Market for business jets perks up

3rd May 2010, Comments 0 comments

The market for corporate jets, which came to symbolise conspicuous consumption before the recession, is staging a timid recovery ahead of what should be a profitable future, analysts say.

The sector will be in the spotlight May 4-6 at a meeting of the European Business Aviation Convention Exhibition in Geneva, with experts debating prospects for an industry that before the crisis was worth about 20 billion euros (26 billion dollars) to the European economy.

The market for corporate jets shrank sharply between 2008 and 2009, when deliveries fell 24.3 percent as strapped companies imposed spending cuts and had trouble securing credit, according to US research company Teal Group.

In the previous five-year period the sector expanded by 17.2 percent.

"The good news is that the market has stopped falling and some of the leading indicators offer encouragement," said Richard Aboulafia, Teal Group vice president.

"The bad news is that this a three-year downturn. The key driver, corporate profits, show only limited signs of a recovery."

Deliveries of business jets should not start to rise until 2012, he added.

For Max Kownatzki, an aviation expert at the Oliver Wyman research group, the recession of 2009, unlike that of 2001, "created a widespread public perception of business jets as symbols of 'excessive and unreasonable' spending, which led many companies to actually sell their aircraft as opposed to just cancelling existing business jet orders."

In North America, where US President Barack Obama publicly criticised the use of corporate jets at a time of crisis, deliveries plunged 39 percent in 2009.

"Business jets have always triggered emotional reactions," said Oliver Fainsilber, also of Oliver Wyman.

"Public opinion often links them with a glamourous life style.... However, managers who travel on these jets do so because there is a real need and in most cases they have no choice."

In a globalised economy, companies must look further and further afield for business opportunities, sending personnel to relatively remote locations little served by traditional airlines.

"The market remains extremely challenging but we are seeing tentative signs of some recovery in the fourth quarter," Air Partner, a provider of private aviation services, said in a statement.

Phil Matthews, Air Partner director in Britain, added that "if we look at who is chartering we see that some of the big name banks and financial institutions are returning, although it is still very early days."

Manufacturers of business jets are also seeing an improvement. France's Dassault Aviation reported a 50-percent jump in sales in the first quarter, when order cancellations fell to four from 27 in the first three months of 2009.

In the longer term, according to Aboulafia of Teal Group, "emerging markets... all offer strong macroeconomic growth rates, low business jet penetration levels, which should be conducive to a healthy growth in jet demand."

While there are airspace restrictions in China and "infrastructure limits" in India, "the Mideast, with high oil prices, high concentrations of wealth and superb geography remains the best business jet growth market in the world," he said.

© 2010 AFP

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