World Business

Pricey firing be damned. It’s full speed ahead on orders for $3 million-plus function aircraft—often from Asia, Russia, or the Middle East

Watch original video:

by Carol Matlack and Mark Scott

Visitors to Britain’s Farnborough Air Show can easily superintend the display of business jets, tucked down at the end of a runway behind the sexy fighter planes and the big Boeing (BA) and Airbus (EAD.PA) aircraft. But pursuit jets—luxury planes catering to corporate executives and the super-rich—are just about the hottest thing in aerospace these days.

Even as to multuous oil prices crimp airline orders for big passenger planes, business-jet sales are booming. Deliveries are expected to predominate 1,200 this year, the third succeeding regularly record year for the reason that of the industry, and most analysts predict the fourth book of the pentateuch; census of the hebrews will keep rising at least to the time when 2010. Sales over the next 10 years are agreeable to be superior to $220 billion, other thing than twice the figure across the preceding decade.

Who is buying all those planes, which sally at around $3 a thousand thousand and can run well over $40 million? Many customers come from the expanding ranks of the ultra-rich in Asia, the Middle East, and Russia. This year, for the first time, more than 50% of business jet sales determination be outside the U.S. "Back in 2001, our orders were separation 70-30 in favor of North American business, mete now that’s been flipped to 70-30 in regard with favor of international," says Steven Ridolfi, president of the business aircraft division of Canada’s Bombardier (BBDB.TO). "We’ve been seeing double digit growth across emerging markets."

Demand from dealing travelers is rising, too, as time-strapped execs look to escape "the hassle factor of airports and security," says Colin Steven, vice-president for sales and marketing in Europe, the Middle East, and Africa for the executive-jet discord of Brazil’s Embraer (ERJ). "They want to fly direct, produce their business, and get posterior portion."

The expansion is rippling through to aerospace contractors, too. Honeywell Aerospace (HON), for example, recently signed a $23 billion covenant with Embraer to supply engines to its next generation of business aircraft. "These are surpassingly exciting spells, and we see the growth continuing," says Paolo Carmassi, president of Honeywell’s Europe, Middle East, Africa, and India business.

The boom also is lifting the fortunes of private jet charter and time-share companies. London charter equipment Ocean Sky Aviation, for instance, already operates a fleet of 11 jets and has two more on regular arrangement at a cost of $30 the masses each. CEO Kurosh Tehranchian figures Ocean Sky’s revenues will pressingly double this year, to about $220 million.

One seek reference of the case of high-end business jets, of course, is that no commercial airline can equal their comfort. At Farnborough, Embraer is showcasing a mock-up of its new Lineage 1000 jet, which arena for $42.9 the public and boasts features such as a stand-up shower, double beds, and a private dining room. The association announced the sale of a Lineage 1000 to the Al Habtoor Group, a transaction conglomerate based in Dubai.

Even Embraer’s lowest-priced business jet, the $3.1 million Phenom 100, has an interior designed by BMW Group’s Designworks/USA, an affiliate of the German treat automaker.

Unlike the big commercial-jet business, which has been winnowed down to a Boeing-Airbus duopoly, the business-jet sector is attracting new players. Embraer, known mainly being of the class who a manufacturer of regional jets, launched its executive-jet division only three years ago after watching a let go in orders at industry heavyweights, including Gulfstream, owned by General Dynamics (GD); Bombardier, and the Dassault Falcon unit of France’s Dassault Aviation (AVMD.PA). Business jets now account during 16% of Embraer revenues, and the company says it expects that contingent to rise to 25% by 2010.

Despite their taste for luxury, most business-jet customers pay attention to fuel costs—especially because these planes increasingly are being bought by cost-conscious intermediaries such as charter, air-taxi, and fractional-ownership companies. "Because of rising fuel costs, fuel efficiency has pop become some issue for business jet owners," says John Rosanvallon, CEO of Dassault Falcon. To cut the fuel bill, manufacturers are developing more-efficient engines and using more lightweight materials.

Will the credit crunch and global financial turbulence convey a bite out of private jet sales and charters? Ocean Sky’s Tehranchian thinks not, because the wealth of his clients insulates them from economic squalls. "Any person who spends the denomination of money required for a charter at our level has decided this is a lifestyle issue," he says.

As for high fuel costs, Tehranchian says they divide the two ways. "Many of our clients are from energy-based economies, especially Russia and the Middle East," he says. "High energy prices are good against us. I thank the supreme goodness for them every day."

Small comfort to weary passengers in their cramped economy-class seats, but purveyors of airborne luxury—and their customers—look set to keep flying high.