November 18, 2013

Flip my jet: Demand outstrips supply for the G650

Most private jet manufacturers are still looking at ways to lengthen their order books in today’s economic climate, but there’s one aircraft firmly bucking the trend.

Gulfstream is currently experiencing such exceptionally strong demand for its much-heralded G650 – or G6 for short – that buyers on the the waiting list are selling their aircraft on for a profit, before they’ve even taken delivery. This process, known as flipping, was relatively common before the recession. But it’s certainly not been seen for a while.

Why is the G650 so popular?

The Gulfstream G650 is the largest and most-expensive private jet aircraft in the world, coming in at $65 million. It’s the ultimate Ultra Long Range (ULR) private jet, offering a range of well over 7,000 nm and a maximum speed of Mach 0.925. So it can fly between Dubai and New York, or London to Buenos Aires without a fuel stop.

The aircraft uses the latest innovative technology in its manufacture and operation including the latest avionics systems; fly-by-wire technology; and an oval cross section cabin. More about the Gulfstream G650.

But its range, speed and technology are only part of its appeal. The high-spec VIP interior offers the ultimate in on-board luxury, with a choice of cabin configurations (including a full bar and kitchen) to accommodate up to 18 passengers.

The G650 is also very hard to come by. Less than 40 have been delivered since its launch last year. And there are another 160+ buyers waiting in line, some of whom will need to wait patiently for up to 4 years before they can receive delivery.

Well-known names on the waiting list reportedly include Ralph Lauren, Oprah Winfrey, Warren Buffett and Roman Abramovich. And those lucky enough to already own one include Peter Jackson, the New Zealand film director. The sheer difficulty of getting hold of a G650 – even for those who can usually buy their every desire – is increasing its appeal.

What is flipping?

This is a good example of how an exceptionally exclusive product, hard to come by, is seeing its popularity multiply. We all want what we can’t have. And it’s why some of those names further up the waiting list – or already recently in receipt of their jet – have been able to sell on for a profit, as much as $5 million. Otherwise known as flipping.

Those flipping a G6 reportedly include Formula One magnate Bernie Ecclestone, who apparently found that the aircraft wasn’t suitable for his travel – which include frequent flying to airports with very small runways.

This is a key reason why many private users, even very frequent flyers, choose to charter rather than buy – at least at first. How many times in a year would they really want to travel in such a large aircraft? Ownership of one type of jet is not enough. Maintenance periods, small airports, long distance flights, different numbers of passengers…in many cases it will turn out that one aircraft doesn’t fit all their needs. So charter is often the better solution.

Rather than lose money on such a recent purchase however, Bernie Ecclestone was able to sell his G6 on for more than he paid for it.

This kind of speculation was seen amongst some private jet buyers before the recession, according to Tim Barber, Managing Director of aircraft broker JetBrokers Europe. He says “In the industry good times, flipping took place across aircraft categories. There were even those with the means to pay a deposit, but not the final amount, who placed orders and took a gamble on prices increasing. Many of them were caught out when the market receded. But now the G650 is seeing this type of behaviour again, driven by its unusual desirability. It’s very much led by status, rather than commercial sense”.

However this time around, Gulfstream have caught on to the trend and have introduced stringent new contract clauses that make it more difficult (but apparently not impossible) to trade on before delivery. They aren’t keen to lose control of their customer list (or to see customers making a second-hand profit in this way), but I can’t imagine they mind that their aircraft is in such hot demand.

Large jets leading market recovery

No other aircraft is generating quite such a frenzy amongst buyers as the G650 – Tim Barber says that flipping is still very much confined to this aircraft alone.

But its the bigger aircraft overall that are certainly leading when it comes to recovery in private aviation – they have proved to be more recession-proof than the medium-sized jets.

Market data from WINGX-Advance shows that Ultra Long Range jets have been increasing their charter share all year.

The G650’s younger sister, the Gulfstream G550 is in hot demand and rival manufacturer Bombardier is seeing even greater charter growth of its large jet aircraft.

The Challenger 605 is proving popular, with the Global Express even more so – with a 20% year-on-year growth in demand seen in October.

So while there may only be a handful of super rich buyers trading places in the queue for the G650, it’s still the heavy metal leading the way when it comes to charter private jet recovery.

Our Operations team can advise which aircraft might be most suitable for your itinerary. Contact us or call +44 1747 642 777 (24 hours).

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