The population of wealthy people is growing, and that is lifting the fortunes of Montreal-based Bombardier Inc., the world’s second-largest maker of private jets.
Private jets have long been a status symbol, of course.
But in recent years, access to private flights has broadened with charters and time-share jets.
And investment banks and wealth management firms that cater to “high-net-worth” individuals increasingly offer advisory services to their clients on what models of private planes to buy and how to finance them.
Private flights avoid security lineups and feature luxury trappings including leather recliners, five-star menus and facials at 40,000 feet in the air.
The rising demand for private flights accounts for the jump in Bombardier’s second-quarter profits, reported last week, of $178 million (U.S.), compared with just $19 million in the same quarter last year. (All figures in U.S. dollars.)
Bombardier’s backlog of orders reached $16.1 billion at the end of the quarter, up $1.9 billion from the previous quarter.
That includes a portion of one of the industry’s largest-ever orders. In June, Bombardier announced that a first-time buyer, identity undisclosed, had committed to the purchase of 50 of Bombardier’s Challenger and Global aircraft for $1.7 billion.
The buyer has 70 new aircraft purchase options. If exercised, that would bring the value of the deal to more than $4 billion.
The value of Bombardier’s shares spiked by about 20 per cent on news of the deal.
Bombardier is a stock-market darling. Its shares have soared in value this year by more than 70 per cent, eclipsing tech star Nvidia Corp. (up 28 per cent) and Warren Buffett’s Berkshire Hathaway Inc. (up 11 per cent).
Bombardier has gone from strength to strength as a “pure play” in private aviation, after shedding its rail transportation and other albatrosses a few years ago.
The turnaround at Bombardier has rewarded shareholders who believed the once chronically troubled company could become reliably profitable.
They have seen the value of their Bombardier shares increase almost 16-fold in five years.
Bombardier tends to outpace industry leader Gulfstream, based in Savannah, Ga., in number of planes delivered each year. But it still trails its rival in revenues.
As recently as last winter, Bombardier warned investors that it couldn’t predict the impact of U.S. tariffs on its business and took the unusual step of withholding guidance on its future performance.
But CEO Éric Martel now says tariffs are having a minimal impact. “Despite being in a more volatile environment, we continue to see order activity and we have not seen any cancellations,” Martel said on an earnings call in May.
During Bombardier’s July earnings call, Martel forecast a 6.7 per cent increase in revenues this year, to $9.25 billion, and a 14 per cent increase in pre-tax profits, to $1.55 billion .
Under Martel’s five-year turnaround plan launched in 2021, Bombardier has paid down debt, cut costs, and built up its services and defence businesses to counteract the cyclicality of civilian aircraft deliveries.
Bombardier’s $590 million in second-quarter revenues from aircraft repair and maintenance services accounted for about one-third of total revenues in the quarter.
And Martel says Bombardier’s defence division is on a path to $1 billion in sales in the second half of the decade. It supplies jets with specialized communications platforms to the U.S. Air Force and hopes to participate in Europe’s military buildup.
And U.S. President Donald Trump’s tax overhaul promises to drive further industry growth with its new tax deduction for private aircraft used in business travel.
And the ranks of wealthy clients are growing.
Stock market and crypto windfalls saw the U.S. add about 1,000 new millionaires every day last year on average.
The number of U.S. billionaires has increased by an estimated 50 per cent in the past decade.
And the number of private jet flying hours set a record in 2022 and has stayed at that high level since.
The latest surge in demand traces to health concerns during the pandemic. But private-jet travel is a luxury that few flyers have since been able to give up. Especially now that there are apps for booking a seat on a private flight by the hour.
And status is still a factor in demand. In Reddit postings the merely comfortable with high incomes aspire to private aircraft ownership and envy those with “private-jet money.”
A new Challenger 3500 is priced at about $26.7 million. The longer range Global 7500 is priced at $75 million. Typically, options and customization of planes push their prices higher.
“It’s in vogue to be wealthy,” Kenn Ricci, chairman of private jet service Flexjet, told the Wall Street Journal last week. The wealth stigma has diminished with strong working-class wage gains in recent years and elevated stock and crypto prices, he asserts.
For the ultrawealthy, says the Journal, private-plane ownership has become a way of separating the 1 per cent from the 0.1 per cent.
