Planemakers plunge as private jets fall out of fashion

The inside of a Gulfstream G4 aircraft. Photo / Glenn Jeffrey

Planemakers such as Gulfstream and Cessna will need at least two years to revive sales of corporate jets after the public shaming of executives like Elan Corp's Kelly Martin. The Dublin-based drug company chief helped run up a bill of US$6 million ($10.65 million) last year flying to San Francisco in a Gulfstream V. Now he will be lining up at the airport with everyone else after investors pushed for him to switch to airline flights.

With businesses shunning luxury planes costing up to US$55 million apiece, manufacturers are slashing output and shedding 15,000 jobs.

"Corporate aircraft make commercial airliners look like a safe haven," says Richard Aboulafia, vice-president of the Teal Group aviation consultancy in Fairfax, Virginia. "It's the market most exposed to the huge downturn in corporate profits and where the economy really hits the tarmac."

Pressure to avoid the planes mounted after the CEOs of General Motors, Chrysler and Ford used them to fly to Washington hearings on taxpayer bailouts, prompting Democratic Representative Gary Ackerman of New York to ask: "Couldn't you all have downgraded to first class?"

The outlook for business jet manufacturers is bleak. Deliveries may fall to fewer than 600 in 2010, according to New York-based UBS analyst David Strauss.

Cessna is eliminating almost 5000 posts, or 30 per cent of the workforce, General Dynamics will scrap 1200 jobs at Gulfstream and cut production by one-fifth, and Canada's Bombardier, maker of the Learjet, is cutting almost 4500 jobs.

But farm equipment-maker Deere & Co plans to keep its aircraft even after criticism by shareholder advisory group RiskMetrics, which said in February that CEO Robert Lane spent US$400,000 on private flights in 2008. The company, which has four Cessnas and a Gulfstream V, says the difficulty of travelling from its base in Moline, Illinois, often to the far-flung headquarters of its customers, generally makes using airlines impractical.

However Elan hasn't renewed a contract with NetJets, the private jet company owned by Warren Buffett. "We use commercial transport for the most part but would prudently consider the use of an independent plane if the scales balanced in terms of less overnights, associated expenses and executive time," says spokeswoman Niamh Lyons.

Charles Edelstenne, CEO of Paris-based Dassault, blames the US automakers' Washington trips for making it "a scandal to own a business jet".

Cessna President Jack Pelton says planemakers need to defend the products as time-saving business tools to access markets poorly served by airlines, and has started an advertising campaign urging executives not to be intimidated into shunning corporate jets.

"That stigma is a factor we've never experienced in the past," he says. "We need to make sure we show leadership for the industry and demonstrate the importance of our products and the jobs they create."

- BLOOMBER