This newfound behemoth of technology and space exploration has given rise to an unprecedented surge in wealth, transforming the private aviation industry in ways nobody could have imagined a couple of years ago. This past month, aviation lawyer Amanda Applegate was so inundated with aircraft-purchase contracts she couldn’t even take her annual vacation — and that’s just a sign of how busy the market is. The Cleveland lawyer says this dramatic upswing is driven by several “breakthrough liquidity events” in the tech industry that has dramatically changed who will and will not be able to afford using private jets and how fast they’ll be making the switch.
Elon Musk‘s rocket company SpaceX, which also includes his stake in artificial-intelligence firm xAI, sold a phenomenal $85.7 billion worth of shares in the initial public offering, and created unparalleled wealth for the company’s employees and founders. This one financial transaction has rocked private aviation and is generating a new breed of potential buyers who are ready to convert their paper wealth and move it on to real luxury goods. Early employees of SpaceX and other artificial intelligence firms, board directors of these companies, venture capitalists and investors looking to participate in a long-awaited listing by the bankers are pouring money into private jet travel, marking one of the first and biggest winners of the current AI craze. The sector is anticipating further activity, with AI startups such as Anthropic and OpenAI agog as they prepare for potential public listings, which could create further rounds of new millionaires and billionaires.
Applegate said she thinks there are a lot more people that can afford to travel privately and that number continues to increase. Her firm, Soar Aviation Law, which specializes in aircraft purchases and agreements, has experienced a twenty-five percent increase in business thus far this year, a good sign that the market is heating up significantly. This isn’t happening just in one location or with one demographic or with just one kind of client, but seems to be happening everywhere and with everyone as the technology wealth streams continue to grow.
Most people who enter the private aviation world start out first in a shared ownership program or membership program, so that they can get a feel for the market and aircraft ownership before making the leap into full ownership. Aviation data intelligence firm Jetnet has reported that in the first five months of this year, flights in shared-ownership programs increased by 11.8 percent globally compared with the same period in last year, indicating that newcomers are dipping their toes before pulling the trigger on the considerable investment needed for a sole ownership. At the same time, private jet ownership rose 13.4 percent, which suggests that existing private jet owners are using their planes more often, and that buying an aircraft has become more common among the newly wealthy. The increases in North America, the industry’s biggest market, suggest that both existing owners are flying more and that there is a new wave of buyers entering the market.
The current spending binge is a trend that is seen throughout economic history. When it comes to a surge in the demand for private aviation, major wealth-creating events, such as a stock market boom, initial public offerings or mergers and acquisitions, have always followed. The business jet sector is sensitive to the ebb and flow of wealth building cycles, evidenced by a 24% surge in deliveries during the dotcom boom, according to Jetnet data. This time, though, it happens at the time of extraordinary excitement surrounding SpaceX, with an estimated market valuation of $2 trillion, and the hope that OpenAI and Anthropic may soon be followed by a host of even more liquidity events.
Private aviation company Flexjet, that provides fractional jet ownership, leasing, and memberships that enable members to prepay for flight hours for on-demand travel, has seen a major demographic change among its customers. These tech IPOs are bringing a new generation of Flexjet customers with “self-made” wealth, according to D.J. Hanlon, executive vice president of sales at Cleveland-based Flexjet. The change in generations is not just a shift in marketing strategy, but is also likely to affect the kind of aircraft and facilities that will be attractive to this new generation of buyers.
Interestingly, even before these listings take place, huge valuations in the private market have been making the future payouts appear more and more certain and some investors have been making large private market purchases in anticipation of liquidity events. The overall trend of forward-looking behavior indicates strong confidence in the ongoing strength of the technology sector and suggests that prospective purchasers are willing to make high dollar purchases on expected rather than actual wealth. “This is a California aircraft broker who asked not to be identified due to client relationships, but who has had a few clients with money burning a hole in their pockets like they have with SpaceX over the last six to 10 months.” A decade ago, the broker said he had about 20% of his business from technology, but has about three-quarters of his business today, and that new inventory of luxury aircraft is being sold out fast. The value of aircraft has been appreciating at a very fast rate as a result of the high demand for them, he added, citing his own experience of selling planes last year at 10-15 per cent below today’s prices.
In the short term, AI windfalls are expected to have a proportional effect on wealth distribution, with Jetnet estimating the ultra-rich population will grow at an even faster rate through 2028. Anthropic and OpenAI’s San Francisco offices had the highest year-over-year gains in business-jet travel among the Top 5 U.S. cities, as traffic rose by around 11% through June 14, according to data from Jetnet subsidiary WINGX. The clustering of activity in technology hotspots highlights the clear link between the proximity of AI startups and the demand for private aviation. Meanwhile, in the neighbourhood of Brownsville, Texas, where SpaceX has its launch site, business jet traffic jumped a staggering 177 per cent, to ninety-seven flights, in the window of the company’s IPO.
