A jet plane from Cessna Citation is seen at County Airport of Charles Mr. Schulz Sonoma on this aerial photo taken on June 1, 2021, near Healdsburg, California.
George Rose | Getty images
With consumer confidence, demand for commercial air travel has decreased. Even deep pocket travelers are retreating, according to the last Barclays survey of Business Jet brokers and financiers.
The interest of customers for the purchase of commercial jets has dropped by 49% since March, according to the survey, which was carried out from April 9 to 15 and counted 65 respondents.
The Barclays Business Jet Indicator survey, published last week, uses five measures, including 12 -month prospects and prices, to assess the state of the market. All metrics (inventory levels) except one decreased in mid-March in mid-April. Consequently, the composite score increased from 52 to 40.
The drop in percentage recorded in the last survey, at 23%, is the largest recorded by Barclays from the cocovio pandemic. Barclays analyst David Strauss told CNBC that he expected that the feeling is weakening but not to such a large extent.
A composite score in the 1940s low indicates that the market slows down, according to Barclays.
The indicator is correlated with the book / billiards ratio of airplane manufacturers, a key measure of their financial health. A score of 40 indicates that the value in dollars of new orders from manufacturers is around 10% of the orders it currently completes, said Strauss.
The survey respondents told Barclays that customers had suspended purchases, fearing the impact of prices not only on the planes market but also their operating activities.
Almost half (46%) of the participants said that customers’ interest in buying commercial jets had deteriorated since March. Forty-four percent said that customers’ interest had remained the same and that only 10% said it had improved.
When they are specifically questioned on the effect of prices on the request of new planes, 93% of respondents said that it would have a negative impact on demand, a majority expecting the impact would be significant. Only 7% said they thought there would be no impact.
As for the jets used, 67% of respondents were still pessimistic, expecting a significant or minor negative impact on demand. A little less than a third (27%) expected from demanding jets used to increase a certain measure.
However, waiting legislation can give business jet manufacturers a chance in the arm.
The Senate and the House of Representatives have adopted a budgetary resolution which aims to extend the law on tax reductions and jobs. A key provision of the TCJA allowed companies to immediately deduct 100% of eligible equipment purchases rather than spreading the deduction over time. The rate has dropped by 20% per year since 2023 and is expected to rise in 2027.
Republican legislators now have a way to increase the rate 100% and allow retroactive deductions, which President Donald Trump asked in March. If they succeed in bringing a 100%bonus depreciation, private planes would become much more attractive from a tax perspective.