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  • Writer's pictureDel Chatterson

Immune to the recession

At the recent Concordia MBA International Case Competition we had a presentation from Jet Aviation on their dilemma of whether or not to scale up their facilities to accommodate the interior design and build for a private Airbus A380 just purchased by Prince Al-Waheed of Saudi Arabia. He already has a private Boeing 747 and has decided to add another $300 million palace in the sky.

An interesting observation by executives during the presentation was that the "low end" private jet market was being affected by the financial downturn, but that the super rich were pretty much immune so far. The explanation was that aside from their continuing ability to afford these luxuries, their planning horizons at this level were also longer than the normal short-term period of an economic recession. Interesting.

Suggests we might all take a closer look at which customers or products are more or less vulnerable to these challenging times. Your Cadillacs and SUVs are in trouble, but maybe not the Bentleys and Ferraris?

Unfortunately the super rich market may be immune but it is not very large. The forecast market for private A380's is only about 8 - 10 over the next 15 years, with three potential competitors. And the other bad news is that the buyers tend to be tough negotiators, slow to pay and quick to sue!

High risk and huge investment. Not much attraction there for most of us.

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