Brittle business - Business jet programme update

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These are tough times for business aviation. An industry that only 12 months ago was reporting record aircraft orders, lengthy backlogs and basking in one of the longest periods of growth in its history is now gripped by one of the darkest recessions for 70 years. The meltdown across the world's financial markets and the subsequent global economic recession has had a catastrophic impact on airframers. They have been forced to cut production and slash their workforces because of order cancellations and deferrals from cash-strapped customers.

In addition, the used aircraft inventory has reached a new high. A growing proportion of the world's business jet fleet is for sale, dragging down the prices of pre-owned and new aircraft. This contrasts to a year ago, when owners and deposit holders could command jaw-dropping premiums for their business jets, particularly large-cabin types.

The business aircraft sector "has been hit harder by the economic crisis than any other aerospace market. After unprecedented growth, the market is falling at an unprecedented rate," says Richard Aboualfia, aerospace analyst with the US-based Teal Group. "All meaningful indicators - utilisation, prices, used aircraft availability and corporate profits -indicate a prolonged and painful downturn. Financing business jets has also become more difficult, while delivery numbers are falling fast, and we won't see a recovery to the 2008 peak level for many years to come."

cessna
 © Cessna

Aboualfia's pessimism is reflected in Teal's latest market forecast for the industry-to be released at EBACE -in which it predicts total production of 12,768 business aircraft worth $195.7 billion between 2009 and 2018, including 9,300 business jets, 575 corporate versions of jetliners and regional jets and 2,893 business turboprops. The projection has been lowered significantly since its previous market outlook published 12 months ago, which predicted production of 18,400 business aircraft over the proceeding decade.

Business aviation has been further undermined by a verbal and psychological drubbing. What started as a pummelling by the national press and Washington politicians - over the misguided use of private jets by the chief executives of three US car giants while seeking a financial bailout from Congress - rapidly turned into a witch-hunt. Public opinion turned against all operators of business aircraft and they suddenly became symbols of profligacy and elitism for their accusers.

The industry has come out fighting, however, with an array of campaign weapons designed to raise the profile of business aviation and to hit back at its critics. "Preference for, and acceptance of, business aircraft will return when world economic growth resumes," says Aboulafia. "The past 13 years have seen business aviation transformed from a backwater market to a key part of the aerospace industry."

BOMBARDIER

For Bombardier, maker of the Learjet, Challenger and Global families of business jets, this latest downturn is marked by its suddenness. "They were such heady days last year and then very quickly the downturn was upon us," says Bombardier Aerospace president Steve Ridolfi. He says the lower end of the product line - the Learjet 40XR/45XR - was hit first, but the impact has been felt across the range of products.

In the fourth quarter of fiscal year 2008-9, the Canadian airframer saw its inventory of unsold white tails surge from three to 19 aircraft. "There are a number of companies large and small as well as individuals which are in deep difficulties and are no longer able to afford take delivery of their aircraft," Ridolfi says. "We have, however, managed to find buyers for some of these aircraft."

 © Bombardier

Bombardier says it has conducted a "deep-dive" analysis of its backlog, seeking to move up customers who want jets earlier. Their purchases could replace orders by earlier customers who can no longer afford them."How we react to this crisis and to our customers is crucial," Ridolfi says.

To date Bombardier has slashed 4,000 jobs - equivalent to 14% of its workforce - and is looking to deliver in 2009 25% fewer than the 235 business jets delivered in the past year.

"The industry has been through a number of downturns - the last one in 2001-2 was severe as well. Thankfully we've learned from our experiences by building our cash reserves and continuing to foster a solid product development strategy," says Ridolfi.

One such programme with which Bombardier is hoping to steal a march on its rivals is the Learjet 85-a full-scale mock-up of which will be on display at EBACE. The eight-passenger midsize business jet is a significant step for Bombardier: it is the first clean-sheet Learjet design in more than a decade; the first all-new platform launched by the Canadian airframer since its super midsize Challenger 300 in 2000 and the first all-composite business jet to be certificated under US Federal Aviation Administration Part 25 rules. Ridolfi says the Pratt & Whitney Canada PW307B-powered Learjet 85 is expected to be the airframer's largest, fastest - at Mach 0.82 - and most expensive Learjet model when its enters service in 2013.

Bombardier is also set to fly for the first time in July a Global 5000 super-large business jet equipped with the Global Vision cockpit. The flightdeck incorporates a new integrated avionics suite based on Rockwell Collins' new Pro Line Fusion architecture in place of the legacy Honeywell Primus 2000XP and will be available from 2011. Headlining Global Vision will be Rockwell Collins' new synthetic vision displays, which will be shown across the entire primary flight display. Global Vision avionics will also include personalised formats of display information, electronic checklists, maps with graphical flight planning, Rockwell Collins MultiScan weather radar and an integrated cursor control panel with trackball cursor, says Bombardier.

 Click on image to see full size table

"We are constantly looking at way to improve our product line to keep our customers happy. This also extends to the servicing and support business, which we are always striving to improve. But what worked well last year has to work twice as well today," says Ridolfi.

CESSNA

This sentiment is shared by Cessna, maker of the Citation series of business jets, with over 6,000 of the types delivered to date.

The Wichita-based airframer earlier this year announced plans to slash its production target for 2009 from 535 Citations to 375 and cut its workforce by more than 4,000. And continued declining demand for business aircraft has forced another downwards revision in production rates for 2010, accompanied by up to 700 more layoffs.

"We are in a situation where we have to reduce production to bring supply in line with demand," says Cessna's senior vice-president of marketing Roger Whyte.

He blames the recent "unfair" demonisation of business aviation by members of the US political establishment and popular press for some of the industry's woes. "The recent campaign by the ill-informed against owners of business aircraft is unjust. Business aircraft are used for a multitude of missions from transporting corporate executives to business meetings to transferring poorly children to hospital. People will always need to fly," he says. To counter the negative publicity, Cessna earlier this year launched a marketing initiative designed to extol the virtues of business aviation and repair the damage to industry's once esteemed reputation. "We have to put the record straight," says Whyte.

cessna 
 © Cessna

The knock-on effect of the destructive crusade and the economic turmoil has prompted Cessna to suspend development of the large-cabin Citation Columbus.The Encore+ business jet will also be phased out, Cessna says, because of slow sales of the light jet and the arrival of its newest stablemate, the CJ4 . The last aircraft will be delivered in the second half of the year.

The six-passenger CJ4, now in the final stages of flight-testing, "provides essentially the same fuselage size and performance as the Encore+, but offers a state-of-the-art flightdeck, a modestly swept wing, uprated Williams International FJ44-4A engines and a cabin designed for enhanced productivity", says Cessna. The CJ4 is on track for type certification this year, with deliveries beginning in 2010.

Whyte says that despite the downturn, Cessna's backlog is robust and the airframer is continuing to deliver aircraft across the globe where international sales now account for more than 50% of its orderbook. He says the Citation family is courting the non-executive markets, including the training and aerial work sectors: "We delivered two [superlight XLS+] to Turkey in April that will be used for airways calibration missions and have orders from training schools in the Far East."

Cessna will also deliver in July the 200th Mustang very light jet - a model, Whyte says, "which is holding up well in the economic crisis". He admits that the downturn has put a greater squeeze on the finance pipeline, although he suggests that opportunities are still available for buyers. "In absolute terms it is more costly to buy aircraft, but some companies are offering finance," says Whyte.

DASSAULT

Dassault will be hoping to take its mind off a desperate start to the year - business jet cancellations outweighed orders by 27 in the first quarter - by celebrating the certification at EBACE of the Falcon 2000LX, the latest, blended winglet-equipped and longer-legged version of its large-cabin twinjet. A series of technical hitches, including concerns over the design of the leading-edge slats, had delayed planned certification of the $29.9 million jet from 2008.

The 2000LX joins the $38.2 million 900EX trijet - due to be replaced by an LX version in the middle of next year - and the $46.9 million long-range flagship, the 7X, certificated in 2007 and for which Dassault has taken 250 orders and delivered more than 30 examples. It also offers lower-specification, and fairly slow-selling, DX variants of the 2000 and 900.

 © Dassault

Although the family-owned French airframer has not made the swingeing workforce cuts forced on most of its US competitors, it has brought outsourced manufacturing in-house, shut production several days a month and encouraged some early retirement. Olivier Villa, senior vice-president of civil aircraft, says: "We are reviewing the situation weekly."

Orders fell from 212 in 2007 to 115 last year - including 23 from its biggest customer NetJets. However, the previously buoyant market will cushion Dassault from some of the worst effects of the downturn this year. It finished 2008 with an order backlog of 489 and this year expects to deliver between 80 and 90 aircraft, up from 72 last year and 70 in 2007. That is a lot fewer than Dassault had been predicting at the height of the market. It had been planning early last year to ramp up production in 2009 to 10 aircraft a month.

Villa says that with many customers struggling to sell aircraft in a depressed secondhand market, there has been a lot of pressure to defer deliveries. The company, he says, will be happy to finish 2009 with net positive orders.

However, with EBACE approaching, Villa says he sees some evidence that "things are getting stabilised". He adds: "The pre-owned market is bottoming out. There seem to be more sales happening as vendors are unwilling to drop prices any more. There is hope, but it is very difficult to forecast."

One of the victims of the nervous market appears to be its "Future Falcon" super-midsize jet, a replacement for the out-of-production Falcon 50EX at the bottom of the airframer's range. Dassault has chosen the 10,000lb-thrust (45kN) Rolls-Royce RB282-3 to power the aircraft and talked about a 2012 service entry, but there will not be a formal launch this year.

"We are still committed to the programme," Villa says, noting that Dassault will "look at what is happening with our friends", or rival manufacturers, before taking a decision to work towards freezing the design. Late 2014 now seems a more likely service-entry target.

EMBRAER

Embraer continues to press ahead with the development of its new Legacy 450 and 500 business jets despite the market conditions. "We are sticking to the schedules and hopefully in 2012 and 2013 when the 450 and 500 enter service [respectively] the market will be on the road to recovery," says Embraer's vice-president for executive aircraft Luis Carlos Affonso. The joint definition phase and preliminary design review for both aircraft is complete and the critical design review is scheduled for early next year. "The aircraft are advancing well and the timeframe for the first flight of the 500 is earmarked for the second half of next year," Affonso adds.

embraer legacy 450
 © Embraer

The Brazilian airframer is still a relative newcomer to business aviation, launching its offensive four years ago when the Legacy 600 was its only product. Embraer has successfully identified market niches across the business aviation spectrum in which it has introduced "great aircraft for great value", says Affonso. "By expanding our product line we are able to attract new customers and retain customers within the Embraer family."

The product line also consists of the Embraer 190-derived Lineage 1000, the super-midsize Legacy 600 - a derivative of the ERJ-135 regional jet - the Phenom 100 very light jet, which has just received European certification, and the Phenom 300 light jet, which is earmarked for approval later this year. The six-passenger aircraft, which is poised to complete its US-based lightning and natural icing testing campaigns, is to make its EBACE debut alongside the Phenom 100.

Affonso admits the financial crisis has hit orders and deliveries of its business jet family. "Sales of new aircraft are very slow - these are very challenging times," he says. Affonso, unlike Cessna's Whyte, believes the finance markets are constraining the industry. "There is less money available to buy aircraft and what is available is being lent at much higher interest rates than before and the downpayments are now as high as 60%," he says. Another contributory factor in the downturn is the vast numbers of aircraft available on the secondhand market. "A year ago around 25% of aircraft in the used inventory were less than 10 years old. Today, that figure has grown to half. This is equivalent to one-fifth of the global business aircraft fleet, which has created tough competition for new aircraft," says Affonso.

He admits, however, that the Phenom 100 - with around 12 in service - the Phenom 300 and the Lineage, which is scheduled to enter service this quarter, have been largely unaffected by the burgeoning used aircraft inventory "as the aircraft are so new", but the Legacy 600 has been hit badly with a number of customers cancelling their orders in the past few months. Last year Embraer delivered 33 Legacy 600s, but this year Legacy production will be cut by more than 50%, with only about a dozen aircraft delivered. Embraer has not produced fewer than 13 Legacys since 2002, the year the aircraft was certificated.

The Phenom orderbook is still holding up at 800 orders and the Lineage at 20 orders, he says, but the tallies for these new types have wobbled. "We have received a number of cancellations and deferrals for the Phenoms, notably from fleet customers who believe their business models will not grow as quickly as they thought," says Affonso. However, he concedes there are enough customers willing to move up in the queue and take earlier slots.

The São José dos Campos-based airframer plans to build 110 Phenoms this year - including around three 300s - down from the 120-plus originally planned.Embraer has already laid off 4,300 workers - 30% of its commercial and business aircraft workforce - "an inevitable outcome of these challenging times", says Affonso.

EMIVEST AEROSPACE

Sino Swearingen Aircraft owner Emivest Aerospace is gearing up to fly the initial production SJ30 light jet, the first of five or six light jets the company plans to fly, certificate, complete and deliver this year from its final assembly site in San Antonio, Texas. The manufacturer had previously delivered only two SJ30s since certificating the aircraft in 2005.

emivest aerospace 
 © Emivest Aerospace

One of those is being used as a demonstrator and flight training aircraft in San Antonio. Emivest became Sino Swearingen's majority owner last year after it bought an 80% share of the company from Taiwanese investors. Along with restarting deliveries, Emivest has been working to optimise production of the five-passenger Williams FJ44-2A-powered twinjet in an attempt to attain a production rate of 45-50 aircraft a year by the end of 2010. As part of the optimisation, Emivest will transfer fuselage, vertical tail and rudder production from its Martinsburg, West Virginia site to another location, possibly San Antonio. In return, Martinsburgwill produce the wing control surfaces now built in San Antonio.

Emivest's first aircraft, serial number 8, will be delivered to a private company in southern California, the first of three jets it has ordered. Emivest says the orderbook is steady at 250 orders for the $7.25 million jet, a backlog representing 24-30 months of production.

GULFSTREAM

At Gulfstream, declining orders for its midsize and large-cabin business jets have forced the Savannah, Georgia-based airframer to slash 1,200 jobs and consider further action if the downturn deepens. "The mid-cabin sector has been worst hit," says Gulfstream president Joe Lombardo, "due to the price point of the G150 and G200". Production of these two models is expected to fall this year to 24 aircraft from 32 in 2008.

"We are producing fewer 150s than 200s", he says. Production of the large-cabin G550 and G450 will fall from 94 to 73 aircraft. "The market has soured. What sets this downturn apart from previous ones is that people are unable to find the money to buy new aircraft," says Lombardo. What is also problematic in today's climate, he concedes, is the difficultly faced by existing owners in selling their aircraft on the used market to allow them to move up to a new model."It has become very difficult to predict the market values of aircraft, but we are watching and waiting for signs that it is bottoming out," says Lombardo.

gulfstream
 © Gulfstream

Meanwhile, Gulfstream is forging ahead with development of the ultra-long-range G650 and super-midsize G250 business jets. "We benefit from having General Dynamics as our parent as it believes in the strategic value of product development. It is vital that we keep our eye on the ball," Lombardo says.

Launched last year, the G650 is described as the largest non-airliner business jet. The aircraft has an array of sophisticated electronic systems for use by pilots and passengers and will have a maximum operating speed of Mach 0.92 - edging out the Citation X for the title of the world's fastest and largest business jet.

"The first test article is waiting for its wing [from Spirit AeroSystems]," says Lombardo. The aircraft is scheduled to make its first flight later this year, leading to certification and service entry in 2011 and 2012 respectively.

Development of the G250 - a replacement for the G200, formerly the Galaxy business jet - is running in parallel. The aircraft is being jointly developed by Israel Aerospace Industries, which also partnered Gulfstream on the midsize G150, which was certificated three years ago. The first G250 test aircraft is also awaiting its wing from Spirit AeroSystems and is "expected to fly before the end of the year", leading to certification and service entry in 2011, says Lombardo.

"We will continue to invest in research and development and new technologies. We remain active in sonic boom suppression research and continue to work on advanced cabin concepts," Lombardo adds.

HAWKER BEECHCRAFT

Derivative product development remains at the heart of Hawker Beechcraft's strategy. "This is the future lifeline of the company," says Hawker Beechcraft president of commercial sales, Brad Hatt. The company has not developed a clean-sheet design since the super-midsize Hawker 4000 (formerly the Horizon), which entered service a year ago after a 14-year development programme. "Our goal is find ways to increase performance and reliability of the aircraft across our product line while lowering the operating costs for our customers," says Hatt. The past few years have seen a flurry of upgrades to the product line.

"We've upgraded the engines on the Beechcraft C90 and the King Air 200 and we've upgraded all three King Airs with Collins Pro Line 21," says Hatt.

hawker-beechcraft-4000
 © Hawker-Beechcraft

In 2007 Hawker introduced the Hawker 750, 900XP, the King Air B200GT and the C90GTI and last year saw the launch of the King Air 350i, Premier II and 450XP business jets. The 350i features a package of interior upgrades to the 350 - improved lighting, reduced cabin sound levels, more space, more luxurious seats - that Hatt believes will appeal to business jet owners as well as owners of older King Air variants. The $6.5 million aircraft - the first turboprop to offer the Rockwell Collins Venue integrated cabin management system - is scheduled for certification and service entry later this year.

Hatt says the King Air family of twin turboprops, which have been around since 1964 with more than 6,000 aircraft delivered, provide greater fuel efficiency on a fuel cost per kilometre basis than small jets and are appealing in today's high fuel cost environment.

The Premier II is an upgraded version of the six-seat Premier IA, itself a revamp of the Premier I that entered service in 2001. The Premier II will have winglets - which increase wingspan by 330mm (13in) to 13.89m - and feature two 3,000lb-thrust Williams International FJ44-3AP engines, replacing the less powerful 2,290lb-thrust FJ44-2As of the Premier IA. The new model will have a 20% increase in range to 2,780km (1,500nm) with a pilot and four passengers. The aircraft is scheduled for service entry in the second quarter of 2010.

Meanwhile, the Hawker 450XP gains Collins Pro Line 21 avionics and more powerful Pratt & Whitney engines, setting it apart from the 400XP, which it will replace when it enters service in mid-2010.

Hatt concedes that Hawker Beechcraft has been struck by the severity of the downturn. "There is no denying that the financial markets are putting a squeeze on aircraft sales," Hatt admits. "There has been a 180° shift in the market since last year, but what sets this downturn apart from others I have experienced is the severity and speed with which it has happened. By October last year the market had fallen off a cliff," says Hatt. Hawker Beechcraft has cut its workforce by 2,800 to keep pace with falling production rates. "Booking levels for our aircraft are down and we have received a number of cancellations and deferrals," says Hatt.

PIAGGIO

For fellow twin turboprop manufacturer Piaggio Aero Industries, this financial crisis has affected the psychological and economical attitudes of business aircraft buyers. "Customers know that if the crisis deepens they are going to get something a lot cheaper, so they wait," says Piaggio chief executive Alberto Galassi. "This downturn is global. No country is unaffected and even if customers are interested in purchasing an aircraft they are finding it very difficult to raise the cash - it's a perfect storm," he adds.

Galassi says that the P180 Avanti II has been less affected by the recent pillorying of business aviation. "The Avanti flies below the [publicity] radar. With 183 aircraft in service it seems to be a politically correct aircraft for the time. It doesn't give off an image of privilege and luxury but of efficiency and utility - it ticks all the boxes," says Galassi.

piaggio avanti ii
 © Piaggio

Nevertheless, Piaggio's order tally has been hit. "We have 87 orders for the Avanti, but have lost around 10% of the total to cancellations and deferrals," says Galassi. "We are planning to deliver 30 aircraft this year, the same as 2008, but five fewer than we originally planned," he adds.

The popularity of the Avanti has spurred Piaggio to develop a family of three business jets that will be bigger, Galassi says, than the Avanti. "Our shareholders [including India's Taj Air and the Abu Dhabigovernment] are keen to expand the Piaggio product line," says Galassi. The first aircraft could be unveiled next year.

AIRBUS

At the very top of the business aircraft spectrum the economic fall out has brought mixed fortunes. Airbus, which offers the A318 Elite, A320 Prestige and A319 Airbus Corporate Jetliner family of VIP single-aisle airliners says:"Sales have slowed since the downturn began, but our orderbook is holding up, with 100 single-aisle and 50 widebody orders - including around 15 A330-200s and one A380. We plan to deliver 25 aircraft this year." The European airframer concedes it now "much tougher"to sell airliners.

airbus
 © Airbus

"But we have received minimal deferrals and cancellations and continue to make headway in key markets, particularly the Middle East," it says.

BOEING

Demand for high end business jets has fallen at a striking rate in some regions. "There has been a dramatic wealth loss in areas where our business was very strong - particularly Russia," says Boeing Business Jets president Steven Hill. "Here the country has faced a severe market crash. Privatisation has also been scaled back and personal wealth has been hit badly. The Russian phenomenon is over for the time being," says Hill.

He says there are 10 BBJs on the used market, many of which were owned by Russians, and two green aircraft whose owners can no longer afford to take delivery. "We have also had two 787 VIP cancellations in the past six months, one from a Russian customer and the other a Chinese buyer," says Hill.

 © Boeing

On the plus side, he says, aircraft availability has altered dramatically from a year ago. Then, the nearest available BBJ slot was four years ahead. "With an adjustment in our delivery schedule you can get a BBJ in 2010 and this is helping to clinch sales, particularly in China where we expect to grow our market share this year and next," says Hill. Here the demand is particularly strong for the BBJ3. This aircraft, based on the 787-900 and certificated last year, offers a maximum rage with five auxiliary fuel tanks of 9,920km.

Hill says Boeing has a backlog of 54 narrowbody and widebody VIP aircraft and has delivered 114 aircraft. "We plan this year to sell up to eight BBJs/BBJ2 and BBJ3s and two widebodies to Middle Eastern customers. We have 13 787-8/9s, with the first aircraft earmarked for delivery in 2012." And hehopes to get the go-ahead this year to launch the BBJC, a BBJ with a side cargo door.