July / August 2014

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Demand for New Aircraft Models Mirrors Improving EconomyChoices Abound in New and Affordable used Bizjets

6 B U S I N E S S AV I AT I O N A D V I S O R Ju l y/A u g u s t 2 0 14 w w w. B i z AvA d v i s o r. c o m

bY roLLaNd viNcENTRolland Vincent Associates

rvincent@rollandvincent.com

For the first time since the US Great Recession began 6½ years ago, we now see abundant evidence of a

widespread industry recovery. In many ways, the recession, a downturn that hit business aviation and aircraft values hard, mimics that of the 1980-82 down-turn, with one vital difference. This time, airframe and engine manufacturers’ widespread investments in new products, facilities, and technologies are stimulat-ing a rebound across the industry, fueling its return to growth.

Such broad-based investments in new business jet aircraft and engines are both noteworthy and unprecedented, as they are being made by long-standing industry stalwarts like Gulfstream, Dassault, Bom-bardier, and Textron, as well as by newer entrants. They will have a long-term im-pact on the value of aircraft currently in

production, as well as on fractional shares and charter fleets.

Buyers of new jets currently have al-most 50 business jet models from which to choose, ranging from $4M entry-level very light jets up to $65M+ ultra-long-range large cabin jets and converted airliners, with more product announcements ex-pected this year. Newer Original Equip-ment Manufacturer (OEM) entrants — which include Embraer, Honda, and Pi-latus on the airframe side, and Snecma and GE Honda on the engine side — are bol-stering the range of product choices avail-able to current and prospective owners.

With a strengthening economy, surging corporate profits, unprecedented wealth creation, shrinking used aircraft invento-ries, and recent deferrals in replacement purchasing, conditions are indeed ripe for a ramp-up in new aircraft purchases.

Not surprisingly, many OEMs are con-centrating their Research & Development spending to serve customers seeking

larger and more capable aircraft. In con-trast with the rest of the business jet mar-ket, that large cabin segment fared well throughout the Great Recession, validat-ing the product strategies of Gulfstream, Dassault, Bombardier, and Rolls-Royce, which focus on serving this market. Cur-rently leading the pack in the ultra-long-range segment, the Gulfstream G650 and the in-development G650ER offer un-matched speed and 8,000+ mile non-stop range. The new 7,400+ mile Dassault Fal-con 8X and 8,400 mile Bombardier Global 7000 are expected to be in service in 2016, followed by the 9,000+ mile Global 8000 one year later.

The large-cabin segment also is being bolstered by a French tour de force with the all-new Falcon 5X, a $45M, 6,000 mile air-craft with entry in service expected in 2017. The 5X offers a new wing, new en-gines, and the largest cabin cross-section in the industry. With a lighter-weight air-frame, more efficient aerodynamics, and

Demand for New Aircraft Models Mirrors Improving Economy

Choices Abound in New and Affordable used Bizjets

dassault Falcon Jet 8xDassault aviation

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w w w. B i z AvA d v i s o r. c o m Ju l y/A u g u s t 2 0 14 B U S I N E S S AV I AT I O N A D V I S O R 7

all-new Snecma Silvercrest engines, the Falcon 5X is expected to have fuel burn and emissions up to 33% lower than its competitors, including the Gulfstream G450 and Bombardier Global 5000. Not to be outdone, Gulfstream is working tire-lessly on a new family of large cabin jets, including G450 and G550 replacements based on the larger G650 cross-section, with public launch anticipated at the Na-tional Business Aviation Association an-nual convention in October 2014.

By building on its successful strategy of offering advanced technology, strong value for the dollar, and superior dispatch

reliability, Embraer is now the fastest growing business jet manufacturer, with an expanding family of aircraft from the large cabin Legacy 650 and Lineage 1000, down to the fast-selling Phenom 100 and 300 light jets. With certification and entry in service expected in 2014 and 2015 re-spectively, the Legacy 500 and Legacy 450 already are raising the bar in the super-mid-size and mid-size jet categories. Their latest fly-by-wire technology, which saves weight and reduces maintenance expense, as well as larger cabin size at the price point, once again causes competition to ask, “How do they do that?”

The just-certified $26M Bombardier Challenger 350, with service entry in 2014 with fractional powerhouse NetJets, of-fers longer-range, larger-cabin, and per-formance improvements over the Challenger 300, widely acknowledged as the leader in the expanding super-mid-size jet category. Customers in the $20-25M price bracket also may be tempted to purchase the 4,100+ Gulfstream G280, re-assured by its impressive range and run-way performance, and by Gulfstream’s outstanding product support and reputa-tion for brand quality.

With its recent acquisition of Beech-craft, Textron Aviation now commands more than half of the worldwide business turbine fleet. With holdings including Ci-tation, Hawker, King Air, and Caravan, it is investing heavily in new and improved products to bolster its family of light to mid-size jets. New products include the entry-level Citation M2 and versatile Cita-tion Sovereign+ (both with entry in ser-vice in 2013), the high-speed Citation X+ (in 2014), and the stand-up cabin Citation Latitude (in 2015) and Longitude (in 2017). Bombardier is developing the stand-up cabin Learjet 85, which will help to expand

the brand’s appeal to those seeking high performance and a comfortable, produc-tive cabin environment.

Pilatus’ innovative $9M light jet, with a rapidly building order backlog that already covers the first three years of production, promises to continue its tradition of pro-viding Swiss quality, versatility, reliability, and short-runway/unimproved airfield performance with an aircraft that has an almost cult-like following among owners and operators. With service entry in 2017, the PC-24 raises the stakes in the light jets market segment against the Citation CJ4, Embraer Phenom 300, and Learjet 70.

The innovative and much anticipated $4.5M HondaJet (with entry in service now planned for 2015) is the $100B+ auto-motive giant’s entry into business avia-tion. The aircraft offers owners significant improvements in speed, fuel efficiency and emissions, baggage volume, and man-ufacturing quality in the very light jet cat-egory. Honda’s massive investments in airframe and engine technology — the lat-ter in partnership with GE on the HF120 turbofan — and its new headquarters, manufacturing, and service center cam-pus in Greensboro, NC are visible signs

that the company is positioning itself to be a major force in the business aircraft in-dustry going forward.

Optimism among business jet owners and operators is highest in North America, where those who believe the industry is past the low point in the current business cycle outnumber by four to one those who believe we’ve yet to reach it. Measured quarterly by JETNET iQ Surveys, these results are the strongest since surveys first were launched in 2010.

Pre-owned business jet inventory is dropping to pre-recession levels, with the one notable exception being the six- to ten-

year-old category. Those who bought new aircraft during the 2004 to 2008 “bubble” still are perhaps a year or so from seeing their aircraft values return. With recent memories of significantly higher valua-tions and large balloon payments required to pay off outstanding loans, owners of these aircraft need to temper their price expectations, especially since most of these models are still in production, with new OEM replacement models for some on the horizon. However, this may be a tem-porary situation that will resolve itself be-fore too long.

With most indicators — GDP, corporate profits, wealth creation, and new R&D in-vestments — pointing in a positive direc-tion, and increasing challenges with commercial airline travel, barring any ma-jor geo-political shocks, we are bullish on the prospects for a solid recovery in busi-ness aviation, with attractive opportuni-ties for both sellers and buyers. baa

rOLLAND VINceNt is President of Rolland Vincent Associates, an aviation and aerospace market research, forecasting and strategic planning firm. His 30+ years’

experience includes work with manufacturers, commercial operators, and international organizations.

NOt surprIsINgLy, MANy OeMs Are cONceNtrAtINg theIr reseArch & DeVeLOpMeNt speNDINg tO serVe custOMers seekINg LArger AND MOre cApABLe AIrcrAft.

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