Saturday, August 16, 2014

A Different Take on the Two Tier Corporate Jet Market

Michael Stothard, the FT’s Paris correspondent, reports from the Farnborough air show: Business Jets on the Rise (see the 3:51 minute August 13, 2014 video below.) After a 30 per cent fall in revenue following the financial crisis, the global business jet market is pulling out of its dive.  But as he explains in his article, there is a big difference between the market for big expensive jets and smaller ones.





Big Birds, Little Birds 

What lies behind the more horrendous drop in small plane demand (down 56%) and their continued weakness? I would argue it is yet further evidence of the root causes of America's weak recovery. The large corporations, the Fortune 500 and the next rank down have been very profitable and have gained enormously from the loose monetary policies of the Bernanke and Yellin Fed. Smaller firms have not fared well and the business climate is definitely hostile to unglamorous start-ups. Big Corporate America is buying big jets. The smaller guys are either not starting up in the first place (for the first time since the statistics have been kept more business went out of business than started up) or they can not grow to the point where a small plane would be cost effective.

In a recent Economist interview, President Obama disputes

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