North American Perspectives
By Jack Olcott
Traditionally, Business Aviation within the USA has been the leading indicator for understanding and tracking the health of the global Business Aviation community. Over 58 percent of the nearly 31,000 turbine-powered aircraft used throughout the world for executive and private transportation by air are based in the USA. The same concentration is found among operators (nearly 61 percent USA) and owners (nearly 62 percent USA).
When all of North America is considered, an impressive 71 percent of business jets and turboprops are registered in Canada, Mexico and the USA.
Thus it is appropriate that MEBAA’s Quarterly Journal look at forecasts, trends and recent events emanating from that part of the globe.
Forecasts: Possibly the most respected forecast of the Business Aviation community is published by Honeywell Aerospace, the global engine and avionics manufacturer with its principal offices situated in the USA. According to data released at the 63rd Annual Meeting and Convention of the National Business Aviation Association in October, Honeywell anticipated that approximately 11,000 new business jets will be delivered from 2010 through 2020, with sales in US dollars valued in excess of $225 billion. That revenue projection is approximately 10 percent higher than the manufacturer’s previous 10-year forecast, issued about this time last year.
Honeywell surveys approximately 1,200 flight departments worldwide selected to reflect the Business Aviation community.
The Teal Group, another highly respected source of forecast data, estimates that about 10,000 business jets will be delivered from 2010 through 2019. Total value for that level of activity is expected to be $182 billion in US dollars.
Clearly, the Honeywell and Teal forecasts are consistent, thereby reflecting credibility on their independent findings.
In spite of an eventual return to impressive growth in demand for business jets throughout the next decade, recovery from current sluggishness in aircraft sales is expected to remain slow during 2011. For 2010, forecasters expect deliveries of new aircraft to be between 675 and 700 units, down about 17 percent from the 849 jets delivered in 2009. Deliveries during 2011 are also expected to be in the 675 to 700 unit range. Backlog (aircraft on order waiting to be produced) continued to erode from historic highs created by the unprecedented demand for business jets in the 2005 to 2007 time frame.
Reflecting a common theme among many airframe manufacturers, Dassault Falcon Jet experienced cancellations during the first nine months of 2010 that exceeded the number of new aircraft ordered. In contrast to 2009, however, when the French business jet manufacturer suffered 160 cancellations while booking only 17 new aircraft, Dassault Falcon Jet placed 34 new orders for its aircraft between January 1st and September 30th, 2010—one less than the orders cancelled. Total backlog for Dassault dropped from 500 aircraft in 2008 to 180 units—a number that represents about two years of production—as it entered the 4th quarter of 2010.
Hawker Beechcraft’s Chairman and CEO, Bill Boisture, noted three reasons why he does not anticipate aircraft orders growing before the 2012 time frame: low overall confidence in the global economy, the capital needed to buy into Business Aviation, and the depressed prices of existing aircraft (since the majority of new aircraft are purchased by companies and entrepreneurs that already operate a business jet). With nearly 15 percent of existing business aircraft in the USA available for sale on the used market, the likelihood of pre-owned aircraft prices firming is unlikely in the next year. During the boom times of the mid 2000s, between 8.0 percent and 10 percent of the active fleet was for sale.
Currently business jet manufacturers are writing one new order of every two aircraft they deliver—a “book-to-build” ratio of 0.5. For the manufacturing segment to be sustainable, eventually there must be parity between orders and deliveries, a condition forecasters do not expect before 2012.
In contract to prevailing thoughts about the marketplace, the Canadian airframe manufacturer Bombardier noted with optimism recent increases in flight activity, which grew by 15 percent in the first half of 2010 for owners of Bombardier business jets. During the same period, Bombardier aircraft available for sale on the used market decreased from nearly 18 percent to about 15 percent.
Trends to Watch: While the largest concentration of business aircraft resides in North America, fleet expansion is anticipated to be greatest, in terms of percentage growth, outside the northern hemisphere. Asia and the Middle East appear to be the regions that will experience significant expansion, with the Business Aviation fleet also growing in Europe. Demand outside the USA accounted for more than half of new aircraft purchases in 2009, a trend that is expected to continue. Honeywell forecasts that 40 to 45 percent of new business jets deliveries over the next five years will be to buyers throughout the international marketplace.
Reflecting the needs of corporations and entrepreneurs for travel to emerging areas of the globe such as China, Africa, South America and the Middle East, Honeywell predicts that medium and larger business jets will account for nearly a third of the deliveries between the present and 2015. About a fifth of the business jets expected to be purchased over the next five years will be long-range and ultra-long-range aircraft.
Responding to the anticipated demand for worldwide travel, business jet manufacturers continue development of new aircraft. Bombardier launched the Global 7000 and the Global 8000 at this year’s NBAA Annual Meeting & Convention, with planned entry into service in 2016 and 2017, respectively. Both aircraft are derivatives of the current Global series. The Global 7000, which features a cabin that is 11 feet longer than the Global XRS, is designed to fly 7,300 nm at Mach 0.85 and 5,100 nm at Mach 0.90. The Global 8000 is 2.0 feet longer than the XRS and is projected to fly 7,900 nm at Mach 0.85. Its range at Mach 0.90 is anticipated to be 5,650 nm. Both aircraft are powered by General Electric’s new TechX turbofan.
Flight testing of the Gulfstream 650 continues on schedule, with certification planned for 2011 and first customer deliveries in 2012. Range is projected at 7,000 nm at Mach 0.85 and 5,000 nm at Mach 0.90, the latter projection being demonstrated in flight recently.
Bombardier forecasts that there is a demand for 4,500 aircraft in the ultra-long-range class of business jets over the next 20 years.
While the demand for global travel is shaping a strong market for long-range business jets, interest in other cabin sizes continues. At the 63rd NBAA Annual Meeting & Convention in late October, Hawker Beechcraft introduced the Hawker 200 based upon its light jet Premier II. Featuring elliptical winglets, ventral strakes and more powerful (by 23 percent) Williams FJ44-3AP turbofans, the newest Hawker offers a 1,545 nm range at Mach 0.72 with a passenger load of four.
At the same venue, Gulfstream displayed the midsized G250, which arrived at the convention from Tel Aviv, Israel following a three-leg flight of 6,200nm. Certification is expected in late 2011.
Cessna introduced the rebranded Citation Ten (nee’ Citation X), still offering the fastest (for now) speed of any civil aircraft (Mach 0.92) but fitted with the Garmin 5000 avionics suite and a 15-inch longer cabin.
New models of business jets and positive forecasts from industry observers are encouraging indications that Business Aviation is on the road to recovery, albeit slowly, in North America. Perhaps the most encouraging sign, however, is the increase in charter activity reported by leading providers of lift in the USA. Solarius Aviation, the San Francisco management and charter company founded about two years ago with roots stemming from Sunset Aviation and the Team that ran TAG Aviation for many years, indicated its charter activity increased noticeably in recent months. Solarius now has a managed fleet of about 50 business aircraft ranging in size from King Air turboprops to Gulfstream G550s. Other charter operators also indicate that business is increasing, which traditionally has been a precursor to overall expansion in the strength of the Business Aviation community. NetJets, the world’s largest provider of fractionally owned aircraft, apparently feels that the future for its means for providing Business Aviation is strong—sufficiently so to order 50 firm and 75 optioned Embraer Phenom 300 aircraft, valued at nearly $1 Billion US.
Business Aviation in North America as well as globally continues to be cyclical, with highs that encourage new entrants and lows that cause less well financed members of the community of OEMs, service providers and operators to curtail activities and in some cases shut down. The need for efficient, effective and safe transportation continues to expand, however, particularly as new markets develop domestically as well as internationally. It is significant that each low, whether reflected in delivery of new aircraft or in hours flown by charter companies and corporate flight departments, in higher than the lows of previous cycle.
Business Aviation is an essential part of the US air transportation system, just as it plays an important role in the transportation capabilities of other nations throughout the globe. Growth in the USA is happening, possibly slower than the rebound following the economic and business recession precipitated by the terror attacks of September 11, 2001, but indeed reflecting a welcome recovery.