Updated: Feb 22, 2022
Commercial air travel gets all the attention—but investors should start paying attention to private jets.
Yes, it was a big week for the traditional airlines. United Airlines Holdings (ticker: UAL) held an investor event where it announced a massive order of new planes from Boeing (BA) and Airbus (EADSY) worth $27 billion, while also adding more premium seating, large overhead bins, and a touch more legroom for travelers. It’s a big bet on the normalisation of travel, even if United stock fell 2.1% this past week, while Boeing dropped 4.7%.
Not everyone wants to return to commercial air travel, especially if you can afford not to. While commercial air travel is slowly returning to life—the number of passengers going through TSA checkpoints in June was more than triple that of a year ago, but still 25% below 2019—May business-jet departures, at 275,000, were just 1% below their October 2019 high of 278,000. Used cars aren’t the only preowned vehicles in short supply. Getting your hands on a new business jet is proving difficult as well. Preowned jets for sale were just 4.5% of the total fleet in early June, the lowest on record, according to Cowen data. Jet manufacturers, meanwhile, are short supply to meet the demand.
It’s not a surprise that the demand for new jets has been driven by the ultrawealthy—apparently, interest from first-time buyers is particularly strong—who seem to prefer traveling on their own than sharing a seat with the hoi polloi. At the same time, large corporations are only starting to look at business jets, while foreign buyers remain few and far between. “Thus, the demand surge likely still has runway,” observes Cowen analyst Cai von Rumohr. Don’t be surprised if shares take off.