Demand for widebody VIP completions has slowed considerably following an order spike a few years ago for Boeing Business Jet (BBJ) versions of the 787 and 747-8 Intercontinental.
With market recovery for green completions largely dependent on oil prices and an improving global economic picture, completion houses are busying themselves with refurbishing older twin-aisles, as they wait to see whether orders start to materialise for the recently launched Airbus ACJ350 XWB.
Lufthansa Technik (LHT) took the decision this year to reduce its widebody lines at Hamburg from three to two, to reflect shrinking demand for VIP cabin completions in China, the Middle East and Russia.
“The completion market is currently slowing down,” says Wieland Timm, vice-president of sales, VIP and special mission aircraft at LHT. The German company has completed two 747-8I BBJs and aims to finish its third by the end of this year. But Timm notes that since the rush of orders that followed the announcement of this programme, and a spate of 787 BBJ completions, “such requests have been very limited”.
“Recovery of this market in the next years depends on the oil price – most widebody [VIP demand] is in the Middle East region. If the oil price goes up, they will buy,” he says, adding that the 747-8I BBJ completion market peaked in 2011-12.
During this period, he says, “there was such high demand that lots of customers didn’t get a slot in time and they waited up to a year for a slot in a completion workshop because there was not enough capacity”. Four years on, the opposite is true, he adds, with “lots of completion centres” now competing for not enough business.
In the near-term, LHT has signed a contract for two used aircraft – an A340 and an A330 – for completion in 2017 and 2018, and Timm says narrowbody completion demand is “compensating” for the widebody slowdown. Further out, the company is “well-prepared” and “waiting for the first customer” to sign up for the VIP version of the A350.
“Up to now nobody has bought one, but there are campaigns. We hope we can find a customer that buys a green one,” Timm says. At EBACE earlier this year, LHT unveiled an interior concept for the A350 VVIP which includes a spa area, a cinema-sized screen and a novel lighting system that illuminates the ceilings and walls.
Airbus launched the ACJ350 in May. It features 2,910ft² (270m²) of cabin space and can fly 25 passengers up to 10,800nm (20,000km). Airbus will pre-equip the carbonfibre fuselage with hundreds of attachment points, which it says will “greatly simplify the work of cabin outfitters”.
Lufthansa Technik has unveiled an ACJ350 interior concept, but says critical Middle East hinges on a rise in the oil price
Lufthansa Technik
The ACJ350 is being “heavily promoted by Airbus for green completions”, says Bernd Schramm, group chief operating officer at AMAC Aerospace. The Swiss company now “feels comfortable” to work on the aircraft, as well as the 787, but admits to some doubts when the 787 BBJ was launched, due to the nature of the new materials used in the aircraft.
“There were some restrictions on the design approach [for the 787] because it was a new aircraft with new materials, so it was not so easy to install VIP interiors,” says Schramm, adding that it was necessary to work more closely with Boeing than in the past, and the same will be true with Airbus on the ACJ350.
“We were reluctant in the beginning when the 787 came out because we were not confident we could do all the work with limited information from the OEM,” he notes.
Schramm agrees that the widebody VIP completion market has slowed considerably, a situation amplified by the “boom in previous years” when the initial 747-8Is came on the market for completion.
AMAC is currently working on a 777 VIP completion – a government aircraft scheduled for delivery in the first quarter of 2017 – and does not normally tend to work on multiple widebodies at the same time.
“We had a 747-8 before and we had two 777s overlapping for a certain period. But one widebody and two to three narrowbodies is normally what corresponds to our capacity,” says Schramm, adding that there are no plans to expand from this at the moment. “We’ve always said from the beginning that on VIP completions there is a risk in boom times that you will overload yourself, and we’ve always said we want to limit completion work to three to four aircraft.”
Arnaud Martin, executive vice-president operations at Comlux – which this year unveiled a widebody extension to its Comlux America operation in Indianapolis – also says that since the “bump in the market a few years ago” for 747-8Is and 787s, VIP orders for green widebodies have been few and far between. However, demand for refurbishments on older models is keeping things ticking over in the interim.
“The widebody market has restarted on secondary aircraft – the 777 and A330 are still very good aircraft,” says Martin. “There is a lot of demand on the A330 and 777 but not a lot of demand at all on brand-new aircraft. This market will probably start [to come back] one or two years from now.” This will coincide with the first available slot for a green ACJ350, he adds, noting that until then demand will be “mainly for second-hand aircraft”.
Comlux America’s decision to inaugurate a new widebody hangar in Indianapolis earlier this year may seem at odds with the current demand situation for VIP twin-aisle completions, but Martin points out that the facility can be used for other purposes.
“We expanded our facility to make it capable of handling widebodies, but we don’t have a dedicated widebody hangar – it’s versatile,” he says.
Comlux is currently working on an A330 VVIP aircraft for an unnamed private customer – a two-year project that is scheduled for delivery at the end of next year. The aircraft features a “very unique design”, says Martin, and will carry 40 passengers. The company also has a possible A340 “in the pipeline”, along with a potential A350 deal, as well as “some interest and discussion” over “a couple of 777s”, although Martin does not believe the 777 will be its next project.
The market for VIP widebody completions in key regions, such as China, Russia and the Middle East, is “much softer than it was” for various reasons, says Martin. He describes the Chinese market as “very up and down”, because people there are “under the scrutiny of the government and buying such a big aircraft is almost impossible”.
Meanwhile, the Middle East – traditionally the biggest VIP aircraft market – is in “restructuring mode” because countries are “running a little bit out of money due to the oil price”, and in Saudi Arabia “people are in standby mode thinking who will be the next king”, he says.
Demand from wealthy individuals in Russia has also dropped significantly. “The business we’re doing there has reduced by 50% in the last two years,” Martin says.
Bucking the trend of completion houses pointing to a slowdown in the widebody VIP market is Jet Aviation, which instead sees a return to stability.
“The market is coming back and stabilising at pre-spike levels,” says Jet Aviation vice-president completions sales and marketing Matt Woollaston, who describes the 747-8 and 787 order spike as “an anomaly” that should not be used for comparison purposes. “There is a reasonably stable flow of green completions and we’ve got a pretty healthy order book moving forward. The refurbishing market is increasing because the downturn in the Middle East is driving demand to hold on to the assets they have and refurbish them.”
While he sees reasonable stability in the green completion market, Woollaston does not expect to see a “massive surge” in either 787 or ACJ350 orders for the next several years. “It will be four to five years before people start ordering these aircraft in stable numbers. There will be the odd aircraft over the next one to three years,” he predicts. “In the meantime, we’re seeing the A330 as a very popular platform, along with the 777. There has been a decline in the A340 and 747 markets as those production lines run through to maturity.”
Airbus Corporate Jets says it has sold “more than 10 VIP A330/A340-family aircraft in the past decade”, but does not provide a more detailed breakdown. For its part, Boeing Business Jets’ sales data for the past two decades shows orders for three 747-400s, eight 747-8s, nine 777s and 15 787s.
Jet Aviation is currently working on an A330 and a 787, and will be “inducting an additional A330 and 787s in the near future”, says Woollaston, adding that the company can expand and contract capacity to match market demand. “We have the ability to surge – our available hangar capacity extends beyond our primary hangar in Basel to additional hangars. But we’re pretty careful not to overcommit.”
All players in the VIP completions sector agree that one of the most common refurbishment requests is for upgraded in-flight connectivity solutions, although Schramm says demand for this is “slower than before, but continuing”.
GDC Technics has invested heavily in fitting in-flight connectivity systems, and is in the process of developing supplemental type certificates for the installation of Honeywell Aerospace’s JetWave Ka-band hardware on various aircraft types. On the widebody side, GDC aims to complete approvals on the 747-300/400 and 777-200/300 in the first quarter of 2017, and on the A330 and A340 in the third quarter of next year.
The company’s general partner, Mohammed Alzeer, told FlightGlobal during EBACE in May that GDC’s decision to invest $20 million in connectivity solutions was driven by the fact that “90% of private aeroplanes fly with outdated connectivity”.
Comlux’s Martin agrees that it is vital for completion centres to be as up-to-date as possible on the technology behind in-flight connectivity systems. “It is very important to master this type of technology if you want to be in the market,” he says. “The rest is more about design, but customers really want high-tech aircraft with huge capability in terms of connectivity.”
Keeping abreast of such complex and constantly evolving technology is challenging, as Woollaston points out. “There is strong demand for state-of-the-art connectivity and the challenge to the completion market is the pace of change of technology,” he says. “It’s all about having the ability to understand what’s on offer and how to customise it.”
Alzeer believes that having the ability to engineer and install such complex systems makes GDC stand out from competitors in what he admits is an overcrowded market. Completion houses have mixed views on whether this overcapacity will lead to consolidation. Schramm, for instance, says he does “not see big opportunities for consolidation”, because of the cyclical nature of the business.
“This is not the first time [the market] has been down and last time we didn’t see much consolidation,” he says. But he acknowledges that “the slower the market, the higher the competition and the more aggressive the approach”, therefore, “it helps when you have a good reputation and you deliver quality on time and on budget”.
With this in mind, Schramm says that AMAC feels “in a strong position”.
Martin agrees that “there is not enough business for completion centres in the market” and is of the view that if the situation does not change soon, some kind of consolidation could be seen.
“If the market does not start again in the next few months there will most probably be some restructuring activity,” says Martin.
Jet Aviation has already gone through a “metamorphosis” of its own, following its acquisition by General Dynamics in 2008, and Woollaston believes that having a “strong, robust parent company” puts it in a good position.
“We will see a bit of movement in the competitive landscape – standard market forces would suggest there is going to be movement,” he says. “From a competitive standpoint we’re in a pretty healthy position, but there is no way we’re being complacent.”
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Source: Flight International
