WASHINGTON (Reuters) - The swelling order books for business jets point to solid sales stretching into 2007, but analysts and industry executives forecast demand to plateau or even soften in the years to follow.
The current environment of increasing corporate profits, a strong global economy and a more international customer base all bode well for top business jet manufacturers: Textron Inc.'s (TXT.N: Quote, Profile, Research, Stock Buzz) Cessna, General Dynamic's (GD.N: Quote, Profile, Research, Stock Buzz) Gulfstream, Bombardier Inc. BBDsvb.T and Raytheon (RTN.N: Quote, Profile, Research, Stock Buzz).
Teal Group analyst Richard Aboulafia, however, cautions against expectations that business jet market growth -- estimated to be around 25 percent in 2005 -- is sustainable.
"We're recovering nicely, but don't go nuts. Don't expect the straight-line upward projection slope," Aboulafia said this week at the Reuters Aerospace and Defense Summit.
The Teal Group forecasts the overall large business jet market to oscillate in value between $10 billion and $12 billion starting this year and extending into 2014.
Rockwell Collins Inc. (COL.N: Quote, Profile, Research, Stock Buzz), a manufacturer of cockpit electronics, said it does not expect a sharp downturn to occur even if growth rates slow.
"You have every reason to believe that even if the rate of change is not as great, the level that it will stabilize around will be pretty high," Rockwell Collins Chief Executive Clay Jones said at the summit.
"The way to get into them is proliferating in a way that makes it easy for corporations or high net worth individuals to get a piece of the action."
Jones argues that the hassles related to business travel makes the aircraft -- once restricted to the elite chieftains of corporate America -- a tool to improve the productivity of many frequent business travelers.
Cessna, the world's largest manufacturer of business jets, said it expects its new Citation Mustang model to be an entry-level model when it comes to market in late 2006.
According to the Cessna website, the Mustang is at least $1 million cheaper than any other new business jet.
As a result, the Mustang is attracting orders from a whole new customer base. More than half of its 230 firm orders derive from outside North America, historically the source of nearly 75 percent of orders, according to Cessna.
"It's a good leading indicator that we are seeing markets open up internationally that we hadn't seen before," Cessna CEO Jack Pelton said.
Business jet demand is also expanding into new tax brackets -- albeit, still at the top reaches of wealth.
"It's no longer for the extremely, fantastically rich. It's also for the very, very rich," said Aboulafia. Continued...
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