JULY 18, 2001
Airplane makers will produce about 775 corporate jets in 2001, a record. From this year through 2010, the production of corporate jets will increase 80 percent over the previous 10 years.
After peaking this year, annual production will decline slightly in 2002 and 2003 before turning around in 2004. The reasons for these expected declines are the drag on new orders caused by the current economic slowdown, and uncertainties about how the domestic and international air-traffic systems will accommodate, regulate, and assess user fees on the growing number of business jets of all sizes.
These are the main findings of "The World Market for Business Jet Aircraft: 2001-2010," an analysis of the expanding corporate aircraft industry by Forecast International/DMS Inc., a research firm.
The long-range study underscores "the way the market has exploded" for business jets in recent years, partly as a result of flight delays and increased overall airport waiting times in the commercial airline system, said the study's author, Raymond Jaworowski, a senior aerospace analyst at Forecast.
"The big factor, which is starting to come out in polls and various other studies, is that a lot of executives really resent the wasted time they spend at the airport," Mr. Jaworowski said.
Even when a flight isn't delayed, requirements like "having to show up for international flights two or three hours in advance" are sources of mounting frustration, he said. In getting to and from the airport, or waiting for flights, there is growing awareness that "you can spend almost as much time on the ground as you do in the air," he added.
More than ever, companies are calculating the costs of that downtime in any decision to turn to business jets, either through outright purchase or by use of popular fractional-share programs, industry analysts have said.
At the same time, analysts taking a longer-range look at business travel, which accounts for most airline revenues, have recently been trying to assess how big a piece of the market business jets will be able to claim after the current slump ends and robust corporate travel resumes. Despite the growth, potential obstacles to the industry include proposals to charge aircraft higher airport-user fees as a way to limit congestion, as well as local opposition to increased traffic at medium-size and smaller airports that business jets can use.
Once widely reviled as symbols of elitism and fat-cat excess, corporate jets have become far more popular, and more palatable to shareholders. This is partly because of the sharp growth in recent years of companies that sell fractional shares of business jets to companies that may not want to pay $15 million to $45 million or more for a private jet.
This year, even the commercial airlines have become interested in business jets, or in adapting some of the business-aviation model to their own uses. UAL (news/quote)'s United Airlines, for example, in May formed a new unit, United BizJet Holdings, that has already ordered more than $3 billion of new business jets for an anticipated entry in the fractional-share market.
And several major airlines are currently looking at the new "sonic cruiser" high-speed airliner being developed by Boeing (news/quote) for use almost exclusively for business travel after the new plane goes into production around 2007.
Beyond that, there is growing speculation about a new era of air travel that has a bigger place for small, relatively cheap private jets as a way to reduce flying delays and better parcel out air traffic.
In "Free Flight: From Airline Hell to a New Age of Travel" (PublicAffairs), a new book arguing for a vast expansion of private aircraft tied to production of small private jets that would cost far less than existing corporate jets, James Fallows refers to recent studies by the National Aeronautics and Space Administration showing that travel by most commercial aircraft, on flights of less than 500 miles, is no faster than going by car.
Several aircraft companies are currently working on the production of such planes. For example, Eclipse Aviation of Albuquerque has secured more than $125 million in financing for development of its six-passenger, twin-turbofan Eclipse 500 private jet, which the company has said it hopes to sell for under $850,000.
Meanwhile, though, as more corporations send teams of managers, sales representatives and technicians on road trips, the market for big business jets is currently outpacing that for smaller aircraft.
In all, the study by Forecast predicts, about 7,300 new business jets will be produced from 2001 through 2010, worth an estimated $115.2 billion, compared with 4,030 produced from 1991 to 2000. Production of big-cabin jets in the so-called super mid- size category —- which includes the IAI Galaxy, Raytheon (news/quote) Hawker Horizon and Bombardier Continental models (which cost in the $15 million to $18 million range) —- is expected to more than double, to 847 aircraft worth $14.2 billion.
Manufacturers will also build about 1,050 new long-range business jets, like the Falcon 900 series, the Gulfstream IV and V, and the Bombardier Global Express, during that period, Mr. Jaworowski said.
Source: New York Times