Bizjet Perception, Reality

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The argument for business jets as essential tools for business may see some conflict in tight economic times as businesses seeking to control costs are selling their jets and corporate jet brokers watch their inventories soar. Where manufacturers recently had waiting lists of people seeking positions on non-resaleable deposit lists the trend has now reversed. Citigroup, Time Warner, Alcatel-Lucent, and of course, GM and Ford are among those companies that have allowed leases to expire or put jets up for sale. "The jet market stinks," Richard Santulli, chief executive of Warren Buffett's NetJets, told The New York Times Thursday. Recent months have seen the global market, which some industry optimists had hoped would help carry manufacturers through difficult times, fall into a worldwide slump. The fall of the Indian and Russian stock market, a slowing economy in the Middle East, and fears of a depression brewing in the United States have had a substantial negative impact on sales -- as has a strengthening U.S. dollar. Unfortunately, when a company drops a jet lease, or sells a jet it previously operated, that effort to control costs doesn't just dump an expensive asset, but also the workers hired to maintain it. In GM's case, closing its air transportation services unit cost the company another 49 jobs. Flight Options, which sells jet shares, has laid off 104 pilots. Even within the bizjet segment, there are particular aircraft lines that are suffering more than others.

Operational and ownership costs of big jets can burden a company with fixed costs like property tax and pilot/steward salaries adding up to nearly $1 million annually in support of a $47 million jet like a Gulfstream G550, which typically costs another $2,000 per hour to operate. It's those sort of numbers that have exacted a larger toll on large jet operators and manufacturers, and Gulfstreams, Bombardiers, and Falcons have taken perhaps a larger blow than smaller jets, according to some industry insiders. Financial pressures aside, there are public perception issues in play, as well. In short, it doesn't look good to keep airplanes, but not employees. NetJets believes that history has shown the jet market lags behind the stock market by about three months when it comes to recovery. As such, recovery is not yet on the horizon.