US -based makers of private jets would remember November 18, 2008 with unease. They found themselves caught in severe turbulence that day when the CEOs of Detroit’s “Big Three” automakers flew to Washington DC in their executive jets to seek billions of dollars in federal bailout funds. America’s backlash against the corporate leaders’ nonchalance was brutal, and within two weeks, the car companies had no option but to publicly pledge to sell their jets. Overnight, private jets turned into a symbol of corporate excess and it became inappropriate to buy or use one in the U.S., the world’s biggest business aviation market. For the recession-hit makers of the planes, such as Hawker Beechcraft Corporation, Gulfstream Aerospace Corporation, and the Cessna producer Textron, Inc., the headwinds from the PR faux pas were so strong that over the next three years their sales went into a tailspin.
Nonetheless, private jet manufacturers, especially those based in the U.S., now appear set to cruise again, with a tailwind from the newly affluent markets of Asia. If the recent Singapore Airshow can be considered a straw in the wind, private jet deliveries may finally grow in 2012 after nose-diving 42% in 2009-2010 and tumbling another 6.3% last year. The biennial, 6-day show, which ended on February 19, hosted nearly 900 exhibitors from 50 countries, such as Boeing, Airbus, Embraer, and Bombardier. As many as 50% of the exhibitors represented the defense industry, but according to media reports, it was the airshow’s business aviation section that generated the buzz. Evidently, private jet makers from across the globe, including the Savannah, Georgia-headquartered Gulfstream, Canada-based Bombardier, and Brazil’s Embraer had turned out in force at the show to woo Asia’s growing class of super-rich.
Given current trends and projections, the aircraft manufacturers’ enthusiasm was not misplaced. After all, the Asia Pacific region now has more billionaires than even Europe, and China alone has more than 150 in the category. What’s more, the results of a study reported in Yahoo! News indicate that the number of private jet makers’ target customers in Asia, who are “ultra high net worth” individuals with minimum investible assets of $30 million, touched 23,000 way back in 2010. In fact, according to an analyst forecast reported by CNN.com, the private jet market in Asia is likely to be worth $40 billion in the next ten years.
This process seems to have started already. Gulfstream Aerospace has said that the Asia Pacific accounted for nearly half of its orders for private jets during the third quarter of 2011, and in October 2011, it received a bulk order for as many as 20 jets from a China-based aircraft leasing firm. Similarly, Bombardier told an Economic Times correspondent at the airshow that the other large market in Asia, India, would have at least 1,330 business jets by 2030. Like China, India has about 155 business jets now, according to the country’s aviation regulator. Embraer, whose super luxury, $50-million, 19-seater Lineage 1000 attracted a great deal of attention at the Singapore Airshow, is equally optimistic about growth prospects in Asia. According to the company, Asia has around 700 private jets today, which is just 5% of the global share. In contrast, North America accounts for 40% of the world’s private jets, the firm has said. Incidentally, Embraer sold its first Lineage 1000 in Indonesia for $53 million toward the end of last year.
In fact, Indonesia is perceived to be another lucrative Asian market for private jets. For businesses operating in its vast network of islands, private jets are perhaps a necessity, not a luxury. Not surprisingly, therefore, private jet ownership in Indonesia grew around 270% between 2006 and 2010 compared to the previous five-year period. So, clearly, with the U.S. and European economies in flux, the Asia Pacific is the only region besides South America where the global private jet industry can expect to fly on auto pilot. To put this situation into perspective, Hawker Beechcraft offered some statistics about the percentage of pre-owned private jets up for sale in different regions of the globe. The data reveal that Asia has 7% of its pre-owned private jets on sale now, while North America has 12% and Europe 16%, a sign that the Asian rich are feeling far more secure than their peers in North America and Europe.
Indeed, it appears that the much-talked-about flight of economic power from the West to the East is taking off.
Postcards from Around the World
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