The Real Action Is in Private Jets

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New Players

Unlike the big commercial-jet business, which has been winnowed down to a Boeing-Airbus duopoly, the business-jet sector is attracting new players. Embraer, known mainly as a manufacturer of regional jets, launched its executive-jet division only three years ago after watching a surge in orders at industry heavyweights, including Gulfstream, owned by General Dynamics (GD); Bombardier, and the Dassault Falcon unit of France's Dassault Aviation (AVMD.PA). Business jets now account for 16% of Embraer revenues, and the company says it expects that share to rise to 25% by 2010.

Despite their taste for luxury, most business-jet customers pay attention to fuel costs—especially because these planes increasingly are being bought by cost-conscious intermediaries such as charter, air-taxi, and fractional-ownership companies. "Because of rising fuel costs, fuel efficiency has suddenly become an issue for business jet owners," says John Rosanvallon, CEO of Dassault Falcon. To cut the fuel bill, manufacturers are developing more-efficient engines and using more lightweight materials.

Will the credit crunch and global financial turmoil take a bite out of private jet sales and charters? Ocean Sky's Tehranchian thinks not, because the wealth of his clients insulates them from economic squalls. "Any person who spends the sort of money required for a charter at our level has decided this is a lifestyle issue," he says.

As for high fuel costs, Tehranchian says they cut both ways. "Many of our clients are from energy-based economies, particularly Russia and the Middle East," he says. "High energy prices are good for us. I thank god for them every day."

Small comfort to weary passengers in their cramped economy-class seats, but purveyors of airborne luxury—and their customers—look set to keep flying high.

Matlack is BusinessWeek's Paris bureau chief. Scott is a reporter in BusinessWeek's London bureau .