Economy, 'fat cat' label hit corporate jet makers hard

— -- Commercial aviation manufacturers are rediscovering the truth behind the tragic Greek myth of the Flight of Icarus: When you soar too high, the inevitable descent can be frightfully steep.

Propelled by a roaring U.S. economy and booming demand from oil-rich Middle Easterners and newly rich Russians and Eastern Europeans, the makers of corporate jets and other business aircraft set sales records every year from 2003 to 2007.

But global recession, constricted credit markets and the public flogging of corporations that spend lavishly to fly top executives on corporate jets have sent the sales of general aviation aircraft into a hair-raising nose dive.

JimSchuster, CEO of Hawker Beechcraft, estimates that sales and the value of planes sold are off more than 30% industrywide since last fall. Existing orders are being deferred or canceled at alarming rates.

Aircraft makers such as Hawker Beechcraft are loath to cut the price of their new planes for fear of devaluing those sold in recent years. But the few used planes that are finding buyers these days are selling at prices 30% or more below what the models sold for just a year or two ago. In the last six years, general aviation aircraft makers worldwide sold 21,531 new planes, up 35.2% from the 15,927 sold in the six previous years.

In 2008, sales fell 7% as a result of record high fuel prices in the first half of the year and the swelling economic crisis in the second. Still, the industry's total billings hit a record $24.8 billion.

In 2007, plane makers delivered a record 1,138 business jets and a record 4,272 total general aviation aircraft worth $21.2 billion, according to the General Aviation Manufacturers Association. And in 2008, they delivered a record 1,315 business jets, thanks to a three-year backlog in orders.

Not a normal downturn

But now, like Icarus, who against his father's warning flew so close to the sun that the wax holding his wings together melted, general aviation is melting down at an alarming rate — and not just because companies have stopped buying new planes.

"This industry has seen lots of downturns in the past," Schuster says. "Typically in a downturn, companies would just stop buying planes. But they wouldn't actually shed planes. What we're seeing this time is companies actually shedding their airplanes."

Brian Foley, a veteran industry consultant, says business aviation "takes a mighty fall in any downturn as companies cut back their capital expenditures. ... Buying anything that is not an absolute necessity is being deferred for as long as possible."