Bizliner Competitions: Big-bizjet conference forecasts strong market

 - January 14, 2008, 5:27 AM

A persistently optimistic outlook was in evidence at the first Large Executive & VIP Aircraft Conference: Opening speaker Arnaud Martin, program director of corporate and VIP aircraft for Airbus, noted that while sales are suffering as a result of a depressed U.S. economy, “The market is still alive.” The event, held December 11 and 12 in Hamburg, Germany, attracted some 50 delegates.

Martin said that of the worldwide fleet of widebody business jets currently in service, about 100 aircraft are 25 or more years old. Those airplanes represent a peak in the market for airliners reconfigured primarily for executive and VIP use. These aircraft also represent what Airbus believes will be an increased demand for similar new narrow- and widebody executive and VIP transports as the older airplanes are retired.

Another driving force, he added, will be a growing demand for “bizliners” in a corporate shuttle role, such as the Airbus Corporate Jetliner (ACJ), making regular nonstop transatlantic crossings between Stuttgart, Germany, and Pontiac, Mich., on behalf of DaimlerChrysler. Martin forecast a need for some 400 of these bizliners by 2021. He further noted that bizliner clients will be “more interested in new aircraft.”

Approximately 80 percent of the large executive and VIP aircraft are based in the U.S., said Martin, and despite the current economic malaise Airbus expects the U.S. to continue to dominate the market in demand for narrowbody bizliners.
In general, he concluded, Airbus foresees a “weak market over the next six to 10 months. By the end of 2003 the recovery should begin…

with growth of about 5 percent per year starting in 2004.” However, this would be slightly lower than the annual 8-percent growth in the executive and VIP market for the past five years, represented primarily by ACJ and BBJ sales. Martin said Airbus also expects that continued growth in the fractional-ownership market will boost sales.

Boeing Business Jets director of marketing Charles Colburn was equally optimistic. He said that in the past couple of months “white tail” aircraft at Boeing have begun disappearing, and the company anticipates an increase in BBJ production to 10 aircraft this year. Most of the company’s customers, Colburn noted, would continue to be wealthy individuals, with a slight increase in government clients. “We’re hopeful of an increased demand for the airplanes in a first-class shuttle role,” he added.

While the U.S. continues to be the primary market for executive and VIP ACJs and BBJs, the primary customer pool for widebody bizliners, such as Airbus A340s and Boeing 747s, remains abroad. Bernard Conrad, senior v-p of engineering and production for Lufthansa Technik Completion Center, chaired the conference and noted that the market for the “super widebody” class of executive and VIP aircraft remains, and is likely to remain, the Middle East and Far East, “especially for aircraft configured for government and VIP use.”

Lufthansa Technik, he said, believes the market for super-widebody executive and VIP aircraft “is limited.” However, he added, the Hamburg-based center is already looking to 2004 and while demand may be limited, “it will remain steady.”

As to the market for the ACJ and  BBJ, Conrad said Lufthansa remains “a little conservative over the next two years.” The reason, he said, is the number of airliners that have been and continue to be retired as a result of the U.S. economic slump. These airplanes, he said, are now available “at half the cost of a new ACJ or BBJ.” As a result, he concluded, “I see a better market in interior refurbishment than in green completions in coming years.”

Embraer–the Brazilian manufacturer of the Legacy, a business-jet variant of its ERJ-135 regional jet–is also optimistic about the market for large executive and VIP aircraft. Neil Patton, director of marketing and sales for Europe, the Middle East and Africa, said his company is “seriously” revisiting its plans to offer a corporate/VIP version of its larger 70-passenger Embraer 170 regional airliner. He smiled, referring to the possible business jet version as “a BBBJ–a baby Boeing Business Jet,” somewhere in size between the ultra-long-range business jets and the BBJ. The aircraft, he said, might have a maximum range of 5,000 nm and would cost $30 million.

There was also much discussion at the conference on the subject of aircraft interiors, which Dave Kinson pointed out in his lecture are far more important to buyers of large executive and VIP aircraft than to buyers of smaller business jets. “It’s not about range and it’s not about speed. It’s about the client being able to get what he wants in the cabin.

“It’s simple,” said Kinson. “When they board the airplane, the pilots turn left, the owners turn right. It’s all about the real estate.”

Part of what owners want, said a number of speakers and delegates, is a seamless transition from their homes and offices to the cabins of their airplanes. This is especially true of buyer expectations in the large executive and VIP aircraft category.

Kinson, however, warned that too sharp a focus on the latest technology can backfire when too much attention is paid to what is coming at the expense of what is currently in use. It happened shortly after delivery of a new aircraft with a $3 million cabin-entertainment system. “On the first day, the owner walked into his new airplane and handed the crew a VHS tape. At that point, said Kinson, the crew discovered that in creating a state-of-the-art entertainment system with DVD, no one thought to include VHS capability.”

High-speed Internet connectivity was also a major topic of discussion. According to speaker Thomas Lesmeister, European marketing manager for Matsushita Avionics Systems, “The next generation of Internet user will be connected as never before, and they will demand the same access on an airplane that they are accustomed to on the ground, with the same speed, security and reliability.”

Lesmeister also pointed out that high-speed Internet connections on the larger, long-range executive and VIP aircraft are unique. While the demand for Internet connection remains constant, no matter the length of the flight, “With any flight of more than five hours, entertainment becomes more important than information.”

Vern Hendershott, chief aviation officer for Kalair in Saudi Arabia, emphasized the need for greater speed in cabin Internet systems: “64 kbps isn’t much when you’ve got three passengers all surfing the ’Net at the same time.”

Steve Hannah, L-3 Communications Integrated Systems director of business development, highlighted discussions of the interior completion process with advice on selecting a company. Rule number one, said Hannah, is “don’t wait until the aircraft is delivered to look for a completion center.”

Hannah and Jim Edmunds, head of the commercial department of the UK-based law firm of Beaumont & Son, offered sage advice with regard to the interior completion process:

• The most important decision you will make in the completion process is picking the right completion center to give you what you want on time.

• Planning, teamwork, documentation and supervision are absolute necessities.

• The quicker you need the job, the better the chances are of getting it wrong.

• Know what you want, convey it clearly and write it down.

• Be precise. Loose specs do not provide flexibility. More often they result in “discord, conflict and costly work-order changes.”

• Remember that one work-order change inevitably begets another.

• What you see is only part of what you get. In addition to appearance, consider reliability and maintainability and robust systems.

• How well does this completion center manage its subcontracted component process?

• How good is the completion center’s relationship with the company that built the airplane?

• Cost isn’t everything. You can choose the best vendor, or you can choose the cheapest.

• Does the vendor hold the STC or will this completion entail a costly certification process?

• Obtain a list of prior customers and ask them what problems they may have encountered. Don’t ask only the customers who just took delivery. Ask those whose airplanes have been in service for a year or so.

• Do not be reluctant to confront a completion center on negatives. And remember, there may be reasonable explanations.

• Consider resale value when selecting an interior.

And remember, cautioned Edmunds, “Communicate. If you don’t tell [the completion or refurb center] exactly what you want, then they’re likely to give you what they think you want.”

Edmunds also brought up the subject of intellectual property rights. Many clients, he noted, are demanding not only “one off” designs and components, they are requiring the completion or refurb center, even the vendor of a particular product, to sign an agreement never to replicate those designs or components for any other customer.

If the optimism expressed by speakers represented a vested interest in market growth by the makers of large executive and VIP aircraft, an even more optimistic opinion was expressed by John Tuttle, president of Huntington Beach, Calif.-based Steecon Enterprises.

“We know there has been an economic downturn, but it hasn’t been felt at Steecon,” said Tuttle, whose company is one of the largest providers of cabin interior doors. “Our growth over the past two years has been fantastic, and we expect to have an even better year in 2003.”

Aviation Industry Group of London, organizer for the conference, is hoping that the event has an equally bright future. This year’s inaugural conference drew slightly more than 50 delegates from 10 countries, representing a broad cross-section of the large executive and VIP aircraft industry, from aircraft and equipment manufacturers to flight departments and interiors consulting firms. Sophie Fuggle, senior conference manager, said at future conferences the goal will be to encourage attendance by more aircraft operators and interior consultants, as well as people interested in buying a large aircraft for executive or VIP use.

Fuggle said the date and place of the next conference remains to be determined, but the location will probably be in Europe, “possibly Geneva or Toulouse.” As to when, the December timeframe is most likely. It would then fall during the Muslim holy month of Ramadan, making it easier for Middle East representatives to attend.