Private jet demand declines as tariffs spook would-be buyers

With consumer confidence tumbling, demand for industrial air travel has waned. Even deep-pocketed travelers are pulling back, in keeping with Barclays’ latest survey of business jet broker-dealers and financiers.

Customer interest in buying business jets has fallen by 49% since March, in keeping with the survey, which was conducted from April 9 to fifteen and had 65 respondents.

The Barclays Business Jet Indicator survey, published last week, uses five metrics, including 12-month outlook and pricing, to evaluate the state of the market. All but one metric (inventory levels) declined from mid-March to mid-April. Because of this, the composite rating fell from 52 to 40.

The share drop recorded in probably the most recent survey, at 23%, is the biggest recorded by Barclays for the reason that Covid pandemic. Barclays analyst David Strauss told CNBC that he expected sentiment to weaken but to not such a big degree.

A composite rating within the low 40s indicates the market is slowing, in keeping with Barclays.

The indicator correlates with airplane manufacturers’ book-to-bill ratio, a key measure of their financial health. A rating of 40 indicates that dollar value of manufacturers’ latest orders is lagging about 10% behind the orders it’s currently fulfilling, Strauss said.

Survey respondents told Barclays that clients had put purchases on hold, fearing the impact of tariffs not only on the aircraft market but in addition their operating businesses.

Nearly half (46%) of participants said that customer interest in buying business jets had deteriorated since March. Forty-four percent said customer interest stayed the identical and only 10% reported it had improved.

When asked specifically concerning the effect of tariffs on latest aircraft demand, 93% of respondents said it might have a negative impact on demand, with a majority expecting the impact could be significant. Only 7% said they believed there could be no impact.

As for used jets, 67% of respondents were still pessimistic, expecting a major or minor negative impact on demand. Somewhat under a 3rd (27%) expected demand for used jets to extend by a point.

Nevertheless, pending laws may give business jet manufacturers a shot within the arm.

Each the Senate and House of Representatives have adopted a budget resolution that goals to increase the Tax Cuts and Jobs Act. A key provision of the TCJA allowed businesses to right away deduct 100% of eligible equipment purchases reasonably than spreading out the deduction over time. The speed has dropped 20% annually since 2023 and was set to phase out in 2027. 

Republican lawmakers now have a path to boost the speed back to 100% and permit retroactive deductions, which President Donald Trump called for in March. In the event that they achieve bringing back 100% bonus depreciation, private aircraft would turn out to be way more attractive from a tax perspective.