EBACE: Ageing regional jets tipped for important future

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Once, the notion of a cost-conscious VIP jet operator seemed paradoxical, but the shattering financial crisis of 2008 and subsequent global recession have tightened even the highest rollers' purse strings.

This had led to a redoubling of efforts to market VIP conversions of regional jets, not least on the part of BAE's regional aircraft unit, which completed three sales of Avro Business Jets in 2009 and is hopeful of sealing another three to five deals this year.

BAE Systems Regional Aircraft argues that its large-cabin, four-engine BAe146/Avro RJ-based business jet offers a cost-effective candidate for most business jet missions. London Stansted airport-based Inflite Engineering Services has been selected by BAE as its preferred supplier of ABJ modifications in return for guaranteeing to keep at least one conversion slot available.


Tailwind has completed three CRJ200 conversions on spec, and sold one of them. Picture: Tailwind Capital
Inflite is "one of the most experienced 146 Avro maintenance providers" - says BAE Systems' vice-president of Avro Business Jets, Stewart Cordner - and this gives it a natural advantage as a conversion house. "Generally speaking if you have your completion done you're going to go back to the same place for your maintenance," he says. The relative strength of the euro also aids Inflite's cause.

The partnership between Inflite and BAE originated after Bahrain's air force approached completion centres seeking a double "club 4" executive seating and large TV screen installation for an RJ85, prompting Inflite to seek BAE's help toward meeting the requirement.

"New-generation jets are replacing ours in certain areas, so we had to reinvent ourselves," says Cordner. The ABJ conversion programme is part of what the company terms a "high-five strategy" that seeks to market its out-of-production types as passenger, freighter, VIP, special-mission and waterbomber aircraft.

"This is far from a product that is following the normal profile of passenger/freighter/developed world/scrapyard," says Cordner. "Our goal is to really extend that line out."

Before marketing conversions, BAE had sold several brand-new Avro business jets off its production line. Buyers of these "Statesman" aircraft included the Queen's Flight (Royal Air Force 32 Squadron), Formula One motor racing supremo Bernie Ecclestone and the president of Uzbekistan.

 
ABJ conversions are part of BAE's strategy to reinvigorate out-of-production types. Picture: BAE Systems

WATCH THIS SPACE
With some conversion candidates, specifically BAe 146s, available at prices as low as $2.5 million, the ABJ conversion programme offers customers the option of devoting more budget to the interior of the aircraft and make use of the high level of interior space available, says Cordner. "Once I'm in the cabin on the aeroplane, I don't feel the aerodynamics and things like that; I can feel the interior," he says.

With new business jets, customers tend to resist any temptation to customise the interior to a great extent. There are, after all, residual values to worry about, and potential buyers may be put off by anything too wacky. With the ABJ conversion candidates, values have already dropped below the point at which residual values remain a concern, argues Cordner.

"The residual value is worth what the parts are worth," he says. "We can go ultra-whatever-you-want, and it's just got a lead time and a price." Even at the higher end of the range - roughly $10-11 million - ABJ prices are a fraction of the $35-40 million (or more) one would have to pay a manufacturer for a similarly sized new jet.

Cordner stresses the aircraft types' ability to cope with 6.5e_SDgr steep approaches and short fields as well as deficient infrastructure: they come with their own air stairs and a battery that allows the first engine to be started electrically without ground power, and can land on unpaved runways.

In seeking to counter negative perceptions of four-engine types, Cordner compares the engines with Pratt & Whitney's geared turbofan and explains the way in which the engines interact. "The thrust required is split over four engines, but it's not four identical engines," he says. "The two outboard engines drive the electrical power. The two inboard engines drive the hydraulic power." The engine's narrow inlet helps prevent foreign object damage, he adds.

As far as fuel burn is concerned, the benefits of twin-engined aircraft can only offset the additional price when utilisation exceeds 1,650h a year, whereas VIP aircraft typically fly 500-600h a year, says Cordner. "People ask 'why have you got four engines?' and we always joke 'because we don't have room for six'," he adds.

While ABJ rivals such as the Bombardier Global Express and Dassault Falcon 7X offer intercontinental capability, the duration of the average business jet flight is under 2h, says BAE, which acknowledges that it is short of its competitors in speed and range but argues that the gaps cannot outweigh the cost savings it can offer. Cordner puts the case succinctly. "Save yourself millions: have a fuel stop."

With its modest target of three to five deals a year, BAE is "not out to steal anybody's thunder", says Cordner. "We've just got a nice little market and it's slowly building up. We're really passionate and proud about our little thing - because it's the nearest thing we get to producing new airplanes again."

In 2009, BAE Systems sold an RJ100 to Abu Dhabi's Amiri Flight/Royal Jet, for conversion to VVIP format; a BAe 146 to UK-based Gill Airways, for deployment as a 46-seat executive shuttle; and a BAe 146-100 to conversions partner Inflite. Previous customers include Casino Rodos, the Dubai Air Wing, First Kuwaiti Trading and Construction and Ford Motor.

It was at last year's EBACE that BAE exhibited an ABJ for the first time - specifically, an RJ70 converted by Inflite for Hemus Air of Bulgaria. Intended for use by Hemus's parent company TIM, that aircraft had an interior designed by UK consultancy Design Q.

At this year's show, BAE intends to unveil two new interior design concepts for the ABJ.


Flying colours offers its own CRJ ExecLiner. Picture: Flying Colours 

NEW 50-SEAT LIFE
While BAE's Cordner believes the 50-seater market to be "dead", others disagree. Prominent among them is Project Phoenix, a Dubai-based company offering a regional-to-VIP Bombardier CRJ200 conversion programme, on which it has partnered Canadian completions house Flying Colours. So far, one Phoenix CRJ200 has been sold, to a Macau-based businessman. It was delivered in October.

Rather than converting aircraft on spec, Project Phoenix pursues a business model under which the process of sourcing an aircraft begins only after a sale has been made. "We keep a constant watch on what's available," says company president Mike Cappuccitti. "We're always talking to the suppliers to make sure we know what we can get it for, and what the conditions of the airplanes are. Clearly the way we contract is that if we can't find the right airplane then we don't go ahead."

He adds: "It's tricky, but thank God we had that business model because if we'd bought airplanes they'd still be sitting on the tarmac."

The timing of the company's launch, in late 2007, hardly proved fortuitous: Cappuccitti admits that "within months the crunch came and destroyed our major USPs [unique selling points]. We've more or less been positioning for the last two years."

There has been "a large increase in interest" in the Project Phoenix programme since last year's Dubai air show, says Cappuccitti. "We've seen a large increase in interest and we are in negotiations for several fleet sales - fleet sales being two or more airplanes."

The company's offering involves a full renovation, rather than a mere refurbishment, says Cappuccitti. "It's a very, very thorough maintenance workscope that we do and it's a brand-new customised interior," he says. "So, it's as good as, if not better, than the original."

At a minimum, a 96-month check is carried, and the aircraft - which has an 80,000 cycle life limit - will have its engines, auxiliary power units and landing gear "reset" to 4,000 cycles. Cappuccitti has previously put the price of a Phoenix CRJ at roughly 40% below that of a new Bombardier Challenger 850. Long-range fuel tanks are not included as standard equipment, and the aircraft requires about 1,980m (6,500ft) of runway for maximum weight take-off. This is the compromise that Project Phoenix has struck between optimising performance and optimising the cabin.

Lead times are running at "roughly eight months" from input to the completion centre so long as the aircraft fits a "baseline specification", says Cappuccitti. However, the first aircraft took considerably longer, at 14 months. This was partly a function of new US Federal Aviation Administration rules for preventing the potential for explosions in auxiliary fuel tanks and associated requirements for temperature shielding between the tanks and adjacent baggage areas.

Additionally, the aircraft had issues with its cabin management system, which required a rewrite of its software. "All the STCs [supplemental type certificates] on the baseline spec are now in hand, and that means there should be no reason for delays or for it extending beyond our quoted time," says Cappuccitti.

Project Phoenix will reveal details of a company restructuring, including the recruitment of a new chairman, at EBACE.

While it has ruled out any move into BAE aircraft, it is considering expanding into conversions of Dornier 328s.

Should it proceed, it will face competition with Oberpfaffenhofen-based 328 Support Services, which last year won FAA approval for its first VIP conversion for a US customer, Miami-based Aviando.

Either way, Cappuccitti offers an optimistic view of trading conditions. "There are definite indications that the pre-owned aircraft inventory available for sale is coming down, which is always a good indicator of the market improving," he says. "Prices are stabilising and everybody seems to think that this year they're going to start creeping back up again."

 
A tailwind cockpit. Picture: Tailwind Capital

COLOUR CHARTER
As well as serving as Project Phoenix's completions partner, Flying Colours independently offers it own CRJ200, branded the Exec­Liner, from its location several thousand kilometres away.

The Peterborough, Ontario-based company - which has been refurbishing Gulfstream and Dassault Falcon jets for two decades - developed its programme in response to a request from Indian fractional ownership company Club One Air. It has, over the course of five years, delivered seven ExecLiners, according to sales and marketing manager Eric Gillespie.

Another has been sold, and is in the process of being converted, and the company has purchased a further aircraft for conversion on a speculative basis. The work will be undertaken either by Flying Colours itself or by its St Louis-based subsidiary JetCorp.

To differentiate its conversions, Flying Colours has developed its own fuel system, which boosts the aircraft's range from 3,890km (2,100nm) to 5,550km, giving the aircraft transcontinental range. Gillespie characterises both his company's programme and that of Project Phoenix as "higher-end" conversions offering "great operating costs" in charter use. An eight-month lead time is possible.

The company, which will be exhibiting at EBACE, has had "numerous discussions" on whether to launch a conversion programme for Embraer ERJ-135 and ERJ-145 regional jets, but a firm decision on this is "still to be determined", says Gillespie.

Where Project Phoenix waits for the order before it sources the aircraft, Tailwind Capital takes the opposite approach. The Redmond, Washington-based leasing and remarketing company has completed three CRJ200 conversions on spec, and so far has sold one of them, to Netherlands-based charter operator Solid Air.

US completions specialist PATS Aircraft - provider of the auxiliary fuel system for the Challenger 850 - converted the first aircraft into executive configuration under its trademark Hemisphere 200XR.

Tailwind chief executive Joel Hussey notes that the market generally is "starting to pick up", with the higher end, comprising large-cabin aircraft, showing "resilience". The market for ultra-large-cabin aircraft, he adds, has been the quickest of all to bounce back, and inventories are dropping.

Consequently Tailwind is seeing "a lot more inquiries after a very slow period". Hussey attributes the changing tides to resurgence in equity markets and rising liquidity, as well as growing demand in the charter segment, for which the CRJ200 is a "very attractive asset". However, a challenge naturally arises from the high availability of young OEM equipment in the market, putting pressure on converted aircraft, which are by definition higher-time aircraft.

The CRJ200 was chosen as Tailwind's conversion platform because it "serves such a large segment of the market, in terms of mission profile" and is "a relatively straightforward conversion process to the OEM offering, the Challenger 850", says Hussey. He characterises the 850 as "a CRJ200LR with auxiliary fuel tanks and a corporate interior".

While Tailwind has no immediate ambitions to move beyond the CRJ200 in its conversions business, it is working on a lower-end or "light" conversion, which will be targeted at charter rather than VIP operators and priced below $10 million. It is also considering a medevac version, for which it has perceived a "real requirement" among Middle Eastern and Asian operators.

Jetcraft, which is assisting Tailwind in marketing completed aircraft, will be an exhibitor at EBACE. So too will Fokker Services, which offers CRJ700 and Fokker 100 conversions, the latter branded the F100EJ.

As ever, in the recession-hit business aviation market, necessity is proving the mother of invention.