Business jet market faces slow recovery

By Karen Jacobs - Analysis

ATLANTA (Reuters) - The business jet market, which soared in recent years as U.S. companies posted record profits and new foreign buyers raised demand, is now facing a hard landing.

The sector could be poised for big drops in demand as corporations cut back discretionary spending during the recession and dried-up credit makes purchases by smaller companies and individual owners more difficult. Attacks from politicians who have portrayed business jets as extravagant and frivolous have also hurt.

Some analysts say recovery will be slow in the face of lower demand and increased competition from used aircraft that have flooded the market.

"We don't see the number of deliveries even hitting 2008's level in the next 10 years," said Brian Foley, president of Brian Foley Associates, a business aviation consulting practice.

Last year, deliveries of business jets reached a peak 1,315, according to data from the General Aviation Manufacturers Association (GAMA), a Washington, D.C-based group that tracks noncommercial aviation. Its data shows deliveries rose annually from 2003 to 2008.

Though GAMA does not forecast deliveries, it noted that business jet shipments dropped nearly 36 percent in the first quarter, to 191 from 297 a year earlier.

Restructuring firm AlixPartners LLP projects business-jet deliveries will fall 30 percent this year, with an another 10 to 15 percent drop forecast for 2010.

"The demand will not start to bottom out until 2011," said Philip Toy, managing director and co-leader of AlixPartners aerospace and defense practice.