The turmoil gripping financial markets will have little long-term impact on demand for business jets, according to a forecast widely viewed as a barometer of the industry's health. But critics question whether a market where demand is driven by corporate profits can really fly around the economic storm.

Honeywell Aerospace's 17th annual Business Aviation Outlook predicts that hefty backlogs for new models and robust demand from new markets outside the U.S. will push worldwide deliveries to a record 1,400 aircraft in 2009, valued at $25 billion, extending a rebound that began in 2004.

Deliveries should dip 9% between 2009 and 2011 as customers wait for new aircraft models to come to market - much milder than the 34% drop-off the industry saw in the two years after the 9-11 terrorist attacks, according to the forecast released at this week's National Business Aviation Assn. (NBAA) convention in Orlando, Fla. A separate projection released by Forecast International last week reaches a nearly identical conclusion.

"What's really selling are the longer-range airplanes to big corporations," Honeywell Aerospace President/CEO Rob Gillette said in an interview at Honeywell's corporate headquarters in Morristown, N.J. "With the world being as global as it is, they just keep flying. We're talking about 1,400 deliveries next year, another record."

While Honeywell's global survey of 1,866 corporate flight departments was conducted before the credit market meltdown in the U.S. became critical, company officials say they have seen no sign of widespread order cancellations since then. Most manufacturers are sold out into 2010, with some models not available until 2011, and backlogs have reached nearly three years of production.

"Look at the paid orders that Gulfstream has for the G650 -- it's almost triple what they expected," says Gillette. "These [customers] have $3 million down on a non-refundable, one-way trip to get in line."

Honeywell's forecast brings a dose of optimism to the NBAA show at a time when many in the industry are worried. Corporate flight departments were recently disbanded at Bristol-Meyers Squibb and bankrupt Lehman Brothers. And there are serious questions about the futures of aviation operations at Wachovia and Merrill Lynch, which have been sold off, and American International Group, which had to be rescued by the U.S. government (AW&ST, Sept. 22, p. 15).

"Commercial purchasers of aircraft, and particularly corporate aircraft, are not immune to any sort of slowdown," says Wolfgang Demisch, principal of New York financial consultancy Demisch Associates. "There would seem to be a real risk of deferrals and cancellations over the next several quarters."

UBS Investment Research analyst David Strauss says a lot of delivery slots are being put up for sale, and his bi-monthly survey of the industry shows a sharp drop-off in customer interest in business jets over the past two to three months. Biut so far he has heard of no large-scale cancellations. "The big question is how resilient these backlogs will be."

JPMorgan analyst Joseph B. Nadol, who delivered a bullish assessment of the corporate aircraft market at last year's NBAA show, has grown much more cautious. He notes prices for used business jets are declining while inventories have risen to their highest level in five years. "The used business jet market is rapidly falling apart, which should lead to a deteriorating market for new aircraft in short order," Nadol said last week. "The most relevant question remains not whether the market is going to shift, but how well the original equipment manufacturers with their record backlogs are able to weather the storm."