POSITION & HOLD
Bizav continues on a diet with big cabin aircraft selling and smaller jets slipping
Private Cessna 680 Citation Sovereign at PEK (Beijing, China) is part of the world's fastest growing bizjet fleet.
Growing numbers of them may be in the fractional ownership market, which Williams notes has been hard hit by the recent market downturn. "However," he says "this market is showing signs of recovery as the principal fractional operators diversify their product offering through jet cards, charters, variable levels of ownership programs and strategic alliances, even with the airline sector.
(For example, Bombardier's Flexjet has a service agreement with Korean Airlines.) Over time we would expect replacement demand to continue to drive aircraft demand in the fractional market segment. To date, [that] market has been limited to North America and, to a certain extent, Europe.
Emerging markets should provide a future geographic growth market for fractional operators as the business jet fleet grows in these markets."
In business aviation, geography and size matter. "In the past couple of years it has been a truly global marketplace," says NBAA's Bolen. "Operations to the BRIC countries have been growing rapidly. We also see increased operations in places like Africa. Ultralong-range aircraft have certainly done better in the past couple of years than the more continental aircraft."
Expanding on this theme, Bombardier's Williams says he expects emerging markets to be key to future business aviation growth. Bombardier's 2010 Business Aircraft Market Forecast estimates that approximately 35% of business jet deliveries over the next 10 years will be to markets other than traditional business jet markets.
In many emerging markets, says Williams, the penetration of business jets is very low. "For example," he says, "the world's 2nd largest economy, China, had just over 100 business jets in the fleet at the beginning of 2010. We're now seeing a notable number of bizjet deliveries into this market [with Bombardier predicting] at least 600 deliveries into China from 2010–19."
Other authorities concur. "Domestic aircraft should recover, [but] growth is likely to be slow and difficult for smaller business jets," says Jetcraft Avionics VP Avionics Systems Ken Elliott. "For larger business jets we expect steady growth, especially in high-end new aircraft. EU sales will go through the same steady, slower growth as the US," he adds.
Elliott expects the international market to continue to be the major growth area. "Aftermarket aircraft sales will continue to be lively for a long time to come [as non-US economies grow]. Businesses expanding in emerging countries will likely purchase aftermarket aircraft as their first or additional aircraft."
Rockwell Collins' Irmen comments, "I think international is an area that will come back strong. The market for planes with intercontinental range is great. You can see that with what's happened with the G650 [and its market acceptance] and also with the Global 7000/8000." He adds, "We're looking for strength in markets like China, the rest of Asia, and even Africa."
Here again, Bob Rockwood is a dissenter. He cautions, "The brouhaha over the international market is overstated. Outside the US, neither the infrastructure nor the political will exists that could make corporate aircraft sales a significant factor in the near term.
US dominance of the corporate jet market has only dropped from 86% to 82% since 1990. And over the past 10 years the growth of the offshore fleet has only exceeded that in the US by about 0.5%."
High tech, hot market
When it comes to technology, avionics has seen the greatest change, and unit sales, in recent years. This is likely to remain so.
"It's a given that avionics and electronics—HUD, EVS and its derivatives, FMS, high-speed data transmission—will become ever cheaper," says Bristol Associates' Rockwood. "Therefore they will migrate from high-end jets [through to small] and even move on to turboprops, pistons and certainly helicopters. In addition, development of these devices will continue to be driven by NextGen [even though] no one really wants to pay for NextGen."
Rockwell Collins has invested heavily in avionics for high-capacity bizjets with international range, says Irmen. "Pro Line Fusion, to be certified this year, is on 10 new platforms that will be entering service over the next few years, and many of them are in the intercontinental segment.
The future in that market segment is very bright for us, [as it is] for the industry as a whole. And, of course, we see some of the key features and functions that are coming into high-end equipment migrating down into the middle and lower markets over time.
"This market is really being driven by what is going on in the business jet market. The success [Embraer has had] with its Phenoms, I believe, will drive some of their competition to update and refresh their products.
"Within 5 years, NextGen should also begin to drive the market. The rollout is going slowly, because government is finding it difficult to invest to get the technologies into the field and coordinate that with the airlines. However, there are some key decision points coming soon. We are simply going to have to bite the bullet and do these upgrades to allow more efficient utilization of the airspace around many of our congested airports."
Irmen also foresees some developments that professional pilots may find a mixed blessing. "The industry is currently putting a lot of focus on improving situational awareness and efficiency of flight. It's moving toward single-pilot operations even in Part 25 aircraft.
We believe the technology exists to do that [but whether] it's actually going to happen is not certain. It requires regulatory changes and some acceptance in the marketplace. But making it possible for pilots to fly on their own in Part 25 requires some technologies that are useful even if there are still 2 pilots in the cockpit. They will significantly improve situational awareness and pilot workload. I believe that's what the future holds for avionics."
"We may see a revival of short-haul turboprop service in the not-too-distant future," says Bob Poole at the Reason Foundation. "The current administration's attempt to put tens of billions of taxpayer dollars into high-speed rail corridors is unlikely to survive in an increasingly deficit-obsessed Congress.
As high-speed rail plans falter, there will still be a demand for fast and reliable trips between metro areas 200–500 miles apart. YTZ (City Centre, Toronto ON, Canada)-based Porter Airlines has done very well serving such routes using the Bombardier DHC8-Q400, [which can use] 4000-ft runways.
"As major hub airports get more congested, secondary airports in parts of large metro areas offer an alternative for scheduled short-haul service. We've seen new business models put forward by Allegiant and more recently Vision Airlines, both of which use many secondary airports, though to serve leisure markets. The next step could be Porter clones targeting business travelers in those short-haul markets that were targeted for heavily subsidized high-speed rail service."
Of course, each executive who flies with one of these new short-hop carriers represents an empty seat on the company aircraft. And shifting traffic from the hubs to secondary airports will simply spread the congestion and make the regional facilities less appealing, which may quickly offset the impact of the new competition on corporate fleet operations.
In all, we feel that business aviation's glass is now more than half full.
While the US economy is not growing fast, nor putting people back to work quickly, it is growing—as are most of the world's other significant economies. We expect them to continue growing at least through 2015, and business aviation will grow with them.
Marvin Cetron is a forecaster/futurist and president of Forecasting Intl. His 1994 study for the Pentagon, Terror 2000, contained numerous predictions of the subsequent course of terrorism.