FT SPECIAL REPORT Corporate Aviation

Tuesday November 17 2015 www.ft.com/reports | @ftreports

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Helicopters: need for Industry outlook remains cloudy speed is overtaken Manufacturers should be used to ups and Manufacturers’ “There’s still an intra-continental requirementforsomeusers,”MrAnder- downs conflicting messages son says. “North American users who Page 2 reflect mixed fortunes, still have local requirements can very well utilise the midsize and light jet air- Embraer reports Robert Wright craft.” How the Brazilian The smallest light-jet segment, which wasonceexpectedtoboomasaseriesof maker turned a or anyone seeking to under- manufacturers launched very cheap dream into reality stand the state of the business models, looks set to remain a modest Page 3 jet market, the three weeks at part of the market. JetCraft says very the end of April and start of light, light and superlight jets will F Maywereaconfusingtime. account for only $25bn of the $271bn On April 29, Phebe Novakovic, chief revenuethatitprojectstheindustrywill executive of , earnfromnewjetsuptotheendof2024. expressed cautious but unmistakable Alain Bellemare, Bombardier’s chief optimism about prospects for the US executive, cited the “very soft” market aerospace and defence company’s Gulf- for smaller jets as the reason for cancel- streambusinessjetoperationasshedis- ling the midsize Learjet 85 programme cusseditsfirst-quarterresults. altogether,after the project was initially “We always pull production down in putonholdinJanuary. Large-cabin aircraft the face of weak orders,” she said. “We The whole industry’s prospects, Gulfstream leaves havenointentionofdoingsothisyear.” meanwhile, have been further clouded competitors in its wake On May 14, however, Canada’s Bom- by the sharp falls in the price of oil and bardier, which in January had stopped other commodities, and the poor per- at the top of the range workonitsnewLearjet85corporatejet, formance of European and emerging for size and price made it clear Ms Novakovic’s optimism market economies that had produced Page 3 was not universally shared. Weak manyoftheindustry’srecentorders. demandwasforcingittocutproduction ScottDonnelly,chiefexecutiveofTex- Technology: Ubers of of its biggest, most expensive aircraft — tron, Cessna’s parent, told investors theGlobal5000andGlobal6000. during the third-quarter earnings call skies bid for market “We have seen an industry-wide soft- Mixed picture: the market for large jets has been strong but a recovery in midsize aircraft is more fragile — Patrick Lynch/Alamy that he was “reasonably happy” with Online operators make ness in demand recently in certain theUSmarketforbusinessjets. point of price as well as international markets and are taking 722 delivered in 2014 and highlights from 117 last year. Bombardier’s pro- required a lot more capable aeroplanes But he went on: “There’s no question steps to adjust our production accord- how far the industry is from again hit- duction of its flagship Global 5000 and intermsofrangerequirements.” that the markets in Europe and Asia are convenience ingly,”ÉricMartel,thethenpresidentof tingtherecord1,318deliveredin2008. 6000issettofallto68,from80in2014. It is less clear, however, whether a challenged.Ithinkpartofthatisjustthe Page 4 BombardierBusinessAircraft,said. Thepicturehasalsobeendifferentfor Chad Anderson, president of JetCraft, recovery in midsize jets — anticipated economies are in a pretty difficult spot. The conflicting messages partly companies serving different parts of the a North Carolina-based private jet bro- since demand collapsed during the eco- Of course, the US dollar being quite Flight tests and reflect how mixed 2015 has been for world and in different size categories. ker, says the strength in big aircraft nomiccrisisin2008—willbesustained, strongputssomeadditionalpressureon business aircraft makers. Teal Group, a Deliveries at the top end of the size reflects the growing number of compa- evenifthereareoptimisticsigns.Cessna thatintermsofalltheproductlines.” industry overview Virginia-based aerospace consultancy, range have held remarkably steady nies that need long-range, fast jets to is due to deliver 170 aircraft this year in Yetanimportantdynamicinthemar- For aircraft tests, videos predicts that 713 business jets will be throughout the economic downturn. visitlocationsacrosstheglobe. its midsize Citation range, up 7 per cent ket, one critical in understanding Bom- and comment, go to delivered during 2015. Although the fig- Gulfstream is projected this year to “More often than not, our clients’ on 2014. That segment has benefited bardier’s take on market conditions, ure is an improvement on the 672 deliv- deliver 115 of its largest-cabin jets — the business demands have globalised, not from robust economic recovery in the relates to the plight of Bombardier, www.ft.com/corporate- ered in 2012, it is a slight fall from the G450, G550 and G650 — down slightly shrunk,” Mr Anderson says. “That has US,thebiggestmarketforbusinessjets. Continuedonpage2 aviation 2 ★ FINANCIALTIMES Tuesday 17 November 2015 Corporate Aviation Need for speed overtaken by harsh economic lessons Industry outlook Helicopters market overall has fallen. “At the This resulted in a record top speed of some solution is engines and large pro- military S-97 Raider rotorcraft, which medium and heavy end it has had a sig- 255knots(293mph)—somewhatabove pellers on the end of wings. The engines had its maiden flight this year. This remains Manufacturers have been nificantimpact,”hesays. the theoretical top speed of a normal point up for vertical operations and tilt month the sale of Sikorsky by United However, he says manufacturers are helicopterofabout225kt. forward for cruise — yielding a speed of Technologies Corporation to the Lock- cloudy dogged by events out of nimbler than commercial plane makers Some of the lessons learned in the X3, about275kt. heed Martin aerospace company was their control in a turbulent at “cutting back production to mirror now retired and on display at the Musée The civil version of the tilt-rotor, the confirmed — and Lockheed’s mainly market, reports Rohit Jaggi whattheyseeasforwarddemand”. de l’Air et de l’Espace at Paris-Le Bour- nine-passenger AW609 being devel- defence focus is unlikely to mean there The manufacturers are pressing get, are promised for future Airbus oped solely by AgustaWestland after willbeapushforacivilversion. Continuedfrompage1 ahead with a number of projects that models. In the meantime, the 12-pas- Bell all but stepped out of the project, Away from the speed race, Bell Heli- which manufactures more business jets Helicopter manufacturers should be have a common theme of increased effi- senger H160 uses a fenestron tail-rotor remaining only as a contractor, had copter is pushing efficiency as the key than any other and is projected to have used to ups and downs. But they have ciency and usability. They have also tilted from the vertical, claiming vari- weathered a number of delays but was attributeofits525Relentless,whichhas 32.2 per cent of the market this year by had a number of events to contend with beentestingtheedgesofthespeedenve- ous benefits including sapping less ontrackforcertificationin2017. ticked up more than 50 orders and is set revenue. recently that have been completely out- lope — to push speed limits on conven- power. The H160, scheduled for certifi- However,at the end of October,a pro- forcertificationin2017. The company faces a serious corpo- sidetheircontrol. tionalrotorcraftthatareslowerthanfor cation in 2018, has achieved 176kt and totype crashed near the factory in Italy, Bell, part of Textron, is also fighting ratecrisisasitstrugglestofundthecosts The previously high price of oil, mak- fixed-wingaircraft. has as its target cruise speed a rapid — killing the test pilots. An accident inves- back in the very light sector. “The R66 — $5.4bn so far — of developing its C ing more remote fields economical to Airbus Helicopters came up with one forhelicopters—160kt. tigation will determine whether there is from Robinson became the market Series commercial jet, a competitor to explore,bolsteredsales—alongwiththe of the more elegant — and evolutionary The design of another model, the X6 likelytobeafurtherdelay. leader in the under-$1m market,” says Airbus’sA320familyandBoeing’s737. growing wind energy industry, which — systems with the experimental X3 heavy helicopter, will be finalised over The crash is a reminder of the trou- Dominic Perry, news editor at Flight Richard Aboulafia, an analyst at Teal also requires helicopters for inspection whenthecompanywasstillcalledEuro- the next two years and is intended to bled gestation of the V-22, which con- International, part of information pro- Group, says the crisis — which pushed andmaintenance. copter. enterserviceinthe2020s. sumed more time, money and aircraft vider RELX Group. “But Bell has come net debt up to $6.8bn at the end of the The plunge in the oil price, however, That aircraft did away with the pow- There has been some rationalisation thanplanned.ButordersfortheAW609 back with the 505 Jetranger X.” First third quarter — prompted Bombardier put a damper on more adventurous er-sapping anti-torque rotor at the end oftherange,though.AirbusHelicopters continue to be added, even since the deliveriesareexpectedbymid-2016. to increase Global 5000 and 6000 pro- exploration plans — including some of of the tail boom and instead used two isdroppingtheAS355lighttwin. crash. Economy of operation is likely to be duction to unsustainable rates in the the very ones that most required heli- forward-facingpropellersontheendsof The X3 is a much simpler solution to Sikorsky is the other helicopter man- the main battleground for manufactur- hope of bringing in cash. “They just got copterassistance. stubby wings, not only to do the same speed than the only combination ufacturer exploring high-speed ers in the near term. The ability to go very aggressive about commercial CrispinMaunder,executivechairman job of preventing the body of the heli- rotorcraftcurrentlyinproduction—the rotorcraft — its self-funded X2, with faster is always desirable but, in the terms, did everything they could to of Lease Corporation International, copter rotating in the opposite direction Bell Boeing V-22 Osprey military tilt-ro- twin, coaxial main rotors and a pusher world of civil rotorcraft, cost-effective- bringinorders,”MrAboulafiasays. whose LCI Helicopters specialises in to the main rotor but also to pull the tor. propeller at the back, yielded a speed of ness is likely to win out, especially in a May’s announcement of a scaling- leasing aircraft to operators, says the wholeaircraftforwardthroughtheair. Its complicated and rather cumber- 260kt.Thathasbeendevelopedintothe tightmarket. back of production reflected the unsus- tainability of Bombardier’s earlier pro- duction levels rather than wider weak- nessindemand,saysMrAboulafia. The flood of new aircraft, many pur- chased at knockdown prices, has had knock-oneffectsacrossthemarket.Dis- Upstart in VIP cussing General Dynamics’ third-quar- ter results, Ms Novakovic referred darkly to “non-macro headwinds” in the third quarter because “a competi- tor” was selling some aircraft at “very market makes lowprices”. “Now,inevitably,thatpartofthemar- kethasproblems,”MrAboulafiasays. YetBombardier’scashcrunchislikely good on lofty to shape the long-term competitive landscape in the industry.The crisis has forced the company to postpone intro- duction of its long-range Global 7000 and8000aircraftbytwoyears. ambitions The company is falling behind a wave of innovation. Cessna will show its new midsizeLongitudejetatthisweek’scon- ventionoftheUSNationalBusinessAvi-

$5.4bn 713 Cost to Number of Embraer The Brazilian aircraft maker has turned a Bombardier of business jets building the likely to be dream into reality, reports Liz Moscrop C Series so far delivered in 2015

en years ago, in an unas- It already had the maintenance skills Clean-sheet US fractional ownership company Embraer has spent $200m creating a ation Association in Las Vegas. Gulf- suming grey basement in to keep its jets flying, born from many design: a Legacy elected to order an unspecified global network of 75 owned and author- stream is developing the G500 and SãoJosédosCampos,Brazil, years in the commercial and military 500 on the number of Embraer 450s and 500 air- ised service centres, and parts distribu- G600 as new, higher-technology Luís Carlos Affonso, then sectors, but had the world to prove assembly line crafttoreplacethe60BombardierLear- tioncentres. replacements for its existing G450 and T executive vice-president of when its first all-new , the Paulo Fridman/Bloomberg jet 85s the company planned to buy. It has also expanded production of its G550 models, and as competitors to the Embraer Executive Jets, solemnly told a Phenom100,enteredservicein2005. Canada’s Bombardier initially sus- executive jet aircraft components and Global 5000 and 6000. France’s Das- group of journalists how his company Today,there are more than 300 of the pendedandhasnowcancelledtheLear- finalassembliesoutsideBrazil. sault Aviation is simultaneously devel- wassettobuildonthesuccessofatrialit type flying, and it has won recent fleet jet85programme. Mr Camelier says the strong appetite opingitsnewFalcon5Xand8Xbusiness had run with a VIP version of its ERJ135 orders from two of the biggest Middle Flexjet needed a replacement for cus- for Embraer’s latest offerings is the jets. airliner,createdin2000. Eastairlinesasatrainer. tomers who bought shares in the result of “10 solid years of good service, Mr Anderson expects that the loyalty The resulting super midsize Legacy Embraer now has four other new planned new Learjet. The first Legacy strongcustomersupport”. of Bombardier customers will ensure 600wassuchahitthattheaircraftman- executive aircraft in its stable. Some are 500 will join the Flexjet fleet in this The company has yet to finish build- that it retains a substantial market ufacturer had decided to commit fully already upgraded, the biggest being the year’s fourth quarter, followed by the ing a complete range of business air- share. JetCraft projects that the com- totheprivateaviationmarket. ultra-large cabin Lineage 1000E busi- first Legacy 450 in the second quarter craft. pany will still take 30 per cent of indus- It was going to form a new division ness aircraft, a derivative of ithe ERJ145 nextyear. However, Mr Camelier is pragmatic: tryrevenuesin2024. dedicatedtothesector,andbuildafam- airliner. It also has roughly the slice of Claudio Camelier, demonstration “We have dedicated 10 years of However,Bombardier’sslowdevelop- ily of six more aircraft over the next themarketithadpredicted. pilot for the Legacy 500, and vice- resources to building this portfolio, but ment of its biggest, newest aircraft has decade. And it was going to eat up 20 The company has come a long way in president of sales for Europe, Middle Embraer we do have commercial and military prompted a rash of speculation that per cent of the global market share in animpressivelyshorttimeframe. East and Africa, says the aircraft have has spent divisions. rivals will develop big, new aircraft to thesector. The latest of its products to hit the had a much smoother market entry “For the time being, we are diverting take on Gulfstream’s leadership of the With that, he announced the launch market, the $15.25m Legacy 450, has than their big sibling, the Legacy 600, $200m most of our engineering development lucrative luxury of the market. Cessna of two clean-sheet designs — the entry- just earned its European certification did in 2001. “People know us now, so building a resources to focusing on two huge new may unveil plans for a longer-range level Phenom 100 and the light Phenom and will enter service with its launch the new Legacies are more readily projects — the E2 evolution of our LongitudeatNBAA,whileDassaultmay 300. The journalists listened politely, customerinthecomingweeks. accepted,”hesays. global regional jet family and the upgraded eventually, observers believe, produce wished the company well and went The $19.95m Legacy 500, meanwhile, He adds that the new 500 has a network of KC-390tanker.” an aircraft able to fly 7,000 nautical away rather sceptical about such a wild enteredserviceayearago.Thetwocom- number of important safety features. No company in aviation or elsewhere miles without refuelling, as the G650 claim. pletely new designs share a 6ft stand-up “For example, pilots are unable to service and canrestonitslaurels.Butcreditisdueto can. Knowing it would have a fight on its cross-section, Honeywell exceedstructurallimits,whichisachar- parts theBrazilianaircraft-maker. While Bombardier may continue to hands with others in the sector, namely HTF7500E engines, Rockwell Collins acteristic normally only found in much A decade after that basement presen- deliver more aircraft and bring in more Bombardier and Gulfstream, Embraer Pro Line Fusion avionics and, for the larger, more expensive aircraft with a distribution tation there are more than 800 of its revenuethanitsrivals,itishardtoavoid worked hard to develop a reputation for first time in an Embraer aircraft, a fly- pricetagofseveralmillionmore,includ- centres business jets flying that existed only on theconclusionthatagradualshiftinthe excellentcustomerservice. by-wirecontrolsystem. ingourownLineage,”hesays. paperin2005. industry’sleadershipisunderway.

Contributors Cessna makes light work of heavy economic weather Rohit Jaggi Aircraft columnist

Liz Moscrop Midsize and light jets peteswithEmbraer’swell-receivedLeg- trate on its commercial and heavier Hondahasahistoryofhelpingtoturn Freelance aviation journalist acy aircraft — the spacious Legacy 450 businessjets. around tarnished images. A slogan used New aircraft are focusing hasasimilarpriceof$15.25m The midsize and light sectors of the inUSadvertisingforitsmotorcycleswas Tanya Powley The Latitude takes advantage of the business jet market were hardest hit by “You meet the nicest people on a Transport correspondent specifically on comfort, rising rate of improvement in avionics, the global economic crisis, not enjoying Honda”, which successfully shifted cabin size and efficiency, withatouchscreensystemfromGarmin the buoyancy of that for heavier attention away from the oily rebel label Robert Wright reports Rohit Jaggi of the US that includes synthetic vision, machinery. However, the smaller-air- that had hitherto hung over riders of US industry correspondent and auto throttles, thereby easing the craft sectors are doing better now that two-wheelers.Acleaner,quieterprivate pilots’workloadandimprovingsafety. the US economy is recovering, accord- jet could help do something similar for TheCitationLatitudepausedatthestart Businessjetmakershavebeenslowto ing to the database at aerospace analy- businessaviation. of the long runway at London’s Biggin include some features most passengers sisspecialistFlightglobal. Another light jet that is already help- Rohit Jaggi Hill. When the twin-engined business consideressential,buttheCessnaisnow The light jet sector is eagerly awaiting ing to the address the wasteful image of Commissioning editor jet from Kansas aircraft maker Cessna on top of this — onboard wifi is now the arrival of the HondaJet — as it has private flying is the Nextant 400XTi. A started its take-off roll at the south-east standard. doneforsomeyears.Themuch-delayed remanufactured Beechjet, the process Steven Bird England airport, the acceleration took CessnasaystheLatitude’sdirectoper- project by the Japanese car and motor- of reusing the airframe but incorporat- Designer most of my companions in the spacious ating costs are $4.45 per mile and reck- cyclemakertobuilditsownbusinessjet ing modern, efficient engines, avionics passenger compartment by surprise — ons a total trip cost from Los Angeles to wasstartedin1997. and other features, makes the $5.3m jet Andy Mears champagne glasses went flying before New York of $7,756, or from London to Provisional US certification of the Efficient: the Cessna Latitude — comparatively — green as well as eco- Picture Editor thejetdid. Berlin of $2,318. The company says the $4.5m jet, which can be configured to nomical. The jolting start was not repeated in a Latitude could cost 20 per cent less to carry up to seven people including one HondaAircraftchiefexecutiveMichi- Nextant has also turned its attention For advertising details, contact: flight that covered a surprisingly large runthanitsrivals. or two pilots, was granted earlier this masa Fujino has repeatedly claimed to turboprops, with its G90XT,based on Liam Sweeney, +44 (0)20 7873 4148, stretch of the UK’s east in a remarkably The formula is working for the mid- year and full certification is expected that his aircraft is the “world’s most the already economical King Air twin [email protected]. short time — maximum cruise speed of size aircraft, which won US certification imminently,with first deliveries follow- advanced light aircraft”. Honda also turboprop aircraft. And it is also the midsize jet, which can go as far as in June this year. Leading fractional ingsoonafter. saysthejetisupto20percentmorefuel announcing this week an update to the All FT Reports are available on FT.com at 2,850 nautical miles in one hop, and operator NetJets ordered up to 150 and The aircraft is not revolutionary, but efficientthanitsrivals. XTi’savionics,withsyntheticvisionand ft.com/reports carryuptoninepassengers,is446knots will start taking deliveries of its aircraft does have some unusual features, But the most important role of the the provision for auto throttles helping (513mph). nextyear. including the placing of the two turbo- HondaJet may be in winning public put its electronics package on a par with Follow us on Twitter: @ftreports The $16.3m aircraft from Cessna, part Not that this sector of the market has fan engines, developed jointly with GE approval of private flying. The sector thebestofall-newaircraft. of the Textron conglomerate’s aviation been easy for everyone. Canada’s Bom- specifically for the aircraft, on pylons has still not shaken off the “fat cat” Steps towards recovery in the lighter All editorial content in this report is section, is one of a wave of new aircraft bardier cancelled its programme to above the wings near the fuselage. This, image of business jets that took hold sectors of business aviation are as yet produced by the FT. Our advertisers have that place more emphasis on cabin size build the eight-passenger Learjet 85 it is claimed, improves aerodynamics especially during the early stages of the tentative.Butsomeofthemachineryon no influence over or prior sight of the and comfort, and on efficiency. It com- this year because it needed to concen- andcutscabinnoiselevels. financialcrisis. offeriswellplacedtoreapanybenefit. articles. Tuesday 17 November 2015 ★ FINANCIALTIMES 3 Corporate Aviation Gulfstream jets ahead at the top of its sector

that Bombardier has ceded its leader- Large-cabin aircraft ship at the top end of the business jet The question for sizerangeinordertofundtheCSeries. It is likely to be still longer before competitors is whether Bombardier can update its existing Glo- they can catch up, bal 5000 and 6000 models to compete with the G500 and G600. “There’scom- writes Robert Wright petition,” Mr Aboulafia says. “It’s just that Bombardier, because of the C Series,hashadtokeepdelayingit.” n a low-rise building in a corner of The competitive picture might Gulfstream’s sprawling campus change further if France’s Dassault, the outside Savannah, Georgia, engi- only other manufacturer of the largest neers work at a series of computers businessjets,decidestostartcompeting I near mock-ups of a new aircraft’s head-to-head to supply the longest- cockpit.Nearby,othersarebusywithan rangeaircraft.However,thecompanyis aircraft-shaped steel frame equipped currently developing both its new Fal- withthemovingpartsofanewaircraft. con 8X jet (which first flew in February The workers are all engaged on devel- thisyear)andthe5X(whichfirstflewin opment of Gulfstream’s new G500 and July). The 8X is intended to have a G600 jets, the manufacturer’s effort to 6,450nm range. The company has also reinforce its already powerful position previously focused on ensuring its air- at the top of business aviation’ssize and craft are fuel-efficient and can land and price range by bringing the latest tech- take off on short runways, rather than nology to aircraft with ranges of 5,000 onmoreeye-catchingfeatures. and6,200nauticalmilesrespectively. Dassault has made no official com- The company, part of General mentonthepotentialforalonger-range Dynamics, a military contractor, aircraft but Mr Aboulafia predicts Das- already has the largest end of the mar- sault will be “waiting and watching” to ket to itself with its G650 jet and the see whether Bombardier’s business jet G650ER, an extended-range version division can recover from the financial that can fly 7,500nm without refuelling. blows it has suffered and compete again The new aircraft are intended to offer forthelargest-sizeaircraft. customers the benefits of flying just “It could be that they see Bombardier short of the speed of sound that the as so fundamentally weakened they G650 aircraft offer, as well as some fea- should fill that gap,”Mr Aboulafia says. tures such as a new cockpit layout, but “Or it could be that Bombardier pulls which cost markedly less. The list price throughjustfine.” for the G500 is $43.5m, while the G600 Either outcome for Bombardier is$54.5m.AG650ER’sis$66.5m. remains possible. There certainly are The question for Gulfstream’s com- Flying high: the Gulfstream business when she spoke to “Weareconfidentinourabilitytomain- tothesecondhalfof2018.Thecompany people who are optimistic about Bom- petitors in the large-cabin market — for investors on October 28 about the tain market leadership and provide gave no date for introduction of the Glo- bardier’s chances, even as Gulfstream aircraft costing more than about $26m Paul Bowen/Gulfstream division’s prospects after a buoyant strongvaluetocustomerswithourbest- bal 8000 aircraft, intended to have a starts to work on the next generation of each, capable of flying 3,000nm and thirdquarter. in-classaircraft,”hesaid. 7,900nm range, but its timetable has advances beyond those that Bombar- carrying 15 or more passengers — is “Gulfstream continues to perform At the heart of the topics facing the ‘We’re not generally been around a year behind dierisstrugglingtoproduce. whether they can catch up with Gulf- well in the market,” she said, before market is the question of how long loyal thatforthe7000. Chad Anderson, president of JetCraft, stream’slead in size and speed. France’s adding that the third quarter’s order customersofBombardier’sGlobalseries seeing a lot The delay means that it will be more a North Carolina-based private jet bro- Dassault Aviation has no immediate receipts were the strongest for four of aircraft, the first to offer truly long- of clients like three years until Bombardier can ker, says dedicated Bombardier cus- plans to match the range and speed that years. “Our pipeline is good, as it’s been range intercontinental ability, will wait match the 7,000nm range of the stand- tomers are responding to the delays by Gulfstream’slargejetsachieve.Canada’s all year. It’s heavily North American — for the company to produce its planned saying, ardG650,whichenteredservicein2012, buying new Global 5000 or 6000 air- Bombardier, meanwhile, has had to public, private companies, high net- longer-range aircraft. The company “Screw it, and another four years before it over- craft and waiting patiently for the new, pushbacklaunchofitsultra-long-range worthindividuals.” announced on July 30 that, thanks to takesthe7,500nmrangeoftheG650ER, biggeraircrafttoemerge. competitors for the G650 as it wrestles Nevertheless, Alain Bellemare, Bom- the financial problems stemming from we’ll buy a launchedin2014. Mr Bellemare must hope that the withfinancialproblems. bardier’schiefexecutive,saidduringhis its C Series commercial jet programme, Gulfstream Richard Aboulafia, an analyst at the reactionistypical. ItissmallwonderthatPhebeNovako- company’s third-quarter call that it it was delaying the projected entry into Virginia-based Teal Group consultancy, “We’re not seeing a lot of Global cli- vic, General Dynamics’ chief executive, remained the largest manufacturer of service of the Global 7000 jet, intended 650”’ calls it “one of the greatest self-inflicted ents saying, ‘Screw it, we’ll go and buy a sounded robustly confident about the business jets and expected to remain so. to have a 7,300nm range, by two years, wounds in the history of this business” Gulfstream650’,”MrAndersonsays. Commercial project leaves business jets up in the air

Until earlier this year, part of the Bombardier answer to Bombardier’s need for cash had appeared to be the still-healthy Cost overruns and long demand for its biggest current models, delays are not deterring the Global 5000 and Global 6000. The company started producing the aircraft staunch fans of the aircraft far faster than rivals could their equiva- maker, says Robert Wright lents — 80 in 2014 — in a move that many observers saw as a desperate efforttogeneratecash. Over the decade up until last year,there That strategy had to be abandoned in was little doubt which company was the May with the loss of 1,750 jobs as the leading manufacturer of business air- companyconsumeditsorderbookatan craft—andlikelytoremainso.Canada’s unsustainable rate. The costs of the Bombardier not only had a comprehen- redundancies and the slowdown in cash sive range — starting with Learjet air- flow from reduced deliveries meant the craft, running through the medium-size company ate through $816m cash in the Challengermodelsandranginguptothe third quarter, pushing its net debt up to long-range Global aircraft — but also $6.8bn. The company intends to pro- simply sold far more aircraft than any duce only 69 Global 5000s and 6000s in othermanufacturer. 2016. However, in January this year, Bom- The delays to the 7000 and 8000, bardier,strugglingtofunddevelopment meanwhile, mean Gulfstream’s G650 of its new C Series narrow-body com- and its extended-range G650ER con- mercial jet, announced it was pausing Liquidity: Alain Bellemare tinuetohavethelongest-rangebusiness developmentoftheLearjet85,amidsize jetsmarkettothemselves. jet nearing the end of the development definitiveagreement,anditwillprovide Mr Bellemare has portrayed various process. Subsequently, in July, the com- far less than the $2bn Bombardier says decisions this year — the pausing then pany announced that it was delaying by itneedstobringtheCSeriestomaturity. scrapping of the Learjet 85, for which twoyearstheplannedentryintoservice Although the company says a plan to the company took a $1.2bn write-off on of a still more important aircraft, the sell a minority stake in its train making October29,thescalingbackof5000and Global 7000 long-range jet, until the business, the largest in the industrial- 6000 production and the delays to the second half of 2018. There is no longer a ised world, will provide further cash, newer aircraft — as part of an overall planned entry into service date for the there remain questions about the planforthecompany’sfinances. Global8000,whichisintendedtobethe group’sability to continue in its present The company also says it will “soon” world’slongest-rangebusinessjet,capa- form. Its shares fell 19 per cent on the announce the placing of a minority ble of flying 7,900 nautical miles with- dayoftheQuébecannouncement. stakeintheBombardierTransportation outrefuelling. “It’s a non-definitive agreement to rail business to bring in further The events are symptomatic of the provide a woefully inadequate amount resources. crisisfacingthecompanybecauseofthe of cash and it’s far from clear where the “What we’ve been working on was to big cost overruns and long delays in rest of the money they need is going to have a game plan to shore up the liquid- bringing the C Series into service as a comefrom,”MrAboulafiasays. ity and to ensure we would be able to smaller competitor to Airbus’s A320 bring all these programmes to fruition,” family of narrow-body jets and Boeing’s MrBellemaresaid. 737 aircraft. The $5.4bn cost of develop- Yet, while many observers remain ing the C Series has affected the com- ‘There’s a good brand sceptical about whether the wider com- pany so severely that Alain Bellemare, loyalty with the installed pany has adequate resources in place to the chief executive, said on October 29 manage its plans, some customers when announcing a planned, US$1bn base of existing owners’ appear to share Mr Anderson’s funda- investment in the C Series by the Richard Aboulafia, Teal Group mental optimism about the fate of the Québec provincial government that it business jets arm. Excluding the effect was intended partly to inspire confi- Chad Anderson, president of JetCraft, ofthe64cancelledordersfortheLearjet dence. a North Carolina-based private jet bro- 85, Bombardier took in 32 business jet “Our first goal was to make sure that ker, says customer loyalty will keep ordersintheJunetoSeptemberquarter, we would have sufficient liquidity to Bombardier narrowly ahead, both for upfrom21inlastyear’sthirdperiod. reassure customers and reassure all of overall deliveries and revenues. Tex- Mr Anderson says his customers are the stakeholders that Bombardier was tron’s Cessna nevertheless is closing the still buying new Challenger and Global not going away and I think that we’ve gap in deliveries, while General Dynam- aircraft, in spite of Bombardier’s prob- donethat,”MrBellemaresaid. ics’ Gulfstream looks set to narrow its lems. “Bombardier’s market share is Richard Aboulafia, an analyst at the salesrevenuelead. incrediblystrong,”hesays.“Ithinkpeo- Virginia-based Teal Group consultancy, “There’sagoodbrandloyaltywiththe ple take a bit of a look in the rear-view says the agreement with Québec is only installed base of existing owners,” Mr mirror to predict the future. I don’t amemorandumofunderstanding,nota Andersonsays. thinkBombardierisreadytogoaway.” 4 ★ FINANCIALTIMES Tuesday 17 November 2015 Corporate Aviation Appreciation of depreciation shapes an industry Sabre rattles

Fractional ownership flurry of entrants to the fractional mar- category.” Connectivity, in-flight enter- order could be worth $5.4bn (€4.8 bil- ket in the late 1990s, the two main play- tainmentandlongerlegsarefactorsthat lion),ifallaredelivered. long-distance Demanding customers are ers (for larger jets) are now NetJets — helptoattractcustomers,headds. NetJets also ordered up to 150 Cessna owned by Warren Buffett’s Berkshire SistercompanyFlightOptions,mean- Citation Latitude business jets in 2012 driving market leaders to Hathaway — and Texas-based Flexjet, while, is also seeing increased sales. The and will take delivery of the first one in invest in new aircraft and a owned by aviation entrepreneur Kenn company mostly sells shares in smaller July 2016. Its new booking app has travel hopes more tailored service, Ricci’sDirectionalAviationCapital. aircraft — the Nextant 400XTi (a received about 20,000 bookings Part of the appeal for clients is the remanufacturedBeechjet/Hawker)and throughitsonlinecustomerportal. reports Liz Moscrop familiarityandconsistencyonoffer.Jets Cessna Citation CJ3 variants. “The Nex- While the fractional providers are COLUMN arrivewiththesameinteriorandagreed tant enhances range and technology doing well, jet card operators are also service standards — whether amenities with its new engine,” says Mr Doyle. thriving. Switzerland’s VistaJet is Rohit Private flyers who are airborne fewer on board or personal chauffeurs on “Our customers opt for range with the reportinga17percentincreaseinflights Jaggi than 50 hours a year benefit from char- landing. The strategy is working for NextantandspeedwiththeCitationX.“ globallyoverthepast12months. tering aircraft, rather than part-owning Flexjet, which reports 31 per cent Both Flexjet and NetJets are offering New York-based Wheels Up, which one,accordingtotheruleofthumb.The growth in bookings over the past quar- highly tailored programmes to their concentrates on the lower end of the same rule says that ownership of a ter, with a 20 per cent lift in sales over customers. The Flexjet version is called market, signed 1,000 members by the whole aircraft makes financial sense if thepreviousyear. “Red Label” and offers what Mr Doyle end of 2014 and flies 27 new turboprop The potential of the Sabre combined jet and rocket engine oneisflyingatleast250hoursayear. In 2014, the company placed an order describes as “state-of-the-art interiors BeechcraftKingAirsand10refurbished will come as no surprise to readers of the Financial Times. The territory in between has been a for up to 50 Gulfstream jets comprising the customers would choose for them- CessnaCitationjets. Aerospace company BAE Systems this month announced fertile ground for NetJets, the global G450, G650 and the new G500 aircraft. selves”.They also get crew dedicated to Fractional CalifornianoperatorJetSuiteoperates an investment of £20.6m in the UK’s Reaction Engines to leader in long-term fractional owner- The first G650 is due to be delivered an individual aircraft, which is guaran- ownership a fleet of Phenom 100 and Citation CJ3 develop a synergetic air-breathing rocket engine (Sabre), ship. Fractional stakes generally start at early in 2016, but Flexjet says it has teedtobelessthanfiveyearsold. light jets. Alex Wilcox, chief executive, which could hold the key to developing highly competent, 1/16th of an aircraft, or 50 hours’ flight moved the G450 deliveries forward in NetJets is offering a similar concept may make says: “Fractional ownership is twice as reusable, single-stage space vehicles that can launch time a year. There are tax advantages, responsetocustomerdemand. called the “Signature Series”, which it sense if expensive and our passengers are buy- themselves. too, on business ownership, which vary Matt Doyle executive vice-president says is countering a somewhat flatter ingliftnotmetal.Aeroplanesdepreciate The Sabre technology has been in development since 1982. dependingonwhereitisregistered. of sales at Flexjet, says: “By the end of market in Europe. NetJets Europe is one flies andarealiability.Wealsohavenomem- If it fulfils its promise, it will allow craft to take off from a Another alternative to ad hoc charter the year, we will have added 27 aircraft. selling its ageing Falcon 7X aircraft and between bership fee, which is very attractive for runway, attain five times the speed of sound in the Earth’s for regular flyers is a jet card. This is We have Bombardier Challenger 350s taking delivery of new Bombardier ourcustomers.” atmosphere, then transition to a rocket mode for space essentially a prepaid debit card sold in and Learjet 75s coming, as well as Challenger 350s. NetJets became the 50 and 250 He adds: “The larger jets market is travel — and reverse these stages to land conventionally. 25-hour increments. Participants can Embraer Legacy 450s and 500s. Our launch customer for the type when it hours per saturated, and there is no one else com- I wrote in the FT in 2009 that the technology, for which the book a flight on a jet anytime, any- customers are really excited by the new, placed an order for 75 aircraft and petinginthelightjetsegment.” European Union this year approved UK government plans to where,withlittleadvancenotice.Aftera more capable, efficient aircraft in each options for a further 125 in 2013. The year award a £50m grant, could also offer hypersonic travel from point to point on the Earth — with Brussels to Sydney taking just four-and-a-half hours. Minimising travel time is always attractive. Commercial air carriers are once again offering ultra-long, nonstop flights. Qantas plans to offer a Perth-London route by 2017 Ubers of the skies that would take 19 hours — a touch longer than a Sabre- engined craft could theoretically achieve. And in the world of business aviation, buyers have a substantial appetite for greater nonstop range in large aircraft. The Aerion supersonic business aircraft project also moves challenge the on. The US company started taking orders in 2007, and has since then unveiled an improved airframe design and an important tie-up with Airbus, but has still to choose the engines and an assembly site for its Mach 1.5-capable traditional brokers aircraft. This is no story of the tortoise and the hare, but what is encouraging is that there are rival technologies offering the of private jets prospect of planet-shrinking travel. Interiors It’s a far cry from the brown leather and gold fittings popular in private aircraft until not very long ago. Gulfstream will at the National Business Aviation Association convention in Las Technology Online companies are muscling into Vegas this week unveil a cabin design that is all cool, light colours. the executive air travel market, says Tanya Powley The G600 mock-up refines the design ethic that was showcased with 2008’s G650 from the Georgia manufacturer ookingaprivatejetforabusi- users, such as tech entrepreneurs,”says of business aircraft. That exploited the cabin’s open feel ness trip or a last-minute lux- Mr Twidell. “These are still important provided by big windows ury weekend away has customersegmentsforus,butourclient with light colours and airy Buyershavea become easier over the past base is now much more diverse and designs. B five years as a number of new includes international royalty, heads of Units are slimmer, seats substantialappetite businesseshaveenteredthemarket. state and well-known personalities are more comfortable and forgreaternonstop From UK-based PrivateFly to India’s fromsportandentertainment.” there is more counter space JetSetGo, the business of chartering jets At PrivateFly, its most popular route in the galley. There is even rangein has undergone a transformation with in Europe is London to Nice, and in the stone flooring — a thin brokersthatofferanon-demandservice US,LosAngelestoLasVegas. veneer to avoid adding too largeaircraft thatletscustomerssearch,compareand US-based JetSmarter has also seen much weight — in the entry book private jets online or through a growth of about 15 to 20 per cent each and the forward toilet. phoneapp. month since its launch in March 2013. The G600 shares the G650’s large cabin — and with a range These self-styled ‘Ubers of air travel’ The company has even attracted fund- of 6,200 nautical miles, its occupants will benefit from not aretakingawaybusinessfromthetradi- ing from members of the Saudi royal feeling as if they are cooped up in a tiny flying tube, even if tionalbrokersthathavelongdominated familyandAmericanrapperJayZ. travelling at not far off the speed of sound will minimise the themarketforprivatejethire. JetSmarter charges a yearly mem- Planes at your just an extension of a way to make a res- tion.” This could include booking pri- time in the air. They have also unnerved the frac- bership fee of about $9,000 to gain fingertips: ervation on a private aircraft,” says vate jets for the music industry and tional ownership industry, in which cli- access to wholesale rates on charter JetSmarter BrianFoley,anaviationconsultant. group tours, which would need a large ents pay an upfront fee for a guaranteed jets, and concierge services. offers wholesale “It used to be fax machine, then tele- amountofplanning. number of hours per year with the Sergey Petrossov, chief executive and rates phone, now there’s the option of book- Onlinebrokersconcedebothbusiness assurance that a jet will be available for founder of JetSmarter, says its demo- ing online. There’s nothing revolution- models can coexist. “Travel agents still immediateuse. graphic is “diverse”. “A typical user is ary about this. In fact, it’s very evolu- exist and usually provide assistance PrivateFly was one of the first compa- anyone from the spontaneous traveller tionary.” Mr Foley says for some, the with unique or exclusive travel pack- nies to enter the market and now has looking for a weekend getaway, to a need for human interaction will still ages that online travel agencies would access to about 7,000 planes across the businessman or woman who needs to remain — particularly for very rich cus- have trouble calculating in real time,” globe. The key to the company’ssuccess bookalast-minutetrip,”hesays. tomersbookinga$100,000flight. saysJetSmarter’sMrPetrossov. isitsownsoftwarethatchecksavailabil- Most online brokers say they provide Mark Briffa, chief executive of Air Mr Twidell admits there have been ity with partner charter operators, consumers with rates five to 50 per cent Online Partner, the corporate jet broker, some areas typically dominated by tra- matches clients with the right aircraft lower than a traditional broker, partly agrees. “Many of our clients — both cor- ditional brokers that have been slower andprovidesafixed-costquote. down to their more efficient business brokers porates and high-net-worth individuals to break into, such as large corporate Adam Twidell, a former pilot who model. The attraction of the private jet concede — value the insight and service that business.“Wedonowhaveagrowinglist founded PrivateFly in 2008, believes market has seen a spate of new online comes with having an established rela- ofsmall-andmedium-sizecompanies— there has been a definite market shift to brokers, including the UK’s Victor and both tionshipwithabroker,”hesays. some of whom have grown with us from onlinebrokers,particularlyforlightand US-based BlackJet, backed by Uber co- business “Air Partner does a lot of flying for individual users,” he says. “FTSE 100 mediumjets. founderGarrettCamp. governments, heads of state and large companies and other major corporates “The early adopters to PrivateFly However, business jet experts believe models can corporateswithcomplexitinerariesand have established, legacy-driven sup- were typically leisure-orientated, high- this does not necessarily mean the end coexist an online booking service just wouldn’t plier relationships and contracts, so net-worths and individual business of the traditional broker. “For me, it’s be viable for these types of organisa- theytakelongertochange.” Light in the sky: Gulfstream G600 mockup Cost of fuel is small part of complex formula that affects demand

Oil price fall and increasing the incentives to hold on generally price sensitive and whose nautical miles (13,890km) without prices for the jets or their operating to older, less-efficient planes. Lessors profitability can hinge on slender mar- refuelling, while Bombardier’s Global costs.” Low commodities prices are say they are already signing far more gins, the priority is to eke out the maxi- 8,000 is intended to have a 7,900nm Yet the fall in the oil price is still longleasesforolderaircraftthanbefore. mumpossiblepassengerrevenueforthe (14,631nm)rangewhenitentersservice expectedtohavesomeindirecteffecton affecting executive travel, The question for business jet manu- minimum possible spending on fuel. laterthisdecade. the business jet market through its cus- reports Robert Wright facturers is whether those factors will That imperative prompted airlines to Many in the industry say that, even if tomers. further postpone the big demand recov- orderaircraftsuchasAirbus’sA320neo, cost were a significant matter for most The demand from executives at ery that manufacturers of light and which can use Pratt & Whitney’s more business jet owners, the aircraft fly so commodity producers — including oil When United Continental published its medium-sized jets have been awaiting fuel-efficient geared turbofan engine, much less than commercial jets, which companies — to fly direct to negotiate third-quarter results on October 22, it since the economic crisis, or whether whenfuelpriceswerehigh. on long-haul routes can fly as much as with the leaders of mineral-rich coun- revealed it had been hit in two ways by demandwillcontinueunperturbed,asit Business jet manufacturers have 15-16 hours every day,that fuel is a rela- tries or to remote production sites the declining oil price. The company, hasformakersofbiggerbusinessjets. introduced many of the same improve- tively insignificant factor in operating played a big role in keeping demand for United Airlines’ parent, attributed a 5.6 Loren Thompson, analyst at the Vir- ments to engine technology and lighter costconsiderations. the largest jets buoyant over the past per cent decline in its yields (revenue ginia-based Lexington Institute, says materials for and wings, but Corporate jets are generally used for eightyears. earnedperpassengermile)partlytolast lowpricesforoilandothercommodities used them to serve customers who no more than 400 to 500 hours a year, The reversal in prices — and the year’s fall in the oil price and hence its areaffectingthereadinessofsomebusi- worry far more about saving time and against10timesthatformanycommer- resulting cancelling and scaling back of fuelsurchargerevenue.Italso,however, nessestopayforexecutivetravel. workingefficientlythanmoney. cial jets. Fuel costs are consequently oil company projects — looks set to identified a second, less obvious factor. However,fewinvolvedintheindustry Tanked up: an aircraft being refuelled Some manufacturers have focused on only a relatively small share of corpo- depress demand from such customers Spending by United’s energy industry believe that the fuel cost of operating usingtheefficiencyimprovementstogo ratejets’runningcosts. just as demand from other businesses, clientshaddeclined35percentyear-on- aircraft is a significant determinant of fuels. “The assumption is that the own- faster.AnewversionofCessna’sCitation Mr Thompson says operators of atleastintheUS,isbeginningtorevive. year as the falling oil price prompted owners’ decisions about aircraft that ers don’t mind paying the extra,” Mr X will have a top speed of 0.935 times smaller corporate jets are likely to be Mr Thompson says the signs are that companiestocutbackonexpenditure. only the wealthiest individuals and Thompsonsays. thespeedofsound. more sensitive to operating costs, and demandforhigh-endjetsappearsstillto The price fall has prompted some organisationscanjustifymaintaining. At the heart of the differing reactions Othermanufacturershavefocusedon hence more likely to postpone pur- berobust,despitetheproblems. analyststofearthatpermanentlylowoil Mr Thompson compares the corpo- from commercial airlines and business allowing owners to travel further with- chasesinlightoflowfuelcosts. But he adds: “In areas where it’s a prices could hollow out demand for rate jet market to the luxury motor car jet manufacturers to the falling oil price out refuelling. Gulfstream’sG650ER, an But he adds: “At the top end of the tough decision whether to buy a busi- commercial jets by reducing the advan- sector, in which many vehicles are aretheverydifferenteconomicsbehind extended-range variant of the G650 business jet market, buyers are rela- ness jet or not — in the middle ranges — tages of new,more fuel-efficient aircraft designed to operate only on premium them.Forairlines,whosepassengersare introduced in 2014, can fly 7,500 tively [unresponsive] to changes in the therecouldbeaproblem.”