Burgeoning market in Latin America draws bizav manufacturers to Toluca

 - September 19, 2006, 8:11 AM

Mexico has been good to Gulfstream. That is one of the main reasons Roger Sperry, Gulfstream’s v-p of international sales, wouldn’t miss March’s Aero ’06 in Toluca, Mexico. “We have 35 Gulfstreams in Mexico,” Sperry told AIN. “It’s the largest fleet of large-cabin aircraft in the country.”

Sperry said he’s recently seen an influx of GIVs into Latin America. “As the economy picks up we’re seeing more Latin American companies expanding operations to Europe and even Asia. As they expand into those markets they need a larger, cabin-sized aircraft. At the same time our product line is expanding so we can move into the growing market for smaller turbine-powered aircraft popular with smaller companies and entrepreneurs.”

Sperry said last year’s international sales accounted for 35 percent of the company’s business compared with 28 percent in 2004. “We delivered 89 airplanes worldwide last year,” he said. “We’re seeing a lot of first-time users, too. I believe security concerns and the airlines themselves play against people taking airlines these days.

“And it’s clear that charter and fractional operators have exposed many new people to business aviation and that will play well for all the OEMs in the long run. But Mexico is a particularly good market for us. It is so close to the U.S., and with NAFTA there is a lot of traffic going back and forth. We expect our product-line expansion will help us stay strong in the market down here.”

Ernest Edwards, vice president of sales and marketing for executive jets at Embraer Aircraft Holding, talked about his company’s recent research into the business aircraft market and its future.

“Of the 2,144 turbine-powered business aircraft in Latin America, Mexico has 702, making it the second largest fleet of business aircraft in the world behind the U.S.,” Edwards said.

According to the Embraer study, Brazil has 656 turbine-powered business aircraft; Venezuela has 347, Argentina 164, Colombia 76 and Chile 52. The remaining 147 aircraft are spread among 12 other Latin American nations. “The telling number is that, across the Latin American fleet, 63 percent of the business aircraft are greater than 20 years old; in Mexico that jumps up to 68 percent.”

Latin American countries tend to have export-driven economies, according to Edwards. “Latin American gross domestic product (GDP) growth is estimated to be at 4.3 percent compared to the world estimate of 3.5,” he said. “Broken down by country, Venezuela tops the list with 9.5 percent, Argentina with 8.7 percent, Chile at 5.9 percent, Colombia at 5 percent, Mexico 3 percent and Brazil at 2.6 percent.”

Embraer’s 2006 to 2015 regional market forecast indicates 7,213 aircraft will be sold in North America during the period, reflecting a 4-percent compound annual growth rate (CAGR). Europe, Africa and the Middle East are forecast to need 1,778 aircraft (for a 4-percent CAGR), Asia Pacific 249 (9.1-percent CAGR) and Latin America 440 aircraft with a compound annual growth second only to the Asia-Pacific region, at 6 percent.

Breaking down the 440 anticipated aircraft to be sold in the Latin American region, the report suggests 43 percent would be in the midsize, mid-light, light and very light categories. The next highest percentage is for super-midsize aircraft at 20 percent. In total, it is estimated that over the next 10 years Latin American business aircraft buyers will spend more than $4.9 billion.

Market Craves Smaller Aircraft

“We find ourselves in an excellent position with the Phenom 100 and 300,” Edwards said. Embraer had a Phenom 100 mockup and a Legacy 600 on display at Aero ’06. “The Legacy was a bit high-priced for this market but we now have a very affordable aircraft. We’ve been pleased with the reaction to both aircraft.”

The Phenom 100 is expected to win certification in the second half of 2008 and is $2.75 million in 2005 dollars. Edwards said the aircraft is already sold out to March 2010. “What’s very interesting is that many of the Phenom 100 sales have been to owner-operators with disposable income,” he said. “They see the aircraft at a show and just ask, ‘How much?’”

Edwards said many of the Phenom 100 customers are in the 30- to 50-year-old range and are asking questions he hadn’t heard before. “I had someone look the aircraft over, obviously like it, then ask me, ‘Is it MP3-compatible?’ I just stared at him, so he said, ‘You know, can I plug my iPod in so I can have my own music play on board?’ I thought about that for a minute and said, ‘Yes, you will be able to’ and then put the engineers back at the factory to work on making it happen.”

Agustin Melgar, president of Exposiciones Internacionales, organizer of the Aero ’06 business aviation show, said this year the annual show had 40 exhibitors and five OEMs, including Embraer, Bombardier, Cessna, Gulfstream and the Mexican navy with its Lancair project.

“The number of people walking through the door seems to be down slightly this year; however, I know for a fact that our exhibitors have been doing business,” he said.

Melgar said the number of exhibitors was up slightly from last year but the number of aircraft on static display had increased more dramatically. Last year there were four aircraft on static display and this year there were 11.

This year’s display included a Cessna CJ2+, Caravan, 182 and 206, an Embraer Legacy and Phenom 100 mockup; a Gulfstream G150 mockup and a G550, a Lancair and, exhibiting for the first time at Aero, a Learjet 40 and a Global Express.

Alfredo Galland of Casta Jets, the exclusive Bombardier Business Aircraft representative in Mexico, said the airframer began exhibiting at Aero because “we knew that Gulfstream was going to be here. Aside from that, even though the show is not as big as some others, we feel Mexico is an important market.”

Galland, who lives in Mexico City, sees the effect of the economy daily. “We’re experiencing growth; it’s been consistent; thankfully it hasn’t reversed,” he said. “We are going to have a national election soon and many of our potential customers have stopped dealing with us to wait and see what happens before making a big investment.

“In my mind it’s not really a big issue. No matter who gets elected businesses will still need to do business; if they need an aircraft today they’re going to need one after the election.”

Galland had one word of caution: “We have many old airplanes in Mexico, and I think some people expect every business airplane owner to buy a new business jet as the economy improves,” he said. “That’s not very realistic. Mexico has great potential, but you must remember that many of the existing business aircraft are piston powered or small turboprops worth maybe $200,000 to $300,000. Many of those companies would be unable to make the leap into a $6 or $8 million turbine aircraft. Still, there is a lot of opportunity and I think we will see a strong market in Mexico.”