Ah, the beauty of laissez faire capitalism as revealed by the Private Jet industry.
First, the financial bubble bust which affected the private jet industry, forced the sector to undergo painful adjustments through the market clearing process.
From CNBC: (bold highlights mine)
The private jet industry is gaining altitude again after its death spiral during the recession. But jet makers, brokers and fractional companies say it will be years before the industry reaches its pre-crisis peak – if it does at all.Used jets are still selling for half of their 2008 prices, while inventory remains high and jet use remains well below peak levels, as companies and the super-wealthy pare back their flights. As the industry rapidly reinvents itself to adapt to the shifting demand, the price of flying private is falling to record lows.“It’s been a brutal downturn for this industry, followed by dashed expectations for recovery,” said Richard Aboulafia, analyst at the Teal Group, the aviation-research firm based in Fairfax, Va. “But the features are in place for a recovery and I think we’re already starting to see some slow and steady progress.”This year, there have been a total of 172 new jets sold in North America – a drop of more than 70 percent from the 658 new jets sold during the same period in 2008, according to JETNET, the Utica, N.Y.-based jet research firm. The volume of used planes sold is about on pace with 2008 and 2009, yet prices for used planes are still down by a third or more from their 2008 peaks.
Price signals has then led to the re-coordination or the reallocation of resources towards areas preferred by the consumers.
Moreover, competition has prompted producers to tailor fit their products to the demand of consumers leading to lower prices, faster, bigger and more efficient planes.
Again from the same CNBC report…
The weak demand and prices has led to a radical restructuring in the private jet business, forcing all segments of the industry to conform to the new realities of flying private.For jet makers, the future is about emerging markets like China, India, Brazil and the Middle East. Jet manufacturers are ramping up their sales staffs and expanding offices and support teams around the world to capture business from companies and the newly rich in these regions.The jet makers are also launching products better suited to the new market. The top end of the market – with the biggest, fastest, most expensive planes – has been the most resilient…In the mid-range and lower end of the market, aircraft builders are aiming for faster, more efficient planes…For fractional and charter and companies, the new game is providing lower prices, better service and more flexible offerings. The industry has seen a large rotation among jet owners and short-term customers, as those private fliers who used to own planes outright now opt for lower-priced fractional shares or charters.The surplus of jets in the market has led to a boom in the sales of seats or shares on individual flights. JetSuite, the California-based charter company, is now offering last-minute deals for $499. Travelers this week could charter one of JetSuite's Phenom jets – which seat four people – from Los Angeles to Las Vegas or from Washington to Boston. The $499 price was valid as long as the customers registered through Facebook.Many other charter companies are offering larger jet charters for $5,000 or less per flight.
Given this trend to relentlessly satisfy the consumers, one cannot discount that even the middle class, one day, may be able to access private jets.
This invaluable lesson from Joseph A Schumpeter’s classic Capitalism Socialism and Democracy (Google Books preview).
There are no doubt some things available to the modern workman that Louis XIV himself would have been delighted to have—modern dentistry for instance. On the whole, however, a budget on that level had little that really mattered to gain from capitalist achievement. Even speed of traveling may be assumed to have been a minor consideration for so very dignified a gentleman. Electric lighting is no great boon to anyone who has enough money to buy a sufficient number of candles and to pay servants to attend them. It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls in return for steadily decreasing amounts of effort.
Unfortunately, for governments despite their army of bureaucrats and academic supporters, they all fail to comprehend on such fundamental a lesson.
Laissez faire capitalism or economic freedom is the key solution to the world’s economic woes.
