EBACE Report: A record-setter for deals signed and visitor numbers

 - May 29, 2008, 11:11 AM

The 2008 European Business Aviation Convention & Exhibition (EBACE) was an important litmus test to measure how the global business aviation marketplace might ride into a downturn on the coat-tails of a U.S. recession. Happily, the industry got some clear and positive results, with almost $5.4 billion in new aircraft orders being announced during the eighth staging of the annual event in Geneva (May 20-22). Much of the spending originated in Europe itself, but large amounts also came from the even more dynamic, emerging markets in the Middle East and Asia.

As of press time, EBACE was on course to fulfill projections that more than 14,000 attendees would pass through its doors to visit the record roster of 444 exhibitors. The show has now completely filled Halls 6 and 7 at Geneva’s Palexpo center. While the airport facility has plenty more indoor space for further growth, the static area–packed with more than 60 aircraft–appears to have reached capacity.

The EBACE conference agenda was dominated by debates over constraints over airspace and airways access, and also the impending implementation of Europe’s emissions trading scheme.

Heated Demand for Business Jets

Airbus received its largest-ever order for corporate jetliners with the placing of a $1.5 billion order for six A350 Prestiges by Jeddah, Saudi Arabia-based MAZ Aviation.

The aircraft, one A350-800 and five A350-900s for delivery between 2015 and 2019, are for separate private customers in the Middle East who are already owners of Airbus aircraft, said MAZ Aviation founder and chairman Mohammed Al-Zeer, as he signed the six contracts on behalf of his clients during the first day of EBACE 2008. All six aircraft will be powered by Rolls-Royce Trent XWB engines and will have VIP cabins, although the choice of outfitters has yet to be announced.

MAZ Aviation managed the selection and acquisition of the aircraft for its customers, who will not be disclosed, and will manage the aircraft on their behalf, said Al-Zeer. “This is a new way of acquiring aircraft for VIP customers. Airbus was willing to listen and willing to think out of the box. Very few manufacturers are willing to do that,” said Al-Zeer, who worked for NetJets Middle East for eight years before setting up MAZ Aviation two years ago.

Al-Zeer also said emphatically that the aircraft wouldn’t be chartered and that they would not be for fractional ownership. “They will be personalized, just like a yacht,” he said, while adding that MAZ Aviation would also be able to use the aircraft. Al-Zeer was not clear on how this would work but said it would be on a 60-to-40 ratio with the owners.

Edouard Ullmo, Airbus executive v-p for Asia-Pacific, Africa and corporate jet, said, “This model is a trend I see continuing in other regions of the world, where a group of customers are brought together in each region. It’s a win-win-win situation.”

Airbus previously announced two other orders for the A350XWB Prestige, when C Jet of Hong Kong and an undisclosed Asian customer ordered one A350-900 each in November 2007. The total A350 order book currently stands at more than 350 aircraft.

Airbus COO of customers John Leahy said, “With this commitment from MAZ Aviation, the Airbus A350XWB Prestige is certainly off to a racing start in the important Middle East VIP market.”

The deal followed the announcement at the show that Comlux Consulting, a joint venture between Comlux Aviation and MAZ Aviation, had acquired a 40-percent stake in the Airbus Corporate Jet Centre in Toulouse, which completed its first aircraft (an ACJ) last month.

Meanwhile, Jetalliance of Vienna, Austria, has placed a follow-on order worth $185 million for one ACJ and two A318 Elites for delivery in 2011 and 2012, respectively. The aircraft management and charter company previously placed orders for one ACJ and four A318s. The ACJ and one A318 have already been delivered, while the next A318 will be delivered in “March or April 2009,” said Jetalliance CEO Lukas Lichtner-Hoyer.

Two months after launching the biggest, fastest and priciest Gulfstream ever, top executives for the Savannah, Ga.-based business jet maker arrived at EBACE with a growing order book for their new G650 and sky-high optimism about the direction of the company overall.

Gulfstream president Joe Lombardo said in Geneva that he could not divulge how many G650s are spoken for by the letters of intent the company has received thus far, describing it only as a “healthy number.” Separately, Abu Dhabi-based Prestige Jet announced a deal to buy five G650s, which the charter company described as the biggest single order for the airplane to date. The first 17 G650s built are being priced at $59.5 million apiece, a figure that does not include the costs for paint and interior.

First flight is scheduled for next year, with certification following in 2011 and entry into service in 2012. What is somewhat remarkable about the G650’s planned gestation timeline, Lombardo noted, is the fact that a new G550 ordered today won’t be delivered to its buyer until 2013 due to the large backlog of orders. This helps explain Gulfstream’s decision to add the G650 to its model lineup rather than introduce it as a G550 replacement. It also underscores a rare trouble spot for Gulfstream (and all other business jet manufacturers), namely that production capacity has been stretched thin as the aviation supply chain faces mounting pressure to meet soaring demand.

There are a number of reasons why demand for business aircraft has become so superheated recently, one of the most clearly evident being a buying surge in markets outside North America. Lombardo noted that international sales across Gulfstream’s model line grew to a record 56 percent last year compared with sales in North America of 44 percent. Yet even with the trend toward increasing sales in places like Europe, Asia and South America, the number of airplanes Gulfstream sold to U.S. buyers in 2007 still represented an all-time high. “Emerging markets are important for us, but so too is North America,” he said.

Gulfstream received orders for 257 new airplanes last year and delivered 139. This year it expects to increase deliveries to 159.

A full-scale mockup of the G650 cabin was on display at Gulfstream’s EBACE booth. Although the airplane was formally launched in March, the company has been working on the design for a number of years, according to Pres Henne, Gulfstream senior vice president for programs, engineering and test. So far engineers have completed all wind-tunnel testing, built the first G650 nose structure and finished full-scale barrel testing of the main fuselage, he said. Rolls-Royce has already run the first BR725 engine.

Dassault introduced a new version of the Falcon–the 900LX, which features 4,800-nm range thanks to the addition of winglets. With a 300-nm improvement in range, the Falcon 900LX will eventually replace the 900EX. The French manufacturer also announced it has received a major order from NetJets Europe–for
20 Falcon 2000LXs, worth $720 million–thus bringing the fractional ownership operator’s future fleet of 2000LXs to 30.

Fitting 66-inch-high winglets on the Falcon 900LX boosts the range by 7 percent thanks to a corresponding reduction in drag. New city pairs, such as New York to Buenos Aires, are opened up. Climb performance is also improved by 10 percent, according to Dassault, thus enabling the aircraft to reach FL390 in 20 minutes.

The all-composite Aviation Partners winglets, originally created for the Falcon 2000LX, involve more wing reinforcement on the 900LX because of the trijet’s higher wing loading. They also involve changes on some systems, such as stall warning. In addition, the longer slats on the 900 series have to be accommodated. The winglets add 380 pounds to the airframe’s weight. Whether the winglets will be available as a retrofit on other 900 series aircraft is unknown as yet.

Dassault expects certification of the 900LX in the first half of 2010, followed by deliveries mid-year. The list price is $41 million, an $800,000 increase over the 900EX, senior v-p for civil aircraft Olivier Villa told AIN.

Regarding sales, John Rosanvallon, Dassault Falcon Jet’s president and CEO, predicted 2008 might fall slightly short of 2007, which was a record year. However, he indicated that the first quarter of this year was as robust as last year’s. The company’s backlog is close to 500 aircraft.

Rosanvallon also said the company will not start talking about its next product launch, a super-midsize business jet so far referred to as the SMS, before it begins taking orders, possibly by the end of this year.

At its first official presence here at EBACE, Honda Aircraft announced three European HondaJet dealers that will provide sales and service to customers in the region. It also revealed Formula 1 driver Jenson Button as the European launch customer for the compact twinjet. Company president Michimasa Fujino said Europe is one of the fastest-growing markets for light jets, “and the HondaJet is the right product at the right time” in this region.

“We have a great number of European customers who have contacted us over the past two years about owning a HondaJet,” he said, prompting the company to establish a network of three standalone dealers to cover the Northern Europe/UK, Central Europe and Southern Europe sales territories. The HondaJet price in Europe will remain the same as in the U.S.–$3.9 million. This is an increase from the previous $3.65 million price tag.

TAG Aviation has been tapped to run HondaJet UK & Northern Europe at Farnborough Airport southeast of London. In Central Europe, Rheinland Air will set up a dealership in Frankfurt, Germany. Aviastec will establish the HondaJet Southern Europe center in the Madrid area of Spain.

Honda also expanded its partnership with FlightSafety International to provide HondaJet pilot training for all European customers, though a location has yet to be selected. FSI is currently developing a level-D flight simulator for the very light jet, with the first simulator to be installed at Honda Aircraft’s headquarters in Greensboro, N.C.

Additionally, the company unveiled a “new concept” in-flight entertainment system at EBACE. The system, which could be seen in the cabin mockup on display at Honda’s booth, employs high-definition touch panels that deploy from the ceiling and provide passengers with personal control of in-cabin video and audio entertainment, climate systems and cabin-cockpit communications.

Piaggio has redefined its Avanti II interior with a cabin upgrade the Italian manufacturer calls the “Avanti II.it lounge in the sky.” According to Piaggio Aero v-p Giuliano Felten, it is a way to celebrate what is already “the world’s most comfortable and efficient light business aircraft [by] making it even better.”

The addition of “.it” after the model designation, said Felten, may have its origins in the Internet world, but at Piaggio it stands for Italian Technology. Features in the new .it option package include broadband connection, a new cabin entertainment system, LED lighting throughout and electrochromic windows.

Broadband connection allows passengers to access e-mail, surf the “net,” tap into an office network and stay current with the latest news, “all at the latest DSL broadband speed.” Passengers and crew will be able to use their own 802.11b/g-equipped Wi-Fi data devices such as laptops and BlackBerrys. Universal AC power outlets will be a standard power source for operation or battery recharging.

The heart of the cabin entertainment system is Rosen’s new RosenViewVX combo unit: a worldwide moving map, multi-region DVD player, XM radio receiver (North American coverage only) and audio-video switching; all contained in a single unit.

XOJet, the fast-growing on-demand charter company operating a fleet of Cessna Citation Xs and (starting this fall) Bombardier Challenger 300s, has secured $2.46 billion in financing to fund an ambitious plan to expand further both in North America and internationally, in what the company claims is the “largest publicly announced business aircraft financing package in history.” It is also evaluating larger aircraft, such as the Bombardier Global Express.

The main drive of the international expansion will be focused on the Middle East, and to that end the company has signed a deal with Tasameem Real Estate of Abu Dhabi to create a new joint venture. XOJet CEO Paul Touw told AIN that the business would start there “immediately” although he expects that getting an air operator’s certificate (AOC) from the UAE government will take about six months. In terms of other operations internationally, Touw said, “We haven’t decided because we want to focus on Abu Dhabi.”

Investors participating in the financing include Tasameem, TPG, Export Development Canada, White Oak Global Advisors and Touw, who founded XOJet in January 2006. Immediate funds of $964 million have been made available, with the other $1.5 billion to be generated when the Tasameem joint venture is launched.

Touw said that “despite the backdrop of high fuel prices, difficult credit markets and a looming recession, we still raise the capital.” David Bonderman, founding partner of TPG, said “XOJet’s business model is changing the industry as it continues to outperform our expectations.”

At present, the XOJet fleet is 20 aircraft with one to two aircraft being added each month over the next three-and-a-half years, said Touw; so far the company has ordered 127 aircraft. While these should all be in operation by 2012, Touw added, “We’re also looking at widebodies, such as the Bombardier Global Express, because we need the range.” The typical XOJet customer is from a bank or private equity firm, and although the “average passenger load is only one or two passengers, range is key,” said Touw. With the financing now in place, the company is currently evaluating the available aircraft options.

Explaining the success of the XOJet business model to AIN, Touw said that by combining two types of customer, on-demand charter and owners, and by having many aircraft of the same type to avoid “deadhead” repositioning time, aircraft utilization could reach 1,200 hours annually, with 98 percent of that time carrying passengers. This compares with the fractional model, which Touw views as outdated, where aircraft utilization is around 800 hours but with 30 percent “deadhead.”

Switzerland-based business aviation sales and services provider ExecuJet announced at EBACE the opening of new offices in Moscow, Mumbai and Beijing. The move is described as the first step toward the establishment of more extensive facilities in India, China and Russia, where business aviation is growing at a rapid pace. According to group managing director Gerrit Basson, “There are 300 business jets flying in the Asia Pacific area, offering plenty of opportunities for a company like ExecuJet.”

ExecuJet is already active alone or with associated companies in Europe, the Middle East, South Africa and Australia. It employs 750 aviation specialists and manages more than 110 business jets on behalf of their owners.

Gama Aviation, head-quartered at Farnborough Airport in the UK, is planning to open an office in Dubai and begin charter and aircraft management operations in the UAE within six months, according to CEO Marwan Khalek. Last December a Dubai-based private equity firm bought 33 percent of Gama, enabling it to buy PrivatAir, Inc., the U.S. arm of Switzerland’s PrivatAir Group, in February. “We doubled in size,” Khalek said, “and that came about only because of that equity investment.” With more than 65 airplanes in its charter and management fleet, Gama is ready to expand in the Middle East and Khalek hopes to have 10 additional airplanes based there by the end of next year. Gama plans to build an FBO in Sharjah, another project aided by the private equity investment, and Gama might also use that money “for acquisition of strategic businesses,” Khalek said.

Snecma announced at EBACE that the core demonstrator of its Silvercrest business jet engine has completed a series of tests. The campaign ended on March 31 after four months of trials. The core engine ran 80 hours, including 60 hours ignited. During the tests, the core reached its nominal takeoff speed–20,300 rpm. According to Snecma, a subsidiary of Safran, the core’s architecture and integration have thus been validated. All performance objectives have been “met and, in most cases, exceeded,” said François Planaud, the company’s general manager for commercial engines. Detailed analysis of the test results continues. The Silvercrest, with a thrust range of 9,500 pounds to 12,000 pounds, targets super-midsize and large business jet applications.

No fewer than 10 Boeing 757-200s–both executive and head-of-state aircraft–now benefit from Aviation Partners winglets, the company reported at EBACE this year. The company places the global market for winglets for VIP and head-of-state upgrades at some 25 Boeing 757-200s, five 767-300ERs and 25 Boeing 737 NG and Classic airframes. Aviation Partners expects that number to grow as more airliners undergo conversion to an executive or corporate role. PrivatAir, which already flies BBJs and a 757-200 with Aviation Partners winglets, became the world’s first VIP 767-300ER operator to order the modification. Installation is scheduled for mid-2009. More than 2,500 commercial and business aircraft are equipped with Aviation Partners blended winglets.

Politics Not as Usual?

The European Commission’s director for air transport, Daniel Calleja, pledged more “proportionate” rules for business aviation in the future, acknowledging that this segment of air transport has “too often been neglected in the past.” At EBACE during the opening session, other speakers included EBAA CEO Eric Mandemaker, who insisted on the association’s participation in the environmental debate, and his U.S. counterpart, NBAA president and CEO Ed Bolen, who made a strong statement about how the U.S. “should get its house in order” in terms of access from abroad.

“The EC is this year launching key initiatives to make aviation more efficient, safer and environmentally sustainable,” Calleja said. He recognized the importance of general and business aviation. “About one-tenth of Eurocontrol aircraft movements and two thirds of EASA type certificates are for general or business aviation,” he
pointed out. However, he did not break down the general aviation figures into segments.

The EC thinks aviation needs “better,” as opposed to more, regulation, Calleja asserted. He promised the EC will make sure future safety regulations apply to business aircraft in a proportionate way. He also insisted the EC is well aware of the capacity crunch air transport is facing. Sesar, the second package in the implementation of the single European sky, will be a breakthrough, he claimed. “It will improve access for business aviation, but the capacity situation will not improve dramatically overnight,” he added.

Another challenge Calleja sees concerns the international nature of the industry. “We want a level playing field,” he said, a sentiment Bolen also expressed.

Said the NBAA president, “The U.S. requires a 10-day notice for business flights from Europe. Yet, when we [Americans] face similar requirements in emerging countries, we find it unacceptable. We need to get our house in order.”

From a more technical point of view, Calleja said the European Union and the U.S. are working together to ensure Sesar and NextGen, the two future air traffic management (ATM) structures, will be interoperable. An open skies agreement has recently come to life and further negotiations are ongoing.

A new ATM and significant investment in aeronautical research–under the CleanSky joint technology initiative–are the first two measures in the EC’s response to the need for environmental sustainability. But there is no silver bullet against the fact that aviation is the fastest growing source of CO2 emissions, Calleja maintained. Hence the need for an economic solution–the inclusion of the industry in the EU Emission Trading Scheme (ETS), Calleja concluded.

Mandemaker thanked the EC for stating officially that general and business aviation provides economical and social benefits, and he emphasized the need for EBAA to “fully participate in the environmental debate.” Otherwise, there is a serious threat of “bureaucratic quagmire,” he said. Such a predicament could have a major negative effect on small/medium enterprises, which account for the majority of Europe’s 800 business aircraft operators, Mandemaker said.