Businesspeople Everywhere Cutting Back on Private Jets

The days of flaunting wealth through exorbitant purchases have come to an end, thanks to the global economic recession. As companies cut back and global business activity declines, the demand for private jets has dropped sharply. A host of buyers from Asia, the Middle East, the U.S., and Europe are second-guessing the necessity for an expensive private jet. The decline has jet manufacturers such as Canada’s Bombardier Inc. and Brazil's Embraer S.A. scrambling to adjust their business models amid mass cancellations and declining orders.

Part of the problem is transparency of the buyers. Many manufacturers receive orders from companies which are not publicly traded, and thus, the state of their finances is unknown. Eager to sell, these manufacturers have completed the orders for these jets, but have faced cancellations from these financial unknowns.

Whether or not this becomes the “jet bust” or is simply a downturn remains to be seen. The figures, however, are not good. Stefan Vilner, head of the European Air Taxi Association, said last year the startup group had 14 founding members. Now, he says, there are only five left. Additionally, the number of takeoffs and landings of private jets fell 25.5% in November 2008, compared with data from November 2007.

If there’s one thing we can learn from the financial crisis, it’s that agreements need to be based on credibility. Financial institutions need to focus on finding and taking on good mortgages, and, in this case, jet producers need to make sure that their clients will not default. The issue of overproduction is also prevalent in jet production, similarly to other facets of the transport manufacturing industry. The industry faces the challenge of continuing to maintain workers and keep production up amidst declining sales. For jet producers, finding a client who won’t cancel on them should probably be a first priority.