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Luxury Jet Shoppers: This Deal's For You

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The Associated Press

Published: August 20, 2008

WASHINGTON - General Dynamics Corp. said Tuesday that it will buy Jet Aviation for about $2.25 billion in cash, part of the defense contractor's push to expand its private civilian jet business and tap into robust demand for luxury planes overseas.

With the purchase, General Dynamic's Gulfstream business jet unit adds a worldwide network of aircraft maintenance and service centers where wealthy individuals and cash-rich governments can outfit private jets with plush interiors and custom features.

Although General Dynamics is perhaps best known for its tanks, ships, submarines and other military equipment, it has significantly expanded its aerospace unit in recent years and now expects its fleet of business jets to double in the next decade to roughly 30,000.

The Falls Church, Va.-based company has seen orders for its Gulfstream jets grow in the past several years, as wealthy buyers from burgeoning areas such as the Middle East and China have helped push international sales past those in North America, traditionally the largest market for private jets.

International orders at Gulfstream topped U.S. sales for the first time last year, and the company recently introduced its largest and widest-ranging jet, the G650. Orders have been strong for the plane that costs roughly $60 million.

Jet Aviation, meanwhile, generates roughly 60 percent of its sales in Europe, the Middle East and Asia, and has 25 service and maintenance centers in Europe, the Middle East, and North and South America. By comparison, General Dynamic's aerospace unit, which includes Gulfstream, has 12 service centers, with all but one in the United States.

The deal allows General Dynamics to take advantage of Jet Aviation's strong presence in the rapidly growing Persian Gulf region, which is in the midst of an aviation and infrastructure boom fueled by soaring oil prices.

Many of the world's most ambitious aircraft interior retrofits in recent years have emerged from the Mideast - Saudi Arabia's Prince Alwaleed bin Talal is spending more than $300 million to outfit an Airbus A380, the world's biggest passenger plane, as a flying palace.

Nicholas Chabraja, General Dynamics' chief executive, said Jet Aviation's network drove the company's interest in the sale.

"This is a business for us that is blessed with opportunity," he said.

General Dynamics expects Jet Aviation to contribute sales of $1.5 billion in 2009 and post revenue growth of 10 to 12 percent, Chabraja said. The company employs 5,600 employees worldwide, and its U.S. headquarters are in Teterboro, N.J.

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