NBAA Convention News

Movers & Shakers: BBJ begins its next 'wild ride'

 - November 13, 2006, 6:27 AM

Sales expectations were modest when Boeing formed its business jet unit in 1996 to market an executive/VIP version of the company’s Next Generation 737-700. The mild ride that many anticipated turned out to be “a wild ride” in the words of the division’s first president, the late Borge Boeskov.

But from 2001 until last year, the U.S. struggled through a recession that slowed the wild ride in sales to a near standstill for Boeing Business Jets. Steven Hill, the current president of Boeing Business Jets, said the company, like the rest of the industry, is again on an up-cycle. The question now is, will that upswing translate to another wild ride?

Hill joined Boeing 32 years ago after graduating with a master’s degree in aeronautical engineering from the University of Colorado and has spent his entire career in aviation with the Seattle-based airplane manufacturer. His assignment as president of Boeing Business Jets followed a post as v-p of operations, responsible for all technical, operational, completion and fleet support aspects of the BBJ program. It is a job he relishes, at a time when demand for executive/VIP aircraft is challenging the company’s resources.

In 1996, when Borge Boeskov announced the launch of Boeing Business Jets and the first BBJ, the company expected to sell perhaps four airplanes in the next decade. Now, the order book stands at more than 108, and the BBJ has been followed by the BBJ2 and the BBJ3. What factors made this program such a success?

It really boils down to two things. Boeing went after this business sector as a dedicated market with sales, marketing and support, and with the right product. People were looking for a particular size and range, and we have continued to develop that product.

Boeing Business Jets originally went into this venture with General Electric as a partner. Has thatrelationship changed?

Boeing Business Jets is still in the same 75-25 business arrangement with GE as a silent partner, respectively, and we don’t see that relationship changing with regard to the 737 platform. It has been and continues to be very successful. The twin-aisle [aircraft] is not part of that relationship.

At the European Business AviationConvention and Exhibition this past spring, you announced a healthy order book for the BBJ line. How much has that order book grown since then?

We typically announce orders at EBACE and at NBAA, and at that time we announced an order book of 108 aircraft, of which 13 were BBJ2s, and deliveries at that point of 93 airplanes. Business has been brisk, and we’re now at NBAA with  nicely higher figure.

At the Dubai show last fall you announced the launch of the BBJ3. Do you think there is really sufficient demand for yet another variant?

The size difference [from the BBJ to the BBJ3] is incremental, a natural progression. In time, buyers move up, in terms of size and range.

There was talk at EBACE of a cargo variant of the BBJ. Is this any closerto reality?

We’re still studying a BBJC, based on the 737-700C cargo variant of the airliner. There’s a real marketplace for this option among governments and there are some private applications. It would have an interior easily changed out for different roles–transport, medevac, disaster relief. We’d bring it into the BBJ family with auxiliary fuel tanks.

What are the major markets for the BBJ and what does Boeing Business Jets see as the next emerging markets?

North America remains the largest market, in terms of where BBJ airplanes are based and in service. Behind that is the Middle East, which remains very strong. But a close third now is the Confederation of Independent States and Russia, and we can’t forget about Asia and India as the next frontier.

Who is the typical BBJ customer, or is there such a thing?

Private individuals and governments represent the bulk of the BBJ market, with private individuals slightly ahead. They each represent about 40 percent of sales.

With nearly 100 BBJs in service, are sales of used aircraft having an impact on new BBJ sales?

No. Only three BBJs came on the market this year, and all of them were sold by mid-summer. We’ve had a number of situations in which customers wanted a used BBJ for interim lift while they wait for their new one and there just aren’t enough of them to make one available. We’ve tracked every BBJ sold to date and they’re selling at 108 to 110 percent of their original value. Customers typically plan to get four or five years out of a new airplane, and a number of original buyers had the foresight to arrange a delivery slot for a new BBJ that coincided with the date they expected to sell the old one.

After a few lackluster years following 9/11, demand for the BBJ is growing again. What’s the reason for that and do you see it continuing?

Coming off 9/11, people were worried. There were safety and financial concerns. But the need to travel discreetly and safely never went away. As for financial concerns, it’s just taken time for the market to recover. Sales now are at an all-time high, going back to the initial wave after introduction of the [original] BBJ in 1996, and we see that going forward. The only limiting factor is near-term availability of aircraft. We’re right now sold out for three years, and if we had the production aircraft available, we would be in the 10- to 12-airplanes-a-year market.

Borge Boeskov was described once as “the best salesman Boeing ever had,” and he described those early days of the BBJ as “a wild ride.” Is there another wild ride in the future of Boeing Business Jets?

I feel like it’s already started. We’re going to continue selling the Boeing Business Jet in every market, but particularly in Russia and China. But the real excitement is in the demand for twin-aisle airplanes– the 787 and the 747-8. We’re working with a number of customers and expect good numbers this year. Over the next 10 years, I would expect an average sale of two 787s and one 747-8 a year, or better. There are days I definitely feel like the wild ride has started again.