Global tycoons could see their private jets grounded from next year due to expensive new technology and refinancing concerns.
From 2020, private planes will need to be equipped with ADS-B Out surveillance technology, which the planes say could cost up to $ 200,000.
Aviation finance specialist Shearwater Aero Capital has also warned that traditional lenders are shifting away from older planes in favor of shiny new private jets.
Private jets are usually funded by loans or leases, with owners renting out their plans to generate income.
The loan expert said up to 3,500 old private jets could struggle to secure new financing when their existing loans and leases expire, leaving a funding gap of $ 10 billion.
See also:Even most multimillionaires can’t afford to own a private jet
According to aircraft broker Colibri, private jet owners face a “dilemma” as the cost of installing the technology and subsequent maintenance inspections and overhauls could approach the full market value of an aircraft. .
The aircraft broker has predicted that 11% of the European private jet fleet will be permanently grounded once the new regulations come into effect in June 2020 – the deadline in the United States is January 1.
Managing director Oliver Stone told MarketWatch that the new rules, allowing air traffic controllers to monitor jets, would particularly hurt the value of planes over 10 years old.
In a separate note, the broker said, “Planes valued at less than $ 1 million will have an interesting dilemma with the cost of ADS-B Out and any costs for future maintenance inspections or overhauls,” which will result in a bill that is more or nearly as high as the price. market value of aircraft once completed.
“The combined costs of these events could cause owners to decide that the cost of these upgrades, when combined with proper maintenance, is beyond economic rationale and write off their entire aircraft. “
He added that the prices of individual coins were falling, making it more difficult to recover value.
Shearwater Aero Capital’s survey of business aviation professionals found that 67% of them found it difficult to obtain financing for private jets over 10 years old.
Shearwater managing partner Chris Miller said companies could end up paying more to use new business jets for executives.