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Overseas demand boosts private jet sales
Despite the weakening of corporate profits in US, North American planemakers are reporting record orders
- AP
- Published: 00:30 March 17, 2008
- The US economy may be coming in for a landing, but the demand for private jets is still flying high.
- Image Credit: AP
Washington: The US economy may be coming in for a landing, but the demand for private jets is still flying high.
The bustling economies of China and India, and newfound oil wealth in countries such as Russia, have helped keep sales of small executive jets strong. Despite the weakening of corporate profits in the United States, North American planemakers are reporting record orders, many from overseas.
"There is a lot of demand worldwide," said Raymond Jaworowski, an aerospace analyst with market research firm Forecast International in Newtown, Connecticut.
"If the US economy does soften and even if we go into recession, the effects will be insulated somewhat by the growing economies outside the United States."
Strong market
The overall demand for jets is expected to remain strong in the coming years, said Jaworowski, who forecasts nearly 15,000 business jets worth a total of $192 billion will be sold over the next decade industrywide. The increase will come in planes of all sizes, he said.
New planes may be in the works to satisfy companies hoping to free top brass from the hassle of commercial air travel.
Some analysts expect General Dynamics Corp., owner of the Gulfstream Aerospace, to announce plans as early as this week for its largest plane yet, a jet that could carry around 20 people across the Pacific Ocean on one tank of fuel.
The North American market has traditionally been the biggest consumer of private jets, but Falls Church, Virginia-based General Dynamics said 2007 orders for Gulfstream jets overseas surpassed its North American totals for the first time. The company sold its first large cabin jet in China last month.
Canada's Bombardier said earlier this year that it had a record 452 orders in its fiscal year ending January 31, up from 274 in 2006. The Wichita-based Hawker Beechcraft said the Chinese business aircraft operator Deer Jet, one of China's largest charter companies, ordered two mid-size business jets last year.
Structural change
The Brazilian planemaker Embraer recently signed deals with Indian and Chinese companies, while Cessna Aircraft, the world's largest manufacturer of general aviation planes, said companies outside the US accounted for 53 per cent of its total business jet orders in 2007, up from 48 per cent in 2006.
Nicholas Chabraja, CEO of General Dynamics, told an investor conference on March 4 that the company is still trying to chart the long-term impact of the increase in overseas orders, but said "it looks like a structural change in the marketplace." Private jets have become the travel method of choice for corporate executives who can afford them, cutting down on wait times and delays that affect commercial carriers.
Corporations can either buy planes outright, or buy fractional jet shares to avoid shouldering the hefty price of planes that can range from a few million dollars to $50 million.
Planes vary in size. There are those that can carry a few passengers.
Then there are the larger jets with space for more than a dozen people, along with features such as plush seating and boardroom-like decor. Some of the biggest, such as the Global Express from Bombardier, have a range of roughly 6,300 nautical miles (11,340 kilometres).
Commercial aircraft manufacturers have also entered the market. Boeing offers converted passenger jets, such as the 737, for private use. The German carrier Lufthansa said Friday it will start its own private jet service this summer using mid-size jets bought from Cessna.
Future impact
General Dynamics would not comment on speculation over its new jet, but the company plans an event on Thursday at its Gulfstream facility in Charleston, South Carolina, that it said will affect "the future of the business-aviation industry."
Currently, the company's largest jet, the Gulfstream 550, can travel up to 6,750 nautical miles (12,150 kilometres) and carry a maximum of 19 people.
The new jet, which analysts predict will be called Gulfstream 600, is expected to have a wider body and a range of more than 7,000 nautical miles, enough to make it from Los Angeles to Beijing without stopping. That would make it one the largest traditional private jets on the market.
The new plane would likely surpass the Gulfstream 550's roughly $48 million price tag, said Richard Aboulafia, an aerospace analyst with the Teal Group in Fairfax.
"The upper end of the market will pay any price and is the fastest growing part," he said.
Gulfstream will also likely announce plans this year to offer an upgraded version of its mid-size 250 jet, according to Joseph B. Nadol III, an analyst with JPMorgan.
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