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Business jets facing a slow climb back

Nov. 12, 2013, Toronto - Five years ago, in the depths of the financial crisis, business jets were widely criticized as symbols of corporate extravagance. Today, little of that stigma lingers as global business-jet demand slowly rebuilds, and manufacturers increasingly battle for the high end of the market.


November 12, 2013
By Bertrand Marotte The Globe and Mail

According to Honeywell International Inc.’s closely watched annual
forecast, global deliveries of business jets will reach 9,250 between
2013 and 2022, a drop from the nearly 10,000 it forecast last year. It’s
a sign that jet buyers remain cautious as the global economy expands
modestly.

“A lot of people are starting to be concerned about the trough. The
recovery is looking more U-shaped than like a V,” says Rolland Vincent,
president of aviation consulting firm Rolland Vincent Associates. “Of
the top 20 markets where business jets are registered, only four are
growing at more than 3 per cent.”

 

But even as light and
medium-sized jets remain in a slump, larger, longer-range planes are
enjoying stronger demand. Customers are increasingly doing business
further afield in a globalizing economy and require long-range jets with
roomier cabins to accommodate larger executive teams.

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Eighty per
cent of the business-jet market over the next 10 years will come from
sales of the bigger aircraft in the $25-million-and-up price range,
according to Honeywell. Over all, the business-jet market is expected to
be valued at $250-billion (U.S.) over that period, up slightly from the
forecast a year ago, largely due to the growing popularity of the
large-cabin, pricier long-range jets, such as Bombardier Inc.’s Global
series and Gulfstream’s G650.

 

To attract buyers, aerospace manufacturers are rolling out ever more luxurious and technologically sophisticated models.

 

The
shift to roomier, longer-range jets of course means a big jump in
sticker price, but that is offset by lower operating costs, enhanced
safety systems and more efficient fuel burn, said Jamie Spears of
aircraft dealer and distributor J.A. Spears & Associates.

 

“It’s
really about being innovative and creating safer cockpits and more
efficient usage of passenger space with high-speed Internet, Blu-ray and
so on,” he said.

 

Other technologically advanced features include
digital fly-by-wire, allowing for the piloting of the plane via
computer, larger cabin windows, cocoon-style seats, more generous
headroom, and Wi-Fi for the use of iPads and iPhones on in-flight
entertainment monitors.

 

For some companies, business jets are also
attractive as airlines cut costs by reducing service and destinations,
Mr. Spears said.

 

Notable recent corporate purchasers of business
jets include McDonald’s Corp., which bought a Bombardier Challenger 605
in February and Starbucks Corp., which acquired a Gulfstream G650 in
June.

 

New cutting-edge models now in development – notably the
continent-hopping, $45-million Falcon 5X by Dassault Aviation and
Bombardier’s Global 7000 and 8000 – are expected to help boost the
business jet market.

 

The light and medium-sized segment, however,
is struggling as small-business owners and the more modestly wealthy
continue to put off private-plane purchases. As a result, some service
providers are hoping to entice more business travellers to private
charter flights by providing access to smaller, less crowded airports
via competitively priced short-haul flights on small six-passenger
planes.

 

“On-demand business travel has traditionally been limited
to the chief executive and chief operating officer class. We’re aiming
for mid-level management,” said Kevin Heitman, COO of Toronto-area based
Charter Air Transportation Services Inc.

 

Throughout the business jet market, competition is intensifying.

 

Montreal-based
Bombardier, still the dominant player in the business-jet sector, is up
against rapidly rising rivals such as Brazil’s Embraer SA as well as
established companies such as Dassault and Gulfstream Aerospace Corp.
New models such as Embraer’s Phenom 100 and SyberJet Aircraft’s S130 are
squeezing into an already crowded space and a market filled with
discounted or used aircraft.

 

Bombardier remains in the light-plane
segment with its Learjet division, but it is introducing a jet – Model
85 – at the larger-cabin end of the midsize market.

 

Brian Foley of
aviation advisory firm Brian Foley Associates says Bombardier is
showing it’s committed to all segments of the business-jet space with
the major investments it has made over the past few years.

 

“Bombardier is uniquely positioned because they’re diversified in the three main categories.”