The second LABACE exhibition in São Paulo this week will be staged before a prosperous Latin American business aircraft audience avid for new sales
The second annual Latin American Business Aviation Conference & Exhibition (LABACE) will be held this week in a climate of cautious optimism, fuelled by a business aircraft community hungry for new sales from this historically lucrative region.
LABACE, a partnership between the US National Business Aviation Association and its Brazilian equivalent ABAG, is returning to the Transamerica Expo Centre in São Paulo from 15-17 April and looks set to exceed last year's inaugural turnout. "We expect a 30% increase both for attendees and exhibitors," says ABAG executive director Adalberto Febeliano. Last year they totalled 2,900 and 88 respectively. The static display at São Paulo Congonhas airport will feature around 20 aircraft.
All the major business jet manufacturers, Bombardier, Cessna, Dassault, Embraer, Gulfstream and Raytheon will be out in force as will the main single-engined turboprop makers: EADS Socata, Ibis Aerospace and Pilatus Aircraft. Key helicopter builders, including Bell, Eurocopter and Robinson Helicopter, will also be touting their wares as the show organisers seek to cement LABACE as the sole business aviation showcase for Latin America.
The 15 countries which make up Latin America represent the world's third-largest business aircraft fleet after North America and Europe, with over 2,100 aircraft.Of these, 870 are business jets, accordingto the Airclaims CASE database, andmore than 1,230 are turboprops, says BuchAir UK.
Significantly, turboprops represent mainstream equipment throughout Latin America, particularly Brazil, due to their low operating costs and ability to access the plethora of short and unprepared airfields across this vast region that are unable to accommodate jets. This is in direct contrast to North America and Europe where the turboprop and piston-powered fleets are in decline.
The vastness of Latin America has fuelled a reliance on air transport to access large areas not serviced by the patchy airline networks, says Bombardier vice-president of sales for Latin America Fabio Rebello. This, in turn, has spawned a deep-rooted and widespread acceptance of aircraft as tools for business and not as an admiral's barge - a common perception in many regions of the world.
Against this backdrop, manufacturers have flocked to the region in pursuit of new sales. "We've been in Latin America since the late 1960s," says Jean Michel Jacob, vice-president of international sales for Dassault, which has a fleet of 65 Falcon Jets in the region, representing around 8% of the market. "But over the years we have seen more manufacturers move in and the market has now become very competitive and crowded," he adds.
Cessna has captured about 35% of the market in Latin America with a fleet of 300 Citations, its says. Bombardier, with 31% and 270 aircraft, mostly Learjets and Challengers, is snapping at its heels. In third place is Raytheon with 121 jets, including British Aerospace/Hawker Siddeley HS125 types, and 14% of the region's total, according to Airclaims data. The manufacturer's King Air turboprop family, however, is hugely popular inthe region, with this fleet representing 24% the total Latin American business aircraft inventory, Raytheon says. Gulfstream's fleet, which includes the business jetportfolio of Israel Aircraft Industries, represents a modest 6% of the region's total, with 52 jets.
While the key ingredients for a successful and thriving business aviation market are in place in Latin America, the unstable economies across the region and political unrest in some nations are challenging the prospect of recovery and sustained growth in the short term.
Venezuela has the sixth-largest business aircraft fleet in Latin America, with around 115 types, 61 jets and 54 turboprops. Although the country has one of the largest known oil deposits in the world, as well as huge quantities of coal, iron ore, bauxite and gold, political unrest and deep divisions within the Hugo Chavez government has brought the economyto its knees.
With 49 business jets and 90 turboprops, Argentina is the fifth-largest business aircraft market in Latin America and one of the region's biggest economies. Yet the economic collapse in 2001 has left the country reeling from record debt defaults and currency devaluation.
In its latest business aviation outlook, Honeywell Aerospace says: "Purchase expectations in Latin America, expressed as a percentage of its current fleet, are significantly lower than in any other world region." The engine and avionics maker adds: "Over the next five years, Latin America will account for just 4.9% of global business jet demand - down from 5.6% in the 2002 survey." The average age at which aircraft are projected to be replaced by Latin American operators, it says, increased by about 5% over the same period to 15.7 years.
These projections have not dampened the enthusiasm of the manufacturers, however, which are continuing to sell aircraft into the region year on year, and are sanguine for a speedy turnaround particularly in the Latin America's most prosperous and bullish markets, Brazil and Mexico.
Brazil is Latin America's largest economy, with a gross domestic product of more than $1.34 trillion. The country's vast land mass is around half the size of South America and is serviced by 614 aircraft - 253 jets and 360 turboprops - which are deployed to access the huge number of unpaved runways. Of the 2,014 civil airports in this country, only 180 are serviced by airlines, 715 are publicly owned and the remainder are in private hands.
Mexico plays host to the world's second- largest business aircraft fleet by country with 628 machines. Mexico has dominated the region's business jet scene for over a decade, and with a fleet of 441 now represents over half the total number of registered jets in the region. Mexico's membership of the North American Free Trade Area (NAFTA), which permits the free flow of goods from cheap production facilities in Mexico to the markets of "El Norte" has transformed this Latin American country into one of the region's most stable economies.
The success of similar cross-border trade agreements such as the Mercosur pact, encompassing Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay and the Free Trade Area of the Americas, where optimists have set their sights on a hemispheric free trade area by 2005, could also result in rich pickings for the business aircraft manufacturers.
"As more trade is done internationally, the use of business jets will expand, particularly large cabin types, which are being used in increasing numbers," says ABAG's Febeliano. Brazil will take delivery this year of the first Boeing Business Jet and Gulfstream 550, he adds.
Dassault's Jacob agrees: "We sell around seven to eight aircraft a year in Central and South America, but demand for longer- range, large-cabin aircraft, such as the Falcon 900EX and 2000EX, is starting to grow, particularly in Mexico where we will deliver three 2000EXs alone this year."
In its forecast Honeywell says over a third of the new aircraft that Latin American operators expect to take delivery of over the next five years will be new or derivative models.
The company points to the mid-size and super-mid-size business jets as being the class of equipment prospective Latin American buyers most commonly mention. Manufacturers, however, signal an interest from the region across their product ranges. Bombardier's Rebello says demand for the new Challenger 300 super mid-size has been strong, but sales of the Learjet 40 and 45XR, light and superlight business jets are also taking shape. All three types are scheduled for delivery to the first Latin American-based customers by the end of the year. "Our orderbook for the region covers aircraft across our range," he adds.
Raytheon vice-president of international sales Ted Farid suggests says the mid-size Hawker 800XP has sold well in the region, but sales of its renamed and upgraded Hawker 450XP light jet and Premier I entry level type have been particularly strong. Out of a total 259 sales last year, Raytheon sold 21 to Latin America, but the US company's major presence lies in its Beech King Air turboprop brand, which it says represents 24% of the region's fleet.
Cessna's out of production Citation II and Bravo light jets top the fleet table, with 50 aircraft followed by the mid-size Citation VIIs, also out of production, and Excel with around 20 aircraft each. Cessna's Excel replacement, the XLS, will enter service in Latin American in the fourth quarter.
Gulfstream, meanwhile, says 10% of sales for all of its products are for Latin American customers, while Embraer has forecast sales of 40 Legacies in Latin America over the next decade - more than 3% of its worldwide prediction for the super mid-size jets.
Interest in the new generation of very light jets is also gaining ground as operators seek to replace ageing piston twins and turboprops. Cessna and Safire Aircraft say 10% of Mustang and Safire Jet orders are from Latin American customers.
Helicopter manufacturers are also flocking to LABACE to woo local operators with their latest wares. While Brazil has the largest helicopter fleet in Latin America, The city of São Paulo, a host to LABACE, has the third-highest concentration of helicopters after New York and Tokyo, estimated at about half of Brazil's nearly 900-strong rotorcraft fleet. The city also has around 200 elevated helipads and about 50 heliports.
Growth in civil helicopter sales is driven by market forces, says Febeliano. As with business jets, the poor infrastructure leaves many parts of Latin America accessible only from the air, but often the rugged terrain makes access to the developing oil and mineral industries in remote regions accessible only by helicopter.
Helicopters have also become a regular mode of transport for wealthy individuals seeking to avoid traffic congestion as well the carjacking and kidnapping for ransom that have become commonplace. Law enforcement agencies too are discovering the benefits of policing from the air, he says. "The most popular helicopter in São Paulo is the single turbine - the Eurocopter AS350 for example," says Febeliano. "But larger cabin twins, such as the Agusta/Westland A109, Bell 430 and the EC135/155 are being used increasingly as larger groups of customers are travelling greater distances."
The appeal of Brazil and São Paulo as the base for LABACE cannot be understated, yet the organisers are eager to promote and focus the event on the wider Latin American market. "We will start to take LABACE in its sixth or seventh year to other South American countries such as Argentina, Chile or Venezuela as the economies there pick up," Febeliano says.
As well as providing a showcase for products and services, LABACE will also provide a forum for discussion on key issues affecting the Latin American business aviation. Hot topics include the introduction of reduced vertical separation, scheduled, as in the USA, for implementation in January 2005; CNS/ATM and equitable access to airspace and airports as well as safety and security issues that affect airports and operators alike.
KATE SARSFIELD / LONDON