Business

March 11, 2008

As economy slumps, demand for private jets grows

Overseas sales up even in downturn

STEPHEN MANNING AP Business Writer

WASHINGTON — The U.S. 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 plane makers 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, Conn. “If the U.S. economy does soften and even if we go into recession, the effects will be insulated somewhat by the growing economies outside the United States.”

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. 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 Corp., 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 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 Inc. said earlier this year that it had a record 452 orders in its fiscal year ending Jan. 31, up from 274 in 2006. Hawker Beechcraft Corp. said the Chinese business aircraft operator Deer Jet, one of China’s largest charter companies, ordered two mid-size business jets last year.

The Brazilian plane maker Embraer recently signed deals with Indian and Chinese companies, while Cessna Aircraft Co., the world’s largest manufacturer of general aviation planes, said companies outside the United States accounted for 53 percent of its total business jet orders in 2007, up from 48 percent 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.”

“There is a lot of demand worldwide. If the U.S. economy does soften ... the effects will be insulated somewhat by the growing economies outside the United States.”

Raymond Jaworowski

Analyst, Forecast International

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