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Friday, October 18, 2013

Report: Business Jet Market Struggles Through 'Lost Decade' [UPDATED]

Woodrow Bellamy III

Business jet deliveries have not recovered from the economic recession that began in 2008, and manufacturers are facing the possibility of being stuck in a "lost decade" according to a new report from aerospace and defense analysts at Citigroup. 

 

The report states that between 2000 and 2008, demand for small and medium-sized business jets increased by 109 percent compared to the previous decade. According to Jason Gursky and Stephen Trent of Citigroup, that may have lead to an excess inventory which the industry is currently suffering from. 

 

"In our view, deliveries of new small and medium business jets face an anemic recovery through the rest of the decade based on excess inventory produced during the 2000s," Gursky and Trent write in their report. 

 

However, National Business Aviation Association (NBAA) President Ed Bolen disagrees with Citigroup's assessment that business jet manufacturers are currently in the midst of a "lost decade," primarily because the industry is only three years into the current decade and business aviation companies are still significantly investing in innovative technologies for aircraft and aircraft components.

 

For example, Cessna is currently developing upgraded versions of its Citation X, M2 and New Citation Sovereign jets and Bombardier's all-composite Learjet 85 is scheduled to enter into service next year.

 

"So far I think it has been a challenging decade, but I don't think that it was a lost decade," said Bolen, during an interview with Avionics Magazine.

 

"The companies that are involved in business aviation and general aviation have continued to invest heavily in their products. We're seeing a lot of innovation coming forward, and in fact next week at the NBAA convention we expect to see significant announcements. So I don't think you can call it a lost decade because the products that are being produced are not just numbers, there not commodity products, they're highly sophisticated business tools," Bolen added.

 

China presents the biggest opportunity through the end of the decade according to the analysts. 

 

According to Bolen, the business aviation industry is still in its early stages of development in China and all of Asia. NBAA and other groups have been working with operators and officials in Asia in recent years to develop a more complete infrastructure that can help support growth for the region's business aviation market. 

 

In September, Embraer released its China Executive Aviation Market Outlook projecting demand for 805 new business jets in China over the next 10 years. 

 

Embraer believes 51 percent of that demand will be for large cabin business jets, which the Citigroup analysts claim will garner the largest demand throughout the global business jet market in addition to China. Bolen believes that the interest in large cabin jets is not so much the size of the cabin, but rather the range of the aircraft. 

 

"The reality is that over the past decade, particularly over the past five or six years, as the U.S. economy had fallen precipitously there was a lot of look outside of the United States at business opportunities and the challenge is, how do you move from the United States to the brick countries and other emerging areas of the world," said Bolen. "In order to do that efficiently, a lot of the companies turned to some of the ultra-long range aircraft which also because they're flying longer missions end up being larger cabin."

 

Challenges for the business jet market presented by the Citigroup report are sure to be addressed when the industry gathers in Las Vegas next week for NBAA 2013. 

 

 

 

Related: NBAA 2013 Opens in Las Vegas Next Week

 

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