Business Aviation Market In Recovery

the jet

Manufacturers of business jets can look forward to climbing sales in the  years to come thanks to emerging markets as they gather in Switzerland for an  annual air show, having survived the turbulence of the global financial  crisis. But “we’re still waiting for the  real recovery,” noted Eric Trappier, chief executive of Dassault Aviation, which will have three versions of its  luxurious Falcon jet on display on the tarmac at Geneva at the three-day EBACE  show that opens Tuesday.

In 2012, the French company sold 58 jets compared to 36 the previous year, to  take a 17% market share according to analysts at the Teal Group aviation  consultancy.

“And, after the first quarter which just finished, the trend doesn’t differ  much for 2013,” added Trappier.

With 66 deliveries in 2012, Dassault is still off its pre-crisis performance  of 72 deliveries in 2008.

Deliveries of business jets grew by just 4 percent in the first quarter of  this year, estimates Gama, the association which groups manufacturers.

“Business aircraft have been hit harder by the economic downturn than any  other aerospace market,” said Teal Group vice president Richard Aboulafia.

He said the $13-billion sector saw the value of deliveries drop by 29.2  percent between 2008 and 2012 as the global financial crisis forced corporations  to cut back on executive travel and fewer of the world’s super rich splurged on  luxury jets.

Teal Group expects that the industry will muster 11 percent this year, lifted  by higher deliveries of the Gulfstream 650, which is the most expensive business  jet with a price tag of around $60 million.

For the following four years it sees annual growth of around 12 percent.

“Unfortunately, with this growth rate we won’t see a recovery to the 2008  peak deliveries level until 2015,” added Aboulafia.

Not all the elements are in place for a real recovery.

On the market for used jets “the number of transactions is increasing, but at  still weak prices, in particular for discontinued models,” explained  Trappier.

Moreover, confidence has slow to return to the US market, which is the top  for the industry.

The US market “is the lungs of business aviation despite the sector having  globalised,” said the Dassault chief.

Some two-thirds of the business aviation fleet in service (around 12,000  jets) are situated in North America “although constructors are today delivering  a much greater proportion of planes to the rest of the world,” he noted.

However Ernie Edwards, head of the business aviation branch at Brazilian  manufacturer Embraer, believes there are reasons to be optimistic.

“US corporate profits are at record levels and that means North America will  set the pace of recovery,” he said.

Plus Embraer sees weakness in Europe being balanced out by activity in the  Middle East, China and Africa.

The number of super-rich individuals is also now back at record levels, with  manufacturers eyeing in particular the emerging markets.

In China there are some 3,000 individuals with a net worth above $500 million  and 130 billionaires, according to the Teal Group.

“Only about 150 business jets were registered in China in early 2011,  compared with well over 10,000 in the United States,” said Aboulafia. “But this  is up from fewer than 100 just two years ago and just a few dozen in 2006.”

Bombardier, which is the leader in the business aviation sector with nearly a  third of the market, last year estimated that 2,360 business jets would be  delivered to China by 2030.

The company unveiled its new 10-seat Challenger 350 in Geneva on the eve of  the European Business Aviation Conference and Exhibition.

But even in Europe there are “pockets of growth” emphasised Marine Eugene,  European sales director for NetJets, which offers fractional ownership in  aircraft as well as charter and management services.

NetJets is seeing the London market perking back up.

“After three years in sleep mode, it is very active at the moment,” she  said.

EBACE should be “much more positive this year.”

The highlight of this year’s show is expected to be the Legacy 500, Embraer’s  new midsize entry, which is making its global debut at the show and is expected  to enter into service next year.

Edwards said Embraer expects the Legacy 500 to be a “game-changing aircraft”  that will have the same disruptive influence on business aviation as that  experienced by the telecommunications industry with the advent of the  smartphone.

The midsize jet will offer full fly-wire-technology and a six-foot (1.8  metre) stand-up cabin.

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