After five years of remarkable growth, the business jet market has effectively stalled, raising fears of how deep the downturn will be, and how long it will be before growth resumes. While cautious optimism prevails, some players have been hit harder than others. At the same time, structural changes in this market, coupled with an uncertain economic outlook, threaten to slow the development of new models, which are important for a thriving industry.

UNCHARTED GROUND

When the first business jets arrived in the marketplace in the early 1960s, they quickly came to symbolize an extremely elite form of transportation. Early planes such as the Sabreliner, Jetstar, Learjet and others garnered orders from government VIP users, large corporations and rich individuals. By 1968, this generated a small but profitable market that was worth $2.7 billion (in 2002 dollars).

However, this quickly became a stagnant market, relying on the same limited pool of customers. Total industry deliveries averaged $2 billion annually in the 1960s and 1970s, and didn't rise above $3 billion until 1981. The market grew above $4 billion in 1982, but this was a momentary blip caused by numerous Learjet deliveries to the U.S. government. It quickly returned to the $2-3 billion range, and stayed well below $4 billion until 1996.

But then, the market underwent a transformation and almost quadrupled in size. This became apparent by 1999, when deliveries rose to 653 jets worth $10.3 billion. The market then continued its expansion, and 741 planes worth $11.3 billion were delivered in 2000. If the new dedicated business jetliners are added (Airbus A319CJ and Boeing's 737 BBJ), the 2000 market was actually worth $12.3 billion. As a result of this unprecedented growth, about 40% of the 12,832 aircraft delivered as business jets, or 5,273 planes, were delivered in the last 10 years.