Business Aviation Census: Winds of change

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Shifting tectonic plates under the world's financial markets and global economies have led to the most spectacular downturn in business and consumer confidence for decades, prompting industry observers to question if the good times are finally over for business aviation.

September has arguably been a watershed for global capitalism - on which the success of business aviation is almost entirely dependent. As the collapse and near breakdown of major financial institutions on both sides of the Atlantic has rocked the markets, panicked investors have run for cover and regulators and politicians are mounting the boldest financial rescue packages in living memory. An uneasy calm has been restored, but the economic well-being in many Western economies, notably the UK and the USA, is uncertain.

pilatus pc-12
 © Pilatus Aircraft

Business aviation manufacturers have built substantial order backlogs that should cushion any immediate impact from the financial debacle and have cleverly shifted their sales focus from the USA - traditionally the biggest buyer - to international markets. This strategy has paid dividends as these countries now account for over 50% of new aircraft sales.

"Determining the health of the business jet market can be hard," says aerospace analyst Richard Aboulafia. "Business jet backlogs aren't at all transparent, and this market, like any aviation market, can turn on a dime."

DELIVERIES PEAK

US corporate profits - the key long-lead metric - have lost their importance, he says, "since the international non-US market has gone from 25% to 55% of demand [in recent years]. However, given broader economic concerns and the credit situation, we're almost certainly heading for a deliveries peak in the next 18 months and a downturn after 2010."

Continued growth in the worldwide corporate aircraft fleet over the past 12 months reflects the appeal and endurance of this unique, innovative market that strives to sustain and stimulate demand through the introduction of new and upgraded models.

Flight International's 2008 corporate aircraft census - a barometer for the business aviation industry and compiled by Flight's ACAS database - reflects the industry's strong growth in the 12 months from 31 July 2007. It reveals the world's active turbine corporate aircraft fleet has climbed over 3% to 26,095 jets and turboprops, compared with 25,312 aircraft in last year's census. The total reflects around 900 out-of-production types that have been removed from the census this year having been parked, sold for spares or moved into a non-corporate/business/VIP role since the last listing.

Turboprops continued their resurgence, with the fleet climbing by 2% from 10,267 to 10,472. They have become increasingly popular due to escalating fuel prices that have persuaded the increasing pool of cost-conscious operators to switch to these more economical business aircraft. The worldwide corporate jet fleet has, however, seen double this rate of growth, climbing by more than 4% from 14,989 to 15,624 aircraft in 12 months.

Embraer again recorded the largest percentage increase, albeit from a small installed base, with a 25% rise in its jet fleet from 113 to 142 business jets - attributable to sales of its Legacy 600 business jet. Production of the super-midsize aircraft will climb to a peak of 38 aircraft this year, although from 2010 numbers are expected to fall to 24 aircraft a year. This will have little impact on Embraer's overall production scale in the coming years as its new business jets enter service with bulging backlogs, including more than 750 for the Phenom 100 very light jet and Phenom 300 light jet.

embraer phenom 100
 © Embraer

Production of the Phenom 100, scheduled for certification in the coming weeks, will increase from around 15 this year, including starting final assembly of the Phenom 300 on the same line. The midsize Legacy 500 is earmarked for service entry in 2012 and the midlight 450 a year later. At the top of its range, the large-cabin Lineage 1000 derivative of the 190 airliner is set to enter service late this year with two deliveries planned.

CESSNA DOMINATION

Cessna continues to dominate the fleet in deliveries and in-service numbers. The worldwide Citation inventory grew by 360 aircraft to 5,240, representing more than 17% of the worldwide turbine inventory and over a third of the global corporate jet fleet. The massive boost in the delivery tallies of the airframer's newest aircraft has propelled this fleet - the combined CJ1+ and CJ2+ light jet fleets more than doubled to 95 to 102, the CJ3 light jet total climbed from 164 to 233, the superlight XLS from 205 to 265 and the Encore +, which makes its census debut, has a tally of 25 aircraft.

Cessna plans to deliver around 470 Citations this year and over 530 next year - boosted by the service entry of its newest light jet, the CJ4 - although the manufacturer expects the market to soften after 2009. Cessna is diligently working to bring its new large-cabin Columbus 850 to market in 2012. It says it has already smashed its order target for the aircraft within months of its launch earlier this year.

Gulfstream has seen its in-service business jet fleet rise by nearly 9% from 1,559 to 1,680, including a 160% increase in the midsize G150 inventory to 49 aircraft, a 33% increase in the ultra-long-range G550 fleet to 174 aircraft and a 25% boost to its G200 tally to 168 super-midsize jets. This is expected to be replaced by a new offering in this sector, with a launch due at next week's National Business Aviation Association Convention in Florida. Gulfstream, keen to cement its position as a leading manufacturer of high-end business jets, launched its G650 ultra-long-range type earlier this year. This is being proclaimed as the fastest and largest traditional business jet and the one with the longest range when it enters service in 2013.

Bombardier's inventory of in-production business has climbed by 200 aircraft in the past 12 months, although its total in-service fleet has risen by just over 1% to 3,343 business jets, according to ACAS.

The super-midsize Challenger 300 fleet has increased by 56 aircraft to 197, while Challenger 605 numbers have rocketed from three to 35. The midsize Learjet 60XR makes its census debut with 26 aircraft, while the superlight Learjet 45XR fleet has risen by 31 aircraft to 113. At the top of the Bombardier range the super-large Global 5000 and ultra-long-range XRS fleets have risen by 18 and 22 aircraft respectively in the past 12 months.

Bombardier's out-of-production fleet has shrunk, however, by 119 as aircraft have been parked, sold for parts or removed from the census as they are no longer in corporate service. The Learjet 35A has seen the sharpest fall in numbers from 464 in 2007 to 369 today.

Like Bombardier, Dassault has seen its Falcon business jet tally rise by only a small number. Although deliveries of its popular in-service models have risen by 65 aircraft to 1,594, the declining numbers of out-of-production aircraft have offset notably the French airframer's corporate inventory, which shows an overall hike of only three aircraft. The corporate Falcon 20 fleet shows the sharpest decline, with another 48 aircraft retired, destroyed or removed from the listing.

The French company's philosophy of pitching its product line at the top end of the market continued to reap rewards as demand for Falcons is soaring. The large-cabin 2000EX fleet has risen by nearly 25% to 141, the 900DX from 10 to 18, the long-range 900EX from 177 to 195 and the Falcon 7X from six to 11 aircraft. Production of the ultra-long-range business jet has begun in earnest, with 40 aircraft earmarked for delivery next year and 42 in 2010. The census also shows a three-aircraft rise in the Falcon 50EX tally since last year's census as the last of the super-midsize business jets entered service. The aircraft will be replaced in around 2013 by Dassault's Falcon SMS, which is under development.

TOP-END EXPANSION

At the top end of the business jet market, Airbus and Boeing continue to expand their fleets of VIP-configured airliners. Boeing has seen its fleet rise by only four aircraft, to 250, offset by the fall in the VIP 727 and 757 fleet of five aircraft. BBJ numbers have risen by six aircraft to 102 - 89 BBJs and 13 BBJ 2s - although this tally could be greater if Boeing were willing to release more delivery slots to its business aircraft subsidiary. The upward delivery trend looks set to continue for the BBJ as it introduces next year its 737-900-based BBJs and VIP 747-8 and 787-8/9.

But the impact of these models on numbers will be negligible as the widebodies are in the main being acquired by customers seeking to replace older Boeing types such as the 747.

Airbus's Corporate Jetliner fleet has risen by seven aircraft to 75, boosted by a rise in A319 Airbus Corporate Jetliner and A318 Elite fleets by nine and two aircraft, respectively. Airbus has around 30 orders and commitments.

Hawker Beechcraft boasts one of the broadest product spans and has seen its fleet climb since the last census by 113 aircraft to 2,130. The biggest increases are recorded by the Premier IA light jet with a 75% climb to 109 aircraft, accompanied by a 22% increase in 400XP numbers to 199 aircraft and a similar rise in 850XP numbers to 83. The service entry this year of the Hawker 900XP - a longer-range derivative of the 850XP making its census debut - boosts Hawker Beechcraft's tally by 53 aircraft. The inventory is set for another injection in the coming months as deliveries of the super-midsize Hawker 4000 begin in earnest along with the shorter-range 750. The airframer has also introduced its latest evolution of the Premier IA, but it is unclear when the Premier II will enter service.

hawker 4000
 © Hawker Beechcraft

Hawker Beechcraft also retains its dominance in the turboprop market due to the unequalled popularity of the King Air. This ubiquitous twin turboprop represents half the world's twin-turboprop fleet at 5,501 aircraft.The in-production fleet has risen by 129 aircraft. This includes 48 350s and 38 C90GTs, boosting the fleet to 556 and 119 aircraft, respectively. The B200GT, which makes its census debut, boosts the tally by 43. But the total King Air inventory has fallen by 39 aircraft as earlier models such as the B200, C12C and UC12B are removed from corporate service.

Italy's Piaggio continues to see strong demand for its Avanti II, a revamp of the 20-year-old P180 twin-turboprop, with the inventory up by 28% since the last census to 161 aircraft. Demand is particularly strong for the seven-seat aircraft from fractional operators and Piaggio plans to boost annual production this year from 22 to more than 30 aircraft next year. The airframer is building a new factory to enable it to assemble up to 50 aircraft annually, which could coincide with the launch of a new member of its business aircraft family.

Single-engined turboprops are making significant fleet gains and manufacturers are responding to their resurgence, introducing upgrades to increase their appeal.

Heading the single-engined aircraft inventory tally is Pilatus, whose PC-12 fleet has climbed 7% to 750 aircraft, boosted by the popularity of the Next Generation PC-12, which entered service in May featuring a Honeywell Primus Apex avionics system and more powerful Pratt & Whitney Canada PT6A-67P engines. The Stans, Switzerland-based manufacturer plans to deliver 96 aircraft this year - up four on the previous year - and 105 in 2009.

MERIDIAN BOOST

The decision by Piper Aircraft to install the Avidyne Entegra integrated flightdeck as standard has boosted the Meridian single-turbo­prop fleet by 60 aircraft since the last census to 1,403. Piper's confidence in the business jet market and its growing Meridian customer base prompted the Vero Beach-based manufacturer two years ago to move into the jet market for the first time with the single-engined Piper Jet. The aircraft, which made its maiden flight in July, is scheduled to enter service in 2011 as projected demand for the new breed of personal jets take off.

Cessna has also seen its corporate 208 Caravan tally climb by seven aircraft since the last census, although the overall inventory has slipped from 558 to 550 over the same period as older models have exited the listing.

Bowing to market pressure, EADS Socata has introduced a glass-cockpit upgrade for its single-turboprop TBM850. The first Garmin G1000-equipped aircraft was handed over to a US customer in January. Fleet numbers for the high-performance aircraft have continued to climb since the last census, from 365 to 405 aircraft, and the airframer plans to deliver 60 850s this year. Socata is now being offloaded by EADS to French aerospace group Daher, which gives the Tarbes-based airframer and aerostructures company investment to pursue potential business aviation programmes that have been on the drawing boards for years.

The next 12 months is expected to nudge the single-turboprop inventory higher, with Quest Aircraft expected to ramp up deliveries of its 10-seat, Garmin G1000-equipped Kodiak this quarter. The single-turboprop utility aircraft, competitor for Cessna's Caravan, has a three-year backlog.

Success for single-engine turboprops has been at the expense of very light jets. Only two VLJ programmes have entered service as funding constraints have hampered development of seemingly popular models such as the Aviation Technology Group Javelin - production of which is suspended - and the Adam Aircraft A700, which has been acquired by Russian company AAI Acquisition.

Nonetheless, the first two entrants have made significant fleet gains. Cessna has seen its Citation Mustang fleet climb by 80 aircraft to 93, while Eclipse Aviation's Eclipse 500 tally has escalated to 188 from a 2007 census total of 21. But these are uncertain times for the Albuquerque-based company, which is battling the concerns of certification authorities in the USA and Europe while trying to assess the impact on its orderbook after the collapse of its largest customer DayJet's air-taxi operation.

For the full ACAS corporate aircraft lisitings click here


SECONDHAND SALES NO LONGER ROSY

These uncertain times are reflected across the used business aircraft market. Earlier this year huge order numbers and long delivery schedules drove demand and prices for pre-owned models to record levels.

Many analysts and observers say this market has started to soften, particularly at the bottom end, where the availability of light, superlight and midsize aircraft is increasingly widespread, forcing price tags to plummet. Separate reports released this month by JPMorgan and UBS Investment Research indicate that pre-owned business jet inventories continue to increase, leading both financial analyst firms to warn that deliveries of new aircraft could fall as a result. UBS reported that used inventories last month rose 4% compared with July, while JPMorgan says pre-owned inventories as a percentage of in-service aircraft rose to 9.8 % - marking a 52% increase since January and the highest level recorded since 2003. JPMorgan says: "Let there be no doubt the used market is rapidly falling apart, which should lead to a deteriorating market for new aircraft in short order."

"This has become particularly acute in the last four months," says ExecuJet vice-president of used aircraft sales Nicholas McHaffey. "Manufacturers are witnessing a downturn in sales of these models. In the used market anything below $10 million is not moving easily."

Small business jets are typically owned and operated by small to medium-size businesses, owner flyers and leisure travellers, McHaffey says. Most of these groups are nervous about the current economic climate and are deciding to defer that new aircraft purchase or have decided to sell existing aircraft.

In contrast, demand for large-cabin and ultra-long-range business jets is soaring, along with their price tags. Popular models including the Bombardier Global XRS, Dassault Falcon 7X and Gulfstream G550 are cushioned from the effects of an economic slowdown as the large companies and extremely wealthy individuals who own these types have chosen to acquire or retain them. "It's very hard to pick up a large-cabin aircraft on the used market," says Susan Sheets, president of the US National Aircraft Resale Association. "Aircraft that are coming on the market are being sold at a premium of several millions in some cases."

Growing numbers of customers unable to locate a used aircraft or unwilling to go to the back of a very long queue for a new model are increasingly acquiring earlier delivery slots at well above the aircraft's sticker price.

McHaffey agrees: "A Global XRS ordered two years at $50 million for delivery in 2009 is now selling for around $63 million. Many people are willing to pay this price rather than wait until 2014 for the next XRS delivery slot, for which they will pay around $60 million."

EMERGING MARKETS BOOST CORPORATE NUMBERS

The relentless appetite for corporate aircraft has shifted across the world's continents over the census period, ACAS reveals, buoyed by the booming economies of emerging markets that are helping to stimulate demand from business and leisure travellers and an expanding base of wealthy individuals.

The Middle East fleet has shown the most dramatic growth over 12 months, jumping by more than 30% from 276 to 359 jets and turboprops. Saudi Arabia continues to top the region's fleet tally with 114 aircraft, but the United Arab Emirates has witnessed the sharpest growth - its inventory has climbed more than 40% from 54 to 78 aircraft, spurred by the region's booming charter market.

Asia and the Pacific Rim are also gaining ground. This year's listing shows fleet growth of 20% and 5% respectively. Asia has made great strides on the back of the booming Indian market. Here the corporate inventory has escalated by 23 turbine aircraft since the last census, to 161 - representing more than 80% of the region's business jet and turboprop fleet.

Brunei, Samoa and Vanuatu make their census debuts, recording fleets of three, one and one aircraft respectively for the 758-strong Pacific Rim inventory. Malaysia has seen its fleet climb by a quarter to 23 jets and seven turboprops as it continues to grow in stature. The regeneration of Kuala Lumpur's Subang Skypark airport into a business aviation hub for the region is expected to lure more aircraft.

China continues to offer a cornucopia of opportunity for manufacturers, which have already made a significant impact on the region's business aircraft tally, ACAS reveals. The inventory has climbed since the last census by 19 aircraft to 94 jets and turboprops across its territories including Hong Kong and Macau. The government is making strides to improve the infrastructure and regulatory environment, but growth is slow and much still needs to be done politically and culturally to help airframers penetrate this lucrative but largely untapped market. Japan continues to see its corporate fleet decline - this year by five aircraft to 145. The country's refusal to endorse business aviation holds back the market despite attempts by the industry to ease regulation and allow access for business aircraft to Tokyo's major airports.

Industry can draw comfort from the European market, which faced similar challenges a decade ago. The continent - home to the second-largest business aircraft inventory in the world - successfully smashed the cultural and regulatory barriers that threatened to suffocate the market and has seen its inventory climb year on year as a consequence. This year's census records gains of more than 7% over a 12-month period, ACAS reveals, from 3,058 to 3,288 business jets and turboprops. The traditional markets of Germany and the UK have provided some of the richest pickings with fleet increases of 36 and 69 aircraft respectively. Portugal, the base for NetJets Europe's thriving fractional and block charter programme, has seen its inventory nudge forward by 16 aircraft this year to 175 aircraft.

The Isle of Man makes its census debut, recording 11 aircraft on its registry, boosted by the numbers of owners seeking a tax-efficient domicile for their aircraft.

Within this expanding continent the emerging countries of the former Eastern bloc continue to be lucrative for the manufacturers, lead by Russia with its unquenchable thirst for the latest technology.

This year's census paints a picture of the changing Russian inventory. Fleet numbers have fallen by half to 107 jets and turboprops as 105 Yakovlev Yak 40/42 and 49 Tupolev Tu-134/154 Soviet-era business jets are removed from the census. The decision by the Russian government earlier this month to slash the import duty on business aircraft will pave the way for further sales of Western-built business aircraft.

But it is still unclear whether this tactic will persuade Russian owners to remove their aircraft from less-constrictive and tax-efficient national registers, including Austria and Switzerland, where business jet inventories have climbed since the last census by 52 and 31 aircraft respectively.

Latin America - home to the third-largest installed base - is embracing business aviation in greater numbers. This year's listing reveals the turbine fleet has risen from 2,546 to 2,685 aircraft. Mexico continues its lead, according to ACAS, with its corporate aircraft inventory climbing by 19 aircraft to 773 over the 12-month period. Brazil, home to the largest concentration of turboprops outside North America, is close behind with 761 aircraft - 352 jets and 409 turboprops - an increase of 82 over last year's listing. Elsewhere in the region Argentina and Venezuela have made fleet gains of eight and 24 aircraft respectively, driven by a thriving economy and the need to gain access to remote areas.

North America continues to dominate the world's turbine fleet, but its overall inventory has risen by less than 2% since the last census, to 18,128 aircraft - testament that this increasingly fragile territory and becoming a less significant sales priority for traditional airframers. Canada saw its fleet numbers climb by 56 aircraft to 882 jets and turboprops, while the USA, which accounts for the bulk of the inventory with 17,246, has grown its fleet by a mere 56 turbine aircraft. The country's volatile finance sector and stagnating economy is hitting corporate profits and consumer confidence hard and fleet numbers are unlikely to rise significantly for some time.