NBAA Convention News

Wealthy buyers clamor for airliner-derived business jets

 - October 1, 2008, 11:40 AM

Call it the super-sizing of the large-cabin business jet. Orders for executive-configured airliners are far exceeding manufacturers’ projections.
“We’ve seen quite a jump in orders for these aircraft,” said David Velupillai, marketing director for Airbus’ executive and private aviation division. “We’ve sold a lot more than we expected.”

“The [Lineage 1000] is beating our expectations in terms of market interest,” said Claudio Galdo Camelier, vice president of market intelligence for executive jets at Embraer, speaking about the company’s executive-configured E190 airliner.
Private buyers rather than corporate purchasers are driving the market demand, according to manufacturers.

“There’s just been a tremendous rise in the number of billionaires,” explained Charles Colburn, Boeing Business Jets/VIP director of marketing.

Most of the orders for executive-configured airliners are coming from the Middle East and Eastern Europe, and the weak dollar has acted as a sales accelerant. Manufacturers acknowledge a certain amount of vanity rather than utility may be behind some of the purchases, but emphasize these aircraft represent real value.
“They cost a little bit more to operate, and burn a bit more fuel [than smaller airplanes], but you’re getting a whole lot more for your money,” Colburn said.

VIP Models Boost Order Books
Boeing and Airbus began targeting the private jet market a decade ago. Boeing launched the Boeing Business Jets division in 1996 with the Boeing Business Jet (BBJ), based on its 737. The following year, Toulouse, France-based Airbus launched its Airbus Corporate Jetliner division, starting with the Airbus Corporate Jet (ACJ), an A319 variant. The ACJ was joined by the A320 Prestige and the A318 Elite. Boeing kept pace by introducing bigger versions of the BBJ. The latest iteration, the BBJ3, is expected to enter service next year. Embraer’s Lineage 1000, a derivative of the company’s largest regional jet, is scheduled to receive certification and begin deliveries before the end of this year. Bombardier is mulling a move into the segment with an executive version of its recently launched C Series regional jet.

Boeing, Airbus, and now Embraer’s first generation of executive airliners is based on single-aisle aircraft with a maximum capacity of about 200 passengers. In 2006, Boeing introduced its VIP aircraft line–executive variants of the widebody 777,
the 787-8 Dreamliner and 747-8–and the following year Airbus announced the first customers for its VIP widebody aircraft, based on the A330, A340, A350XWB and A380 families.

Boeing initially estimated the worldwide market for executive airliners to be about 10 per year, while Airbus gauged the market at a dozen annual orders. But with the introduction of the VIP lines, sales have been running far ahead of those projections. Airbus took orders for 38 executive airliners last year while Boeing, which had a backlog of only three executive aircraft orders as recently as 2003, now has 59. Embraer reported firm orders for more than 20 Lineage 1000s.

As for competitive differentiators, Boeing underscores the track record of its aircraft and its ability to customize avionics packages to buyers’ specifications, while Airbus touts its newer designs and the commonality of its cockpits. Airbus also notes that the A380 (the world’s largest and heaviest commercial aircraft) is 30 percent bigger than the 747-8 yet can take off and land in less distance. Boeing points out that the 747-8, due to begin flight tests later this year, will share many systems with earlier models and have the same type-rating as the 747-400 and -200. That will make it easy to crew, and minimize the need for spare parts for customers currently operating 747s with retrofitted executive interiors.

Embraer emphasizes that it delivers the Lineage completed, rather than green, as Airbus and Boeing deliver their executive airliners, sparing customers the task of dealing with the completion process. Though it’s true Boeing and Airbus deliver their aircraft green, both companies are responsive to customers’ design needs, and will incorporate their requests into the airframe if possible. Such requests have included elevators for boarding and onboard medical facilities.

“A lot of people would like to access the lower cargo hold in flight,” Colburn added. “It is pressurized and some of our customers have thoroughbreds, and they’ll take their horses [onboard], and some of them have falcons. They ask if they can put a stairway into the lower hold.”

Completions can add tens of millions of dollars to the purchase price. A green VIP A380 lists for about $319 million, and estimates on completion costs typically range from $50 million to $150 million. And though money may be no object to some buyers, both Boeing and Airbus have developed standard executive interior configurations to reduce completion costs. Boeing engaged BMW DesignWorksUSA to create a cabin interior mockup for the Dreamliner 787 VIP.

Long Backlogs
But a shortage of qualified completion centers and employees could lead to a delivery bottleneck going forward. Last year, Airbus “relaunched” its majority-owned completion center, Airbus Corporate Jet Centre in Toulouse in an effort to increase completion capacity.

“It’s one thing to want to invest in a new outfitting center, but you can’t easily acquire the skilled workforce,” Velupillai said. “That’s the biggest challenge.”
As it is, sheer demand is pushing back scheduled delivery dates for some executive airliners by more than a decade.

“We’ve been so successful, our biggest hurdle is the availability of airplanes,” Colburn said. “Right now we’re selling into 2020, and for people with substantial wealth, it’s hard for them to wait that long.”