A Gulfstream G-IV private jet flies above clouds at sunset during approach to Washington’s Reagan National Airport on June 12, 2024 in Arlington, Virginia.
J. David Ake | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter, a weekly guide for high-net-worth investors and consumers by Robert Frank. Sign up to receive future editions directly to your inbox.
Private jet flying fell 15% in the first half of this year compared with peak levels in 2022 as the industry struggles with declining demand and a new competitive environment for luxury travel.
Despite a brief boost from the Summer Olympics, which saw a record 713 private-jet flights to Paris in the last week of July, the private-jet industry continues to struggle this season. Private-jet charter flights fell to 610,000 in the first half of this year, down from 645,000 last year and 716,000 in 2022, according to data from Argus International.
The two-year decline highlights an ongoing adjustment in the private aviation industry as a surge in new jet-card members and charter flyers who took to private travel for the first time during the pandemic fades. Even ultra-wealthy travelers are showing signs of spending fatigue.
“At the peak, everyone was saying, ‘People who are new to private aviation will never go back to commercial aviation,'” he said. Blade Air Mobility, Charter and helicopter companies. “And guess what? A lot of people came home. And they’re still coming home.”
Aviation is still above 2019 levels, and experts say that barring an unusual surge in 2021 and 2022, business is rising along its normal growth trajectory. But the post-COVID boom created a wave of euphoria in the industry, leading to a surge in IPOs and startups and a frantic scramble for jets and pilots. Now, many say all that expansion is setting the stage for a shakeout.
Wheels up, The company, which went public via a SPAC in 2021, has been struggling after its shares plummeted by more than 90%. Delta Airlines The company has come to its rescue with investments and partnerships. Wheels Up has never posted a quarterly profit and last week reported a second-quarter net loss of $97 million and a 29% drop in membership from a year ago.
Wheels Up CEO George Mattson said the company has made steady progress and that “this quarter’s efforts further solidify our position at the forefront of providing integrated global aviation solutions that seamlessly combine the previously separate personal and commercial travel ecosystems.”
Jet.it, a major US private jet operator, shut down last year after grounding its fleet of Phenom 300s, Gulfstream G150s and HondaJets. VistaJet has faced repeated concerns and media reports about its heavy debt burden, but founder and chairman Thomas Flohr told CNBC in May that “all documents and data have always been available to our shareholders and creditors.”
With fleets idled and demand falling, some smaller charter operators may soon be forced to make tough decisions, industry experts say.
“Smaller airlines with three, four or even five jets are getting hurt,” said Doug Golan, founder and editor of Private Jet Card Comparatories.
The private aviation industry’s recent challenges and fleeting successes stem from the coronavirus. As airports and airlines shut down in 2020, private jets offered an escape and a safer way to fly. Affluent travelers who previously rarely flew private jets because of the cost and energy consumption could now justify isolating themselves at 40,000 feet.
“There was a demographic of people who could fly private jets, but were hesitant because they didn’t like the public stigma,” said Jay Daxson, founder and president of consulting firm Central Business Jets. “COVID gave them a reason to fly private jets, and we’ve seen a massive increase in demand.”
A flood of liquidity from government spending, stimulus packages, low interest rates, and soaring stock prices created record wealth to cover soaring private jet costs. Companies rushed to buy planes, hire pilots, and acquire new members. Prior to 2019, private jet charters topped 100,000 in just a few months. In 2021, nearly every month has topped 100,000, and in July 2021, they surpassed 300,000.
Demand overwhelmed the industry. Private jet passengers who paid six-figure amounts for flights began facing delays and cancellations because airlines couldn’t buy or lease planes fast enough. Pilot and part shortages also grounded planes.
In 2023, even as more planes and pilots began to enter service, demand began to decline: some wealthy passengers felt they could no longer fly private jets because of COVID-19, while others found the rising prices of private jets unaffordable.
“Prices are about 20% higher than in 2019,” says Golan of Private Jet Card Comparison. “We’re seeing a lot of people saying, ‘I spent $300,000 or $350,000 on a flight last year, so I’m not going to spend $400,000 or $450,000 this year.’ Even if they have the money, they have a dollar amount in their head that they don’t want to exceed.”
Along with cutting back on flight frequency, some passengers are simply using commercial aircraft to get between cities more easily, and are combining commercial and private aircraft throughout the year: Golan’s latest survey of private jet passengers found that 87% “switch between airlines and private aircraft depending on where they’re flying.”
With demand declining, unsold aircraft are piling up again, softening prices. Jefferies reported that sales of used business jets rose 17% in July compared with a year ago, while prices fell 7%. Jet brokers say orders for new jets remain strong, but wait times for many models have dropped from three to four years to around two years.
Many industry executives have welcomed the drop in demand, saying the industry is returning to a more balanced equilibrium: profitable routes, available aircraft and happier customers.
“The industry is on a more sustainable path in the long term,” said Travis Kuhn, senior vice president of software at Argus. “A little calm is not a bad thing.”
Golan said that while some occasional flyers may have stopped using private jets, “heavy flyers” are still flying: His research found that 95% of people who started using private jets during the pandemic are still using them, and 77% have memberships, jet cards or fractional programs.
Berkshire Hathaway Inc.’s industry giant NetJets is also benefiting as improved reliability and quality encourage more people to switch from charter to fractional ownership: Argus predicts the number of fractional-ownership flights will grow 12% in the first half of 2024 to 308,000.
“Some of the newer pilots have looked around the market and evaluated it, and they like the fractional model,” Kuhn said. “They have set hours and a large fleet.”
Disclosure: CNBC’s parent company, NBCUniversal, owns NBC Sports and NBC Olympics, which holds the U.S. broadcast rights to all Summer and Winter Olympic Games through 2032.