In the early days of the recession, as consumption went down and unemployment went up, American businesses started making fewer and fewer deals -- and using fewer and fewer private planes to travel to meetings.
George Kleros, vice president of technical services for Jet Support Services, argues that business aviation is a trailing indicator of economic growth and decline.

"In 2007, the industry hit an all time high," he notes, "but in 2008, it started to go into decline. Late in the year, it went into a steep decline." For private jet manufacturers, this was particularly devastating: As The New York Times reported, sales across the board dropped by 28% between 2008 and 2010. The lower end of the industry took a particularly large hit, as sales of jets that cost between $4 million and $26 million plummeted by more than 57%.

By February 2009, the tumbling fortunes of private business aviation had begun to stabilize, but sustained recovery wouldn't arrive for another year. According to Kleros, business jet activity increased by 11% between 2010 and 2011, and has had an amazing 15% increase over its lowest point in 2009. Not surprisingly, much of this travel has been to India and China, but there has also been impressive growth in other areas, including Singapore, Brazil and the Middle East.

International Travel and International Business

Kleros emphasizes that the private aviation explosion has largely been due to a resurgence in business aviation, not personal aviation, and suggests that the increase in flights to Asia, the Middle East and South America indicate considerable business growth in those areas. But, while the growth in business aviation seems to offer a promising outlook for American businesses, many companies are still hesitant to admit that they own private jets. In fact, when making the above video, we were repeatedly instructed to obscure tail numbers, as companies didn't want the existence of their expensive planes publicized. Asked about JSSI's customers, Kleros offers an enigmatic smile and says "We work with many Fortune 500 companies."

Given the cartoonishly wasteful behavior of the Detroit Three, it's easy to dismiss business aviation as a ridiculous expense, but Kleros is quick to note the potential cost-savings of private business aviation. "A jet flight to China costs roughly $7,500 per hour," he estimates. "To fly one person, that's a lot of money. But if you're flying a whole team ... the cost becomes more economical." Factoring in reduced flight times, more flexible logistics and the fact that a team can use a private jet to work while en route to a meeting, and business aviation starts to look like a bargain.

But does the business aviation industry's recent growth presage a broader economic recovery? Even in the aerospace industry, its effect seems negligible so far. While private business flights have gone up, year-over-year sales of private jets dropped by 4.6% between 2010 and 2011. However, Honeywell Aerospace (HON), a major player in the private aviation field, predicts that 2012 will usher in a period of major expansion for private jets. With an estimated $225 billion in sales over the next decade, Honeywell's forecast may be a harbinger of a bright future ... or a lot of hot air.

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Jeff Rockyflatsgear

Perhaps a people are moving to private planes to bypass the wasted time in "security", blue gloves and radiation.
Your skin breast tissues get the brunt of the low energy X-rays shielding the internal organs making the published "effective" dose appear so small. Microwave-wave machines are too new for any long term health studies to have been done. The true dose rate to skin, testicle, breast about 1/20 to 1/50 of a chest x-ray, and machines are required to save the last five images.
http://www.rockyflatsgear.com/Airport-Back-scatter-Scanner-Dose-Explained.html

June 05 2011 at 11:51 AM Report abuse rate up rate down Reply
carleronn

After todays Richmond Fed Index of economic activity these companies won't be hiring tomorrow. The US is teetering on a new recession. The economic numbers are hideous but the media keeps spinning the great job Obama is doing...ridiculous
just nowReport abusePermalinkrate uprate down

May 24 2011 at 11:10 AM Report abuse rate up rate down Reply
Steve D

Who's "annoyed" by private jets? Once they're up there, they're like any other plane. The real annoyances are the not-rich morons who yap on cell phones in inappropriate places, drive down the street with their CD players loud enough to vibrate windows, yap and blare music late at night, and throw beer cans out the window. Rich people robbing you? Not nearly enough. When you can't afford beer or cell phones, then talk to me about your economic hardships.

May 23 2011 at 10:51 PM Report abuse +1 rate up rate down Reply
1 reply to Steve D's comment
ilm9p

Right on, Steve! Fuckin' A right!

May 24 2011 at 7:48 AM Report abuse +1 rate up rate down Reply
cpo1514

Barry & the Mooch are at it again !!!!! Going on trips with a few hundred of their 'necessary' friends on private jets at taxpayer expense. Time to eliminate all excessive private jets when the Libs cannot balance or even submit a fiscal budget.... right Flying Ms Daisy (Pelosi).

May 23 2011 at 10:33 AM Report abuse +2 rate up rate down Reply
1 reply to cpo1514's comment
chris1011

cpo, what a fukbubble you are!

May 24 2011 at 5:00 PM Report abuse rate up rate down Reply
dhharl

You forgot to mention that while Democrats in congress hammered the auto execs about their Gulfstream, Ms Pelosi
demanded a 757 for her personal use as the Gulfstream wasn't good or big enough for her. Who paid for that?

May 22 2011 at 10:40 AM Report abuse +1 rate up rate down Reply
muenft

STOP! Stop talking about luxury jets when the snail darter is dieing. When the striped snipe will be no more. . You know that our liberal lord and masters Big Al Gore is the only one that can have a gas guzzling jet and 15000 sq foot home. Its the rest of us that are to be "conservative" and bike to work, pay 5.00 dollars for gas, bear ever increasing taxes for our liberal masters to preside over us. Don;t even bring up the hope for us to have riches when only our liberal masters can choose who gets tax breaks and General Electric doesn;t have to pay a dime in taxes. They are big supporters of Obama..what a coincidence. But the evil oil company need to pay more taxes (which they pass on to consumers) there that will teach them

May 21 2011 at 8:47 AM Report abuse rate up rate down Reply
tj1108

Its clear by the majority of posts that people hate those who are "Rich". As a person who is barely into 6 figures yearly earnings I have met a couple of people who are "Rich" and own their own jets. I would not trade places with either of them. I have seen what it takes to become "Rich" and believe me very few have what it takes. Try working so hard you dont even realize its Christmas morning when trying to figure out why your cell ph has not rung all morning. Or setting up a cot in an office so you can sleep 1 hr at a time for 3 weeks to keep a plant process from shutting down. These posts are born out of ignorance that comes from porpaganda pushed by Demacrats for decades. The rich get richer is a given. If through life circumstances growing up you develop the qualities to become rich you will always be rich, its in your DNA. 82% of "Rich" made it themselves. That means they didnt inherit it. THEY made it. The rich get richer is a mindless propagand e saying for ignorant minds. Yes their may be "Rich" who are evil manipulators but its like a cross section of society, the % is very small. The vast majority of "Rich" are driven, dedicated hardworking people.

May 21 2011 at 7:56 AM Report abuse -1 rate up rate down Reply
Big Daddy

Why can't the morons who write crap like this, see that every time they open their faces they are hurting the economy. There is a very large work force out there that take care of private / corporate jets. back in 2008 they caused the failure of a lot of small aviation companies. The people who fuel these planes, the mechanics who work on the planes, the inspectors who ensure they a maintained. Too bad you can't get the cost of Gasoline to go down when you sprouting your bull...

May 21 2011 at 7:45 AM Report abuse rate up rate down Reply
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May 20 2011 at 10:07 PM Report abuse rate up rate down Reply
aerohobo

I like it!

I've been working on and around airplanes for 33 years; this includes commercial, military and private aircraft. Being an aircraft mechanic, supervisor and manager has been a terrific and challenging career. I've spent a lot of money on things that kept other folks employed such as food, coffee, cars, houses, appliances, hotels, gasoline, motorcycles, beer, furniture, toys, education and dare I add...last but certainly not least; one wife and three daughters.

Airplanes create revenue! Executives, pilots, mechanics, engineers, flight attendants, dispatchers, agents and other ground support crew spend money where you probably work.

May 20 2011 at 8:42 PM Report abuse +2 rate up rate down Reply