On FT.com Rohit Jaggi looks at the latest addition CORPORATE AVIATION to ’s fleet FINANCIAL TIMES SPECIAL REPORT | Monday May 14 2012 www.ft.com/reports/corporate-aviation-2012 | twitter.com/ftreports

Under a cloud: some analysts argue a more proactive stance is needed to persuade policy makers and banks that private flying is a catalyst for economic activity Dreamstime Sector subdued by sluggish recovery

This year has seen some the US were the only parts of the least. “As much bad press as you businesses from occasional users of stance is needed to persuade both guided perceptions, Ms O’Sullivan world last year in which read about the economies of Europe, corporate jets to buyers. policy makers and banks that private believes. “Everyone needs to become good news for order books deliveries grew. the portion it represents of our busi- Ultimately, says Sean McGeough, flying is a catalyst for economic activ- less secretive,” she says. but a sustained revival is However, Asia is expanding from a ness hasn’t declined,” says Mr Thress. president of Europe, the Middle East ity, not “a luxury, a bunch of guys That means as much manufacturers very low base and still represented The UK, Germany, and Austria – and Africa at Hawker , flying around drinking champagne”. making plain the warranties they likely to be some way off, just 10 per cent of total deliveries and which serves as home to many air- business aviation rises and falls on She says that battles over tax would offer, as aircraft owners and charter reports Rose Jacobs a tiny portion of the global business craft operated in Russia – have taken the back of companies’ spending be made easier if business jet owners, customers talking openly about why jet fleet. the vast bulk of European deliveries. power. “It’s down to corporate prof- as well as those who use charter and private flying is essential to their And, while the US has been “The UK and Germany are both the its,” Mr McGeough says, and he is in private-flying cards, explained the business. teve Varsano is tired of the stronger than most other parts of the industrial and the business hubs of a position to know. Hawker Beech- role business jets play in their work. “You have to explain why a British pitying expressions on people’s world in recent times, the longer-term Europe,” says Eddy Pieniazek, craft last week filed for Chapter 11 The fight to secure funding might Airways scheduled flight won’t do the faces when he tells them he trends stand: the country has seen its Ascend’s global head of consultancy. protection while it restructures (see benefit, too. job,” Ms O’Sullivan adds. sells private jets: “’Business share of deliveries shrink markedly “Those are places where business gets page 4). Ms O’Sullivan talks with some That might help unstick finance Smust be tough,’ they always say. And over the past decade, from 75 per cent done even if manufacturing isn’t hap- However, as the industry waits for astonishment about being able to find and keep down taxes, but Mr Aboula- I say, ‘No, not really’. ” to just over half. pening there.” broader corporate and economic funding for a second-tier airline to fia is not expecting any sort of full- As the founder of London’s only Europe pushed its share up between Jet usage is growing most rapidly in health to set in, some people believe it buy a jet this spring while at the same throttle, V-shaped recovery any time dedicated showroom for corporate air- 2003 and 2005 and it has fallen off only eastern Europe, Russia and Turkey. should also do more to help itself. time she could not persuade the bank soon. craft, Mr Varsano has the luxury of a slightly since then. That has been Fractional operator NetJets Europe, Aoife O’Sullivan, a partner at the to back a wealthy individual looking “The best thing you can say is that customer base rooted in the healthier reflected in Cessna’s experience, at which lets people buy aircraft use as specialist aviation law firm Gates and to buy a private jet. the macroeconomic indicators look end of the market: bigger, longer- they might timeshare properties, says Partners, says a more proactive But that, too, comes down to mis- good,” he remarks. range aircraft suitable for ferrying that volumes were being driven by people between continents. Germany and countries to the east. The market value of large ultra- Inside this issue “Last year started really strongly long-range aircraft rose slightly last Dassault [in terms of volumes], and then from year, compared with continued The company has about July onwards began to fall decline for other types, according to a ‘wait and see’ away, so that in the end 2011 was flat Ascend, the aviation consultancy. attitude to on 2010,” says Eric Connor, And, this year, those models are recovery Page 2 the company’s chairman and chief expected to represent nearly a fifth of executive. Mr Connor adds that he is all deliveries globally, and 41 per cent Fractional not expecting significant growth this by value. ownership year or next. As the industry gathers for the Turbulence forces “This is taking a frustratingly long European Business Aviation Conven- a rethink of the business model time,” says Mr Aboulafia of the lack tion and Exhibition in Geneva, many Page 3 of recovery. “The last downturn people – including manufacturers, was two years and we’re now into operators and analysts – argue that Flight test Rohit Jaggi takes the four,” he adds. corporate aviation’s prospects look at helm of the Nextant 400XT Page 3 During this soft period, however, least as good this year as they did in there have been some changes. The 2011, and perhaps a little better. Chinese market used jet market, for example, is in But Richard Aboulafia, an analyst Moves to free relative health, in strong contrast to air space have at the Teal Group, a consultancy, two and three years ago. boosted sales, warns that a divide persists between and registrations “The number of used sales is still the top and bottom of the market. of private aircraft quite subdued but it’s healthy. The “You could mistake further growth are set to double market isn’t glutted,” says Mr Pieni- in the top half for a broader recovery, Page 4 azek, although he points out some of but the top half was never a prob- that reflects owners holding on to air- lem,” Mr Aboulafia says. “The leading craft longer in the hope of getting a indicators implied there should be a The aircraft manufacturer has filed better price later on. recovery, but it’s tentative and there for Chapter 11 bankruptcy protection Some growth could also be checked are questions about sustainability.” while it restructures Page 4 by regulations, particularly in Europe. That is not to say it is all gloom for The European Business Aviation makers of smaller aircraft. Brad On FT.com Association is lobbying policy makers Thress, head of business jets at Ces- ● The numbers: aircraft orders, flight over the emissions trading scheme, sna, says: “We’re starting to see order hours and charter statistics at which it argues is highly confusing at and inquiry activity increase.” ft.com/corporateaviation best and discriminatory at worst. After three years when first-quarter Other questions loom, too. The frac- trading faded away following the typi- ●How to jet into the UK for the tional ownership model, for example, cally strong fourth quarter, 2012 has Olympics is still in transition, from a time when bucked the trend. The company took the companies operated like property ● High- as many orders in the first three speed investors, riding the wave of rising months of this year as it did in the helicopters asset values to one where businesses first nine months of 2011. have need to make money from operations In regional variation, too, the pic- a high price as well as buying and selling aircraft. ture is more complicated than head- Both fractional businesses and line figures might suggest. Asia and charter companies can help move Emissions law bears down on small operators

or land in Europe – will Carbon trading push up costs, saddle them with regulation and possi- Joshua Chaffin bly ignite a trade war. finds large carriers Yet the majors can count themselves lucky. Private have the capacity to aircraft owners and small Compliance is cheaper for commercial airlines Getty deal with EU law operators are set to bear a much heavier burden under the European Commission, will supply about 85 per the law. the EU’s executive arm, of cent of their necessary per- The EU’s emissions trading “For companies in the the number of carbon per- mits free next year. scheme, linchpin of the business aviation industry, mits that airlines will have In terms of passenger bloc’s plan to lead the world this is going to make things to purchase in the years costs, the commission esti- in the fight against global much more expensive,” ahead. mates that the law, which warming, has proven about says Sue Barham, a partner Each permit gives a com- came into effect in January, as popular among large air- specialising in aviation at pany the right to emit a will add no more than a €6- lines as a flock of geese on Holman Fenwick Willan, tonne of carbon dioxide €12 surcharge on a transat- a busy runway. the law firm. without penalty. lantic ticket. United Airlines, Luft- Such operators, Ms Those that exceed an But private operators will hansa, and Qatar Airways, Barham notes, “are obvi- annual benchmark must receive only 4 per cent of among others, have com- ously much smaller and do buy additional permits to their permits free, forcing plained that this law – not have the same offset their pollution. them to buy the remainder which forces them to pay resources” as the big com- In an effort to soften the through auctions or on for their carbon emissions mercial airlines. blow for large carriers, the on all flights that take off Consider estimates from commission has said that it Continued on Page 2 2 ★ FINANCIAL TIMES MONDAY MAY 14 2012 Corporate Aviation Emissions law hits Falcon has small operators

Continued from Page 1 change the law. An EBAA briefing paper sought to eyes fixed the open market – a stag- challenge the high-polluting gering proportion by com- reputation of business jets parison. by arguing that they are “a “We have to pay much, productivity tool with bene- much, more than commer- fits to nations, communities on clients cial airlines,” says Fabio and industries”, noting that Gamba, chief executive of their fuel efficiency has the European Business Avi- improved 40 per cent over ation Association (EBAA), a the past 40 years. Brussels-based trade group. The group has had some in China Mr Gamba estimates that success. The law has been 15-20 of his group’s mem- tweaked so that operators bers would be forced to pay emitting fewer than 25,000 pany said: “China is the about €4m between them tonnes of carbon a year Dassault most dynamic market, next April, when the first (about 12 aircraft, depend- while a recovery is still bill for emissions is due. ing on size, flying 600 hours The company has a expected in North America. The reason for the differ- a year) can follow a simpli- Europe shows encouraging ence is the formula the fied reporting requirement ‘wait and see policy’ signs, especially in pre- commission uses to award – up from a previous regarding recovery, owned business jets, but as permits. It measures an air- threshold of 10,000 tonnes a whole a wait and see pol- craft’s passenger or cargo (or a fleet of about five air- says James Boxell icy still applies.” weight against miles flown. craft flying 600 hours annu- Mr Edelstenne said India On that basis, a small aero- ally). rance’s Dassault and Latin America were plane with three passengers But its request that all Aviation has showing “significant dyna- ranks far worse than a big operators whose annual started to see mism”. Of the Middle East, one with hundreds. emissions fall below 10,000 signs of improve- he said there have “been Private operators also Fment after a difficult few positive signals, but recent face a disproportionate Fabio Gamba years in the business jet unrest clearly affects short- blow when it comes to the says private market, but it is not yet bet- term international trade administrative work neces- operators pay ting on a full recovery. adversely”. sary to comply with the more than Buoyed by the enduring Dassault hopes to deliver law. They are subjected to commercial popularity of its flagship about 65 of its family of Fal- many of the same reporting airlines Falcon 7X, a large-cabin con aircraft this year, a requirements as large carri- long-range aircraft and the slight increase on 2011. Swooping success: the popularity of the Falcon 7X has seen it retain much of its value in the used market AP ers, yet they may have a first corporate jet with a Orders for the Dassault Avi- fraction of the staff. tonnes be exempted from digital flight control ation group, which also but a deal would more than value in the used market. “although I do expect it less fuel than an aircraft 20 “It’s a nightmare,” says the scheme was rebuffed. system, Dassault delivered makes the Rafale fighter jet compensate for a moribund There are some owners to get stronger.” per cent smaller. Martina Becher of TAG Avi- At present, commercial 15 of its aircraft in the first and which has won final business jet market – even still unhappy the 7X fleet The company’s lower There are, though, some ation, a Swiss private jet operators are excluded three months of this year, bidder status to refit the though most of the Rafales had to be grounded last priced model, the Falcon doubts in the industry company that operates 120 below that level, but private up from nine at the start of Indian air force, increased will be assembled in India. year after one suffered a 2000LX, which sells at a about whether its success is aircraft owners and corporate jets 2011. from €1.2bn in 2010 to The jewel in the business control malfunction during book value of $32.1m, has guaranteed. The EU’s bureaucracy are not. For Dassault, as for the €2.9bn last year, with the jet crown remains the Fal- a descent, but the aircraft been more resilient, Mr Hall says: “They want does not make it any easier. Given their customers’ rest of the industry, 2010 Falcons accounting for con 7X, still relatively new has managed to retain the because it has only two a piece of the market below Ms Becher must submit wealth – and the fact that had been pretty disastrous, about €1.9bn of that. after its 2007 launch and level of goodwill towards it. engines and offers good fuel them and have already flight data to authorities in they have been spared the as orders slumped because While the private jet mar- with a big following in the economy. It accounted for started a big marketing the UK, France and Ger- indignities of modern com- of the financial crisis, par- ket remains stagnant, the business community 20 deliveries last year, com- campaign. But there is scep- many – each of which mercial air travel – private ticularly in the crucial Indian military deal – worth because of its performance, There is pared with 11 for the 900 ticism about the fact that demands the data in a dif- jet operators acknowledge North American market. $15bn-$20bn – would be a large cabin and its ability to scepticism version. its range is limited.” ferent format. that it has not been easy to Dassault had to book a hugely needed boost for the land at London City airport. This has given Dassault This is particularly true “Everything we do find a sympathetic ear. net reduction of nine orders company’s fighter jet busi- The aircraft is particu- about the high hopes for the next in emerging economies. related to the EU emission “In the eyes of the politi- of its Falcon jets to reflect ness. larly important now, limited range model of the Falcon to come Dassault Falcon is setting trading scheme we have to cians and environmental- the fall in demand, but 2011 The future of Dassault’s because it is at the higher off its production lines, the up an operation in Shang- do three times,” she says. ists, we are the bad guys,” saw a partial rebound, as it Rafale combat aircraft was end of the market – in of the 2000S 2000S, which will probably hai to support its expanding The company is still Ms Becher says. received 36 orders. starting to look uncertain terms of size, cabin capacity be available for delivery in Chinese fleet. puzzling over what to do On the bright side, carbon This is still well below because of its failure to and range – which is seeing 2013 after completing a year There are also rumours about its Hong Kong arm, permits are trading at near the boom times, but Charles secure an export order, so the earliest signs of recov- The next model down, the of flight testing. the company’s designers since the Chinese govern- record lows, which should Edelstenne, Dassault’s chief its selection as preferred ery, notably in Asia. Falcon 900LX, has been The company hopes the are working on a “super- ment has forbidden its air- ease compliance costs for executive, is predicting bidder ahead of the The 7X, with a list price more disappointing, per- initial $25m price tag – at midsize” Falcon business lines from taking part in all carriers. Private carriers things should hold up this Eurofighter Typhoon was a of about $50m, accounted haps because its $42.4m least for the first 20 orders – jet to replace its discontin- the scheme – even though can also pass on costs to year, despite the cloud over huge relief. for 12 of the 15 deliveries price tag is not that much will help them target the ued long-range Falcon 50. they risk fines and penal- deep-pocketed customers. Europe’s economy and The final contract for 126 so far this year and its cheaper than the 7X. slightly cheaper end of the But Mr Hall says: “There’s ties from the EU. As Mr Gamba observes: uncertainty in the US. Rafales is yet to be signed, popularity as a leader in “It has been struggling a midsized corporate jet mar- little point in them launch- Not surprisingly, private “Our passengers are less Reporting financial which means the French European-designed corpo- bit,” says Daniel Hall, ket, as well as the fact that ing at the moment while operators and small busi- price-sensitive than those results recently, the com- company remains cautious, rate jets has seen it retain aviation analyst at Ascend, it will consume 10 per cent the market is struggling.” ness airlines are lobbying to on commercial flights.” FINANCIAL TIMES MONDAY MAY 14 2012 ★ 3 Corporate Aviation Turbulence forces fractional ownership rethink

as part of a 10-year plan that will Sputtering recovery eventually take the group much more heavily into long-range operations. Demand has fallen in the New orders aimed at renewing the downturn and even the fleet began in late 2010, when it announced the firm purchase of 50 Sage of Omaha’s NetJets Phenom 300 light jets from Brazil’s operation has suffered, . The deal includes options for a further 75 with deliveries due to reports Kevin Done begin in 2013. NetJets followed up a year ago with ractional ownership of an order at the top end of the market business jets, for many years for up to 120 Bombardier Global air- a driving force in the surging craft. The order includes the firm pur- growth of private aviation, chase of 50 large-cabin, long-range jets Fhas been hit hard by the years of and options on a further 70. Some recession – and recovery is proving a deliveries are due to begin late this long and painful process. year, but the purchase includes 20 Before the downturn, fractional pro- firm orders for Bombardier’s new grammes, offering buyers the ability range of Global 7000 and 8000 jets, to purchase part of an aircraft – a currently in early development and half, a quarter, an eighth or less, due for delivery from 2017. together with a corresponding The long downturn and halting number of flight hours a year – recovery have forced fractional jet accounted for 10 to 20 per cent of all ownership groups to be more innova- deliveries of new business jets. tive in the search for customers. According to Gama, the general In response to the recession NetJets aviation manufacturers association, began to offer even smaller ownership however, aircraft deliveries to frac- shares of only one-32nd of a jet, equiv- tional ownership groups since 2009 alent to just 25 hours of flight time a have “dwindled down to just several year. The fractional groups were unit deliveries each year”. already offering jet cards, which pro- The leaders of the fractional jet vide 25 hours of jet usage a year at a market, most notably NetJets, part of premium price but without the tie of ’s Strong headwinds: Warren Buffett on board one of NetJets’ fleet of aircraft. Mr Buffett has said the company’s results have been ‘a failure’ Bloomberg ownership. It has also begun to offer group, Flight Options, also of the US, customers finance to support the pur- and Flexjet, part of Bombardier, the Inevitably the number of aircraft in mistic and reports a “significant” rise The company reported an aggregate have been rationalised, and NetJets chase of fractional shares. Canadian aircraft and train maker, fractional ownership programmes has in revenues in the first quarter. pre-tax loss of $157m in the 11 years to wrote down the value of its fleet in Despite the growth of fractional have been forced to retrench and also fallen, with 107 aircraft leaving NetJets, which pioneered the the end of 2009, a figure that would 2009, resulting in a loss for the year of ownership over more than two dec- restructure in order to get back to the fractional fleet last year alone, a concept of fractional ownership in the have been “several hundreds of mil- $711m including $676m of asset write- ades, significant scepticism about the sustainable profitability. drop of 10.4 per cent from 2010. mid-1980s and is the industry leader, lions” higher but for the fact that its downs and downsizing costs. business model remains. Their moves to postpone or cancel Activity in terms of flying hours has come through a torrid period dur- borrowing costs were “heavily subsi- The workforce has been cut by Steve Varsano, founder of London- orders have contributed to the sharp and flights has stabilised, but the ing the recession, forcing it to cut dised by its free use of Berkshire’s nearly a quarter from close to 8,000 in based The Jet Business, credits the fall in global business jet deliveries, weak signs of recovery that emerged costs deeply and to reduce its fleet to credit”, Mr Buffett said. Its debt rose 2008 to just over 6,000 last year, and fractional groups for opening up busi- which have almost halved from 1,313 in 2010 and the first half of last year remove overcapacity. from $102m in 1998 to $1.9bn in April since the end of 2008, the number of ness aviation to new users but in the peak year of 2008 to 703 in 2011, have largely petered out since mid- While establishing a reputation for 2008 before the onset of the recession. aircraft in the fleet has been cut by believes one-off chartering is simpler featuring a 7.9 per cent drop last year. 2011, says Marine Eugene, sales direc- operational excellence, NetJets lost Mr Buffett told shareholders two about 20 per cent to about 800. and cheaper. Jetnet, the US business aircraft tor of NetJets Europe, a subsidiary of control of its finances as it chased years ago “without Berkshire’s guar- The measures have brought NetJets “Since the recession, the world has database, says the number of world- the US-based group. “We see a stable volume and market share, and even antee of this debt, NetJets would have back into profit with pre-tax earnings become more value-conscious,” he wide fractional share owners 2012, we are not seeing growth.” Warren Buffett was forced to admit been out of business”. of $227m last year and $207m in 2010. says. “Fractional ownership is more decreased in 2011 by 3.8 per cent from Kenn Ricci, executive chairman of the company’s financial results since Management restructuring has From its smaller base, it has been about convenience than it is about the previous year and has declined by Flight Options, one of NetJets’ much its acquisition by Berkshire Hathaway included two changes of chief execu- able to start planning for its future value. For some people, convenience 9.7 per cent from its peak in 2008. smaller rivals in the US, is more opti- in 1998 had been “a failure.” tive, purchasing and spending policies and for the gradual renewal of its fleet is more important than value.”

Recycling reaches new heights with 400XT

Rohit Jaggi TEST FLIGHT Times are tough for the makers of business jets – most of them companies with long histories. One of the newest entrants to the category, however, is Good as new: the Nextant 400XT Shaun Curry helping to make times tougher for the rest of replaced. The engines are them. swapped for freshly excess of $9m. has designed Williams FJ44- Even among second-hand come up with a business 3AP turbofans, the cockpit aircraft, a lower purchase jet in the light category avionics for a Rockwell price for an early Citation, that makes many of its Collins Pro Line 21 system, for example, has to be competitors look and the interior of the balanced against the embarrassingly overpriced. already sizeable cabin is 400XT’s relatively low cost The US company was set completely transformed. per mile. up in 2007 to look into Even the airframe is The 400XT gained US turning old aircraft into tweaked. A Beechjet weak certification in September new by reconditioning spot, the horizontal 2011 and Nextant has so them, and eventually stabiliser, is given new far delivered 10 aircraft out decided on using the ribs. And the mounts for of a backlog of nearly 70, Hawker Beechcraft the engines are Nextant’s including 40 orders over 400A/XP – known as the own design. Wider than five years from US Beechjet – as the base. the old ones, they provide fractional operator Flight Not only are they lift and remove drag, as Options. European plentiful and available on well as altering the certification is expected the second-hand market, turbofans’ axis relative to this quarter. with more than 600 made the fuselage by 0.5 of a Inside a 400XT at between 1990 and 2009, but degree in the vertical plane London’s Stansted airport, their airframes are also and 1 degree in the only the ashtrays in the strong. horizontal. That improves cockpit give away the age Nextant buys Beechjets, cruise performance with of the original aircraft. available for about $1m, only a tiny penalty in Nathan Marker, Nextant and then puts them single-engine handling chief pilot, has accepted through what it calls a when the aircraft is light. the tower’s offer of a take- remanufacturing process. All together, the off from intersection U, That takes 6,000 man- remanufactured Nextant which leaves just 5,000ft of hours and results in an 400XT is faster than the rain-soaked runway. With aircraft that is about 80 Beechjet 400XP with a the digitally controlled per cent brand new, with long-range cruise speed of throttles full forward, the all life-limited components 437 knots against 414 kts, acceleration is startling, and a high speed cruise of and the aircraft vaults into 460 kts (450kts). But the air long before the operating cost is improved hard surface runs out. Contributors much more radically – by The 400XT has the feel of Rose Jacobs 29 per cent to $2.13 a mile. a much larger aircraft. Companies Reporter And the range grows by 50 Handling is also solid and per cent to 2,005 nautical assured – which is as Rohit Jaggi miles, with four passengers pleasing for those in the Aircraft, Car and and sensible fuel reserves. back as the crew upfront. Motorcycle Columnist As Jay Heublein, Meanwhile, the engines Simon Rabinovitch Nextant vice-president for offer both plenty of power Beijing Correspondent sales and marketing, says: and quick response – “We’re starting to compete making it easier to control Kevin Done with very-light-jet the aircraft’s tendency to FT Contributor economics – but in a light want to go faster. jet.” The price of the I have flown the Phenom Jeremy Lemer 400XT, which includes a 300 and the CJ4 and they New York Correspondent two-year warranty (three are as viceless in handling. on the engines) is $3.9m, or Both are certified for James Boxell Paris Correspondent about $4.3m with almost single-pilot operation and all the options. This is need less runway for take- Adam Jezard strikingly low for an off and landing, but at a Editorial production aircraft classified as new – substantially higher price. which also makes The 400XT is in tune Steven Bird financing easier. The low with the times. Not only Designer price is partly because does it offer the prospect of Nextant does not have to relatively cheap purchase Andy Mears Picture Editor recoup the development and operating costs. It is costs of a new airframe, also about as green as For advertising, contact: but it makes comparisons private jets can get. with new aircraft that As James Miller, Nextant Tom Shepherd have the same range and president, says: “Some Phone +44 (0)20 7873 cabin size interesting. people recycle beer cans. 4406; Fax +44 (0)20 7873 The Phenom 300 from We recycle whole aircraft.” 4006; Email: Brazil’s Embraer costs A slideshow of the 400XT [email protected] more than $8m. And the Citation CJ4 from US is at ft.com/reports/ manufacturer Cessna is in corporate-aviation-2012 4 ★ † FINANCIAL TIMES MONDAY MAY 14 2012 Corporate Aviation

Hawker Beechcraft Manufacturer pummelled by crisis Moves to When Capital Partners and head on. The company is set to eliminate Onex purchased Hawker Beechcraft in 2007 about $2.5bn of debt and, in return, it will for $3.3bn, the US-based company was hand equity ownership to a group of riding high. That year, Hawker delivered bondholders as part of a pre-arranged deal more than 400 aircraft and it seemed the with creditors. market could only go up. “Restructuring our balance sheet and free air In 2011, however, the maker of business recapitalising...will dramatically improve and military training planes delivered about Hawker Beechcraft’s ability to compete in a 291 aircraft and it now stands on a rapidly changing environment,” Robert precipice. Weighed down with more than Miller, chief executive of Hawker, said in a $2bn in debt, at the start of May Hawker statement. space help filed for bankruptcy protection while it Improving its results could require equally restructures. radical moves. Hawker said in court According to court filings, the company is documents that it was looking at options now considering exiting entire business ranging from continuing largely as it is to lines, closing manufacturing sites in the US dropping its line of business jets and boost sales and the UK, and further cutting its focusing on , piston and military headcount, as it tries to find a route to aircraft and services. profitability. Under that scenario, Hawker would Beechcraft opened its first The need for action is evident. Last year, consolidate plants in Little Rock, Arkansas, Chinese market authorised service centre operating losses widened to $481.8m from and Chester, UK; stop producing Hawker and Cessna signed a joint $173.9m in 2010 and revenues fell about 13 900s, Hawker 4000s and Beechcraft Simon Rabinovitch venture with state-owned per cent to $2.4bn. Meanwhile, the backlog Premiers; and further reduce headcount. says registrations Aviation Industry Corpora- of orders dwindled to $1.1bn, down from By 2016 revenues would still be lower tion of China that could $7.6bn in 2008. than in 2011, but the company predicts an of private aircraft lead to joint development of To be fair, Hawker and its private equity earnings rebound. The moves should also are set to double business jets, also a first in owners have been under pressure from the “better position the company for later the country. word go. Industry executives note that 2007 industry consolidation” and “eliminate the Fittingly, in another first, was near the peak of the market and that culture clash” between its brands. orporate jets have the Asian Business Avia- the business jet industry has been losing Still, Richard Aboulafia, vice-president at finally taken full tion Conference and Exhibi- ground ever since. the Teal Group, an industry analyst, worries flight in China tion (ABACE), the region’s Pummelled by the global financial crisis, the options are too “draconian” and “imply after years of premier trade show, moved sales of general aviation aircraft have there’s a lot less value in the product line Cstruggling to get off the to mainland China. It tumbled from 4,272 units in 2007 to about than believed”, as well relying on overly ground. reported that exhibition 1,865 units in 2011, according to the leading optimistic assessments of military demand. The promise of the Chi- spaces for its March show US trade association. “Their best hope is to keep as much as nese market has long been in Shanghai sold out long Analysts note that the market for possible of their civil jet business intact, evident: a booming econ- before opening day because On show: visitors to the Asian Business Aviation Conference and Exhibition in Shanghai ABACE Hawker’s small to midsize jets has been rather than shrinking to a much smaller omy with business people of “an unprecedented level particularly hard hit and remains depressed. core that may lose ground in military who know that time means of exhibitor interest”. days to get approval from shorter range jets are there was no airspace to fly While experts expect a modest recovery markets too,” Mr Aboulafia says. money, and have a vora- From Bordeaux wines to the Civil Aviation Adminis- becoming more favoured. them in, no pilots to fly this year, aircraft worth less than $25m are Hawker expects to file a reorganisation cious appetite for luxury, Swiss watches, the ability tration of China for a flight “The largest cabin and them, and there were no likely to remain difficult to sell. plan by the end of June and execute it by should be a winning for- of China to redraw the map plan. Same-day approvals longest-range business jets young individuals that had “That segment is the first one to go away mid-December. mula for corporate jet man- for expensive goods has are now possible. “The have been most in demand the money or the mindset in a downturn and the last one to come In the meantime, the company remains ufacturers. been obvious for years. But rapid growth of business over the past couple of to buy them...That’s the back,” says one sector banker. “And vulnerable to external forces. Suppliers have But two other factors con- makers of business jets had jets in country took the years,” Mr Rosanvallon grassroots level. That’s Hawker is in a very crowded space, with already begun to demand tougher terms for spired against them. The to wait – their product is agency a little by surprise, says, noting that sales were where it all starts.” lots of companies impinging on its turf.” dealing with the company and, as long as government had kept a sti- somewhat more complex but it is adapting to the particularly strong for the Because China is develop- During a period of the precipitous market Hawker remains in bankruptcy protection fling grip on the country’s and dangerous than a Louis demand and is supportive Falcon 7X, capable of 5,950 ing a taste for shorter decline, Hawker has struggled, pinned down and is publicly discussing the airspace, while crucial Vuitton handbag. of the industry,” Mr Neal nautical miles nonstop. range, smaller aircraft, it by its huge debt burden. The company idea of culling its portfolio, infrastructure, from air- Scott Neal, senior vice- says. Mr Rosanvallon adds: does not mean its appetite has renegotiated terms, cut thousands there is a risk the ports to service centres, has president of sales and mar- Jean Rosanvallon, presi- “However, mission require- for the biggest business jets of jobs and shifted production uncertainty will dent been lacking. keting at Gulfstream, says dent and chief executive of ments are changing to is waning. towards lower-cost locations, to customer confidence. With Beijing now gradu- regulators had to catch up Dassault Falcon, echoes shorter flights within Gulfstream, the leader in limited effect. Scott Donnelly, ally freeing more airspace with the reality of demand. this view: “One of the main China, so demand is the large-cabin market in Through the Chapter 11 process chief executive of for civilian use and pump- “A lot of entrepreneurs benefits of a business jet is increasing for large cabin Asia, expects a wave of Hawker will tackle its debt issue , which owns ing money into infrastruc- gained their first exposure the ability to travel on one’s aircraft in the 4,000nm demand in China coming rival Cessna, said last ture projects, those two to business aviation own schedule. That wasn’t range.” from second-tier cities. month: “It’s pretty blockages are beginning to through charter over the fully possible till recently.” Interest in flying in China “The market is expanding hard to have a clear. past decade, letting them Dassault exemplifies the is also beginning to spread beyond major hubs such as ‘Restructuring our serious discussion The numbers tell the experience first-hand the nearly vertical trajectory of to pure enthusiasts, a devel- Beijing, Shanghai and Shen- balance sheet...will with a customer story. Private aircraft regis- time-saving benefits and corporate jets in China. It opment that bodes well for zhen,” says Gulfstream’s Mr about buying a $20m tered in China were on efficiency of business avia- sold its first Falcon in main- manufacturers of smaller Neal. “For example, Nan- dramatically improve asset if there’s track to more than double tion. So the market was land China in 2006. By last aircraft, says Daniel Keady, shan Jet in Chengdu plans Hawker Beechcraft’s uncertainty about who is last year to 116, up from 56 primed to take off by about year China was its largest Hawker Beechcraft vice- to put two [of our] jets into going to be there to in 2010, according to the the middle of the last single market. president for Asia-Pacific charter service. ability to compete’ support that aircraft.” national aviation authority. decade,” he says. This year, it expects to sales. “This suggests to us the Robert Miller, From the manufacturers’ But those wanting the increase the number of Fal- “We’ve actually sold pis- market is maturing and Chief executive Jeremy Lemer side, there was a dizzying convenience of owning cons operating in China to ton products into China for being embraced by compa- array of milestones: Gulf- their own aircraft met with 25 from about 10. the first time,” he says. nies around the country. stream opened its first sales frustration. A few years ago Even as Chinese demand “We’d never sold pistons That bodes well for the office in China, Hawker it would take up to seven for business jets increases, into China before, because future.”