Business Aviation in Latin America

 - September 12, 2006, 8:57 AM

For years the business aviation market in Latin America was distinguished by little more than wishful thinking as manufacturers watched signs of interest that translated only rarely into signed contracts. Between 1994 and 1999, they saw the business jet fleet for 15 countries drop from 954 to 769 airplanes. It was the low point, and if sales representatives were not perched on ledges of tall buildings, they were at least considering other employment. But that was the way things were, and things change.

Seven years later, the Latin American business-jet fleet is back up to 950-plus airplanes in 16 countries, and dealers have been heard to grumble that they could sell more airplanes if the airplanes were available.

Compared with the U.S. and Canada–where the business-jet fleet totals some 16,000 airplanes– Latin America is a relatively small market on the global map. For most aircraft manufacturers, it is the fourth largest market, behind North America, Europe and the Middle East.

Although relatively small, however, it is not insignificant, with an annual increase in the total fleet size since 1999 of nearly 30 business jets a year. And in 2004 and 2005, the fleet grew by 35 and 40 aircraft, respectively.

Bombardier is a major player in the Latin American market, at least in terms of numbers of aircraft. According to Favio Robello, the company’s v-p of Latin American sales, there are 307 Bombardier airplanes in service in the region, with the Learjet line making up the largest share. There are 101 in Mexico and 82 in Brazil.

“I’ve just completed six years with Bombardier,” said Robello, “and I can tell you that last year was the best year we’ve had in Latin America.”

Cessna holds a major market share in Latin America, with 362 Citations in service. There are also 236 Caravan turboprop singles in service in the region. The largest Citation fleet is in Brazil, where there are 135 in service. In 2004, Cessna delivered 14 Citations in Latin America; last year the company delivered 21. “And this year we’ve already delivered 11,” said a spokesman in July.

Jet Sales Are on the Upswing but Turboprops Rule

There are about 62 Gulfstreams–from G100s to G550s–in service in Latin America. “We now have five G550s flying in Latin America,” said a spokesman, who also noted that for the Savannah, Ga.-based OEM, the market has assumed an importance equal to that of the Middle East.

Raytheon Aircraft is heavily represented in Latin America but primarily in the turboprop market. Of the 22,000 turboprops in the region, a little more than 1,100 are Raytheon airplanes–King Airs for the most part. But the company has had some success recently with its Premier IA light jet and sold two at the FIDAE 2006 international airshow in Chile earlier this year.

Ernesto Rois-Méndez is president of the Asociación Latinoamericana de Aeronáutica (Latin American Aeronautical Association). He is a careful observer of the Latin American market and is relatively blunt in his assessment of the region’s business aircraft market.

“What is amazing is that with instability and unrest so typical in Latin America, there is such growth in business aviation,” said Rois-Méndez. Elections inevitably have a negative effect on business aircraft sales as potential customers choose to wait and see how the political–and, by association, the economic–winds blow, he explained.

Two factors consistently inhibit the market for business aircraft in Latin America–political and economic instability, and they are inextricably linked. There are a number of recent examples.

In Mexico there was the July 2 presidential election in which Manuel Lopez Obrador lost in a hotly contested battle to Felipe Calderon.

In Venezuela last year, President Hugo Chavez, a self-avowed Marxist, claimed the U.S. was preparing for an invasion of his country, and more recently was preparing to sign an arms deal with Russia valued at some $3 billion. The U.S. has banned military sales to Venezuela, and some observers believe a ban by Venezuela on U.S. civil imports could follow.

Brazil is preparing for presidential and congressional elections later this year, and the nation’s efforts to reach an agreement on natural gas prices with neighbor Bolivia collapsed in July. Brazil has in recent years become a major exporter of natural gas.

In Chile, a presidential runoff election in January this year saw Michelle Bachelet the winner, after which the Chilean congress saw fit to reduce the presidential term of office from six years to four.

The situation in Venezuela is “interesting,” according to some aviation handling services. Baseops International said it has seen a “huge” decrease in flights from the U.S. to Venezuela in the past two years. The company also reported a slight decline in business aviation travel to Latin America in general over the past year, but an increase in the number of flights to Venezuela originating in Europe.

On the other hand, Universal Weather reports only “a slight decline” in the number of flights from the U.S. into Venezuela and an increase in the number of flights into Latin America in general.

A spokesman noted that requests for continuing travel in Venezuela beyond international arrival point Simón Bolivar International airport, or to remain in Venezuela more than 72 hours, were requiring between five and seven days for approval. And he added that crews flying into Simón Bolivar were discovering that with the closure of the deteriorating four-lane main bridge connecting Caracas with the Caribbean coast and the airport added at least two hours to the ride into the city center.

Alberto Rosales, a trip support specialist with Universal Weather, said operations into Latin America, and in particular into Brazil, are becoming more frequent. “People are feeling more secure, more comfortable, and they are flying again,” said Rosales. “We’ve noticed this and it’s one reason we opened the new office in São Paulo [at Guarulhos International Airport].”

Changing Regulations and Irregular Enforcement

Regulations remain an issue, not only differing from one country to another, but also in terms of how strictly they are administered from one airport to another within the same country.

In Brazil, said Rosales, crew visas remain an issue at some airports, even though the regulations do not require that pilot and copilot have one. On the other hand, officials seem to agree that a flight attendant is not a crewmember and therefore must have a visa. Bottom line, said Rosales, “Everybody should have a visa.”

At some airports in Bolivia, authorities require proof of the aircraft’s landing field performance after arrival. But at El Alto International in La Paz, it is required before a landing permit is issued.

In Santiago, customs officials no longer clear business aviation passengers through the Universal office but require that they go through customs in the arrivals terminal, which can add an hour or more to the arrival process. “But we did manage to work out an agreement for a private line at the
terminal for general aviation arrivals, which has got it down to about 30 minutes,” said Rosales.

In Mexico, there is a recent and major change to requests for landing permits, said Lupe Jensen, a Universal Weather specialist on travel to Mexico. “Last year, civil aviation in Mexico had a Web site on which the user could fill out the landing permit before departure. Now the operator has to have a handling agent submit the form and accompanying documents.”

Reports on the number of business aircraft in service in Latin America, despite the best efforts of analysts and marketing experts, create a somewhat murky picture.

Rois-Méndez notes that there are a lot of aircraft with N-numbers based in Florida that belong to owners in Venezuela and Colombia. This, he said, sometimes reflects an owner’s desire to ensure the resale value of the aircraft by offering a U.S.-registered airplane that has been maintained to FAA standards. It might also be the result of high import taxes in most Latin American countries.

But Rois-Méndez maintains that Latin America has been and continues to be a good environment for business aviation, and that despite the inhibiting factors, it is a growing market. Aircraft fleets are consistently swelling, but the numbers traditionally lag behind the actual needs of business and industry. This, said Rois-Mendez, suggests steady–if not spectacular–room for growth for some time to come.

Aircraft manufacturers, buoyed by strong sales in the past couple of years, appear to be anticipating more of the same.

Very Light Jet Makers Poised for Success

As the first VLJs approach certification, Latin American interest in the breed seems to be gathering momentum. Brazilian Cessna dealer TAM expects to take delivery of seven Mustangs next year and holds market positions for a total of 24.

The introduction of the Phenom 100 VLJ last year by Brazil’s Embraer has also stirred up interest. The $2.85 million twinjet is expected to enter service in mid-2008 and Latin American, particularly Brazilian, customers are likely to be receptive.

“I think there is definitely a market for the very light jet in Latin America,” said Rois-Méndez. “Those who can afford one will love it.”

He added, however, “As the backbone of an air-taxi service, the VLJ might be a tough sell, as most Latin American countries have only three or four major cities to support such a service.”

Manufacturers Pleased with Sales Gains

“We’ve increased our sales this year,” said Bombardier’s Robello, adding that the success reflects the efforts of a new sales director in Brazil and a sales director in Dallas who spends most of his time in Mexico, as well as those of a pre-owned aircraft sales director in Florida.

But, he added, simply selling airplanes does not ensure long-term success, and Bombardier is planning a new parts depot in São Paulo that will allow delivery of parts for any Bombardier aircraft to any major city in Latin America in about 12 hours.

Bombardier has a field service representative in Brazil, one in Argentina and two in Mexico, and OceanAir in São Paulo had its validation as a company-authorized service facility renewed this summer.

While the market in Latin America is primarily for small and medium business jets, Bombardier expects to see a growing market for larger aircraft with legs to match a global economy that more and more Latin American businesses are entering. “The Global is a victim of price at this point,” said Robello, “but we’re selling more Challengers and as the Latin American economy moves more and more into the export arena, we’re seeing interest in Globals as well as Challengers.

“Long-term investments by Latin American individuals and companies spell stability, and these individuals and companies are looking at outside markets more than ever.”

With 362 in service, Cessna has the largest business-jet fleet in Latin America. A spokesman said the company strategy is relatively simple, and the same as it is in the rest of the world–“focus on complete support through our dealer and maintenance network.”

As for future growth, said a spokesman, “We see very strong, growing economies throughout the region and great opportunities for our whole line of aircraft.”

The TAM facility at Jundiaí Airport near São Paulo is an authorized Citation service center. At 85 strong, the Citation fleet in Mexico is substantial, and supported by Centro de Serviçio Avemex in Toluca.

Gulfstream, traditionally limited in sales numbers by the price and mission of its large long-range and ultra-long-range aircraft, found a ready market in Latin America when it introduced the smaller and less
expensive G100 and G200 in 2001. As a result, the Gulfstream fleet in Latin America has doubled in the last four years, said a spokesman, “and we see no reason for that trend not to continue [now that] we have aircraft more suited to the region. Latin America is an important market for us.”

But like competitor Bombardier, Gulfstream is seeing greater demand for heavy-iron long- and ultra-long-range aircraft. Not long ago there were a handful of GVs in Latin America. “Now, in less than three years, we’ve sold as many G550s as there were GVs in the fleet in 2003.” And, he added, the total fleet in Latin America has doubled in the last four years.

Gulfstream is also focusing on support of its Latin American fleet. While service and support is available at its West Palm Beach, Fla.; Dallas; and Long Beach, Calif. factory service centers, there are authorized line service providers in Caracas, Venezuela; and Santiago, Chile; as well as an authorized warranty center in São Paulo. The West Palm Beach facility is a three-hour flight from most major cities in Central America, Mexico and the north coast of South America.

A spokesman at Raytheon Aircraft, which supports some 22,000 turbine airplanes in Latin America, said sales for the Beechcraft and Hawker jets have been strong, “and we expect that to continue.

“Compared with Europe and the Middle East, Latin America as a market isn’t growing as fast, but Brazil is strong.”

Despite all the political, economic and regulatory growth inhibitors, very light jets, larger business jets and turboprops represent a healthy market in Latin America, and manufacturers and vendors are optimistic about the future.

Check out the complete 'Business Aviation in Latin America' (PDF)