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Monday, January 1, 2001

Outlook: High Hopes for General Aviation

Business jets will remain the driving force of the GA market, says Frost & Sullivan. The bullish outlook for this sector should bring on a new generation of avionics systems.

Business aviation is a particularly strong driver of the general aviation (GA) market. More and more companies are choosing this option as an important travel resource. In 1999, GA accounted for 35% percent of the commercial and civil avionics markets, with total revenues of $1.5 billion. And revenues are expected to continue to increase through the end of this decade, says Frost & Sullivan, largely because of an increase in aircraft numbers.

The analyst firm does not anticipate further consolidation among business jet manufacturers. This leaves Bombardier, Gulfstream, Cessna, Raytheon and Dassault to control the market. The demand for low-end business jets also will grow with the emergence of companies such as Century Aerospace and Visionaire. However, funding and product development will remain an issue for these low-end companies.

Many Recent Changes

The GA sector has witnessed a revival in the past few years with an excess of 2,504 aircraft being shipped in 1999. Also, more changes have taken place in the cockpit in the past two to three years than over the past four decades of general aviation combined, says Frost & Sullivan. GPS is a key driver of the GA avionics market, and aircraft electronics suppliers have flooded the market with a new generation of GPS based products, such as moving maps.

The strength of the economy, particularly in the United States, will continue to be a major driver for general aviation. When the economy does well, says Frost & Sullivan, people have more expendable income for personal travel. This benefits the air transport market, but in addition, it allows more people to enroll in piloting classes and possibly buy their own GA aircraft.

Frost & Sullivan projects that the booming economy and last summer’s airline delays will continue to stimulate business jet sales. Attracted by the flexibility business jets offer, more companies are investing in aircraft to gain such benefits as time management, privacy and efficiency. Despite price tags ranging from $5 million (Citation) to $40 million (Dassault Falcon, Gulfstream V and Bombardier Global Express), the emergence of fractional ownership has been the key contributor to business aviation development.

Smaller, affordable technology will greatly benefit the GA avionics market. Sophisticated systems that were created in the 1980s and once reserved for air transport and business aviation will continue to penetrate the small aircraft markets. Avionics manufacturers are offering integrated systems derived from the air transport sector to the high end of business aviation. Rockwell Collins and Honeywell have been key innovators in this trend with their Pro Line and Primus systems. Indeed, because of the considerable dollar amounts required for research and development, the smaller players may find difficulty in competing against these two giants.

Still, technological advancements from large and small companies alike will bring increased competition and, therefore, lower cost and greater choice for GA pilots, says Frost & Sullivan. One example of this is multifunctional displays (more on this later). Another is data links, which can deliver weather, airport and traffic information to small aircraft.

New general aviation aircraft manufacturers and experimental aircraft also stimulate the avionics market, the analyst firm adds. Light airplane sales have been very healthy, particularly for Cessna Aircraft. Newcomers Cirrus and Lancair also propel the GA market’s growth and are especially keen on installing the latest available avionics in their aircraft.

Restraints on Growth

From a geographic perspective, companies in the United States that operate business jets are planning to replace or expand their fleets by 28%. This compares to a 17% increase in Europe, where the cost of operrating business aircraft restrains growth comparable to the United Sates. Africa and Asia, including the Middle East, will not present significant sales opportunities for business jet operators and avionics suppliers over the next three to five years.

Maintenance costs in the GA market likely will increase because maintenance/ avionics personnel will need to be better trained.Further restraint to growth may be due to the lack or maintenance personnel, says Frost & Sullivan. From the mid-1980s through the early 1990s, many avionics technicians ventured into other fields due to the lethargic aviation economy. More money was, and still is available for those wishing to work in the computer or even the automotive industry.

Airlines also have been aggressive in hiring technical graduates, taking the larger share of newly trained technicians. This also explains why the average age of GA technicians is above 50 years old. Frost & Sullivan speculates that GA will face the problem of securing qualified personnel in the years to come, and to overcome this, technician positions will have to be made more attractive.

Europe’s GA market likely will not grow unless the cost of flying and owning an aircraft is dramatically reduced, Frost & Sullivan comments. Europe has been living with the much-dreaded user fees for a long time (whether a landing fee, touchdown fee, lights fee, overpriced avgas, or rental prices), and this has impacted the slow growth of GA on the continent. In short, GA in Europe is reserved only for select numbers.

Technology Trends

From a technological standpoint, multifunctional displays (MFDs) are becoming increasingly an indispensable tool of the GPS era in many GA segments. Over the next five years, these MFDs will perform better and replace most of the current analog instruments, predicts Frost & Sullivan. More MFDs will include primary flight data such as engine information. They also will reduce pilot workload by providing systems’ information that allows the pilot to manage flight and aircraft data more efficiently.

Competition in the MFD segment will intensify in 2001. Eventide’s Argus was one of the first MFDs to enter the GA market. Now, virtually every avionics manufacturer seems to have an MFD, and Garmin, Avidyne and UPS Aviation Technologies appears to have captured the technology lead over Bendix/King, Frost & Sullivan observes. But the success of these products will be based on three elements: cost, certification and product upgradability.

In corporate jets, head-up displays (HUDs) or head-up guidance systems (HGSs) have emerged as an essential instrument over the past decade. This is principally due to technological progress, but also because of the new entrants. The world market for HUDs should continue to grow at approximately 10% to 15% per year over the next five years. The core of the market will remain in Europe and North America. Rockwell Collins Flight Dynamics, Honeywell and Thomson-CSF Sextant share the high end of this market. Thomson-CSF Sextant’s recent introduction of a new, advanced HUD offers the largest field-of-view in its class and represents the first member of the manufacturer’s latest family of head-up displays. It was designed specifically for regional and business aircraft. The Thomson-CSF Sextant HUD system for the Bombardier Global Express provides built-in growth potential for improved Category III operations and the display of enhanced vision system (EVS) imagery. Gulfstream, too, is installing a HUD/EVS in its GV and, as an option, in its GIV-SP business jets.

Cost and size have seriously limited HUD applications outside of the larger business jet market, according to Frost & Sullivan. However, rumors of the introduction of a lower-end product, better adapted to the needs and budgets of heavy single- and light twin-engine aircraft owners, have recently surfaced.

In terms of competition in GA avionics, Frost & Sullivan expects Bendix/King to continue to lose market share to Garmin and UPS Aviation Technologies, since these companies have developed the newest products. The Garmin 530 and UPS MX-20 have been well received by the GA community. Avidyne products also are popular with the high end of the GA market, Frost & Sullivan claims. Avidyne’s recent agreement with Rockwell Collins will see the FlightMax 850 system integrated with Collins’ TCAS II and used as an optional TAWS display interface. The FlightMax 850 is designed as an indicator replacement for the Collins WXR 250, 270 and 300 radars, as well as other legacy radars–a key advantage for Avidyne over Garmin and UPS, the analyst firm concludes.

This year may also bring more consolidation in the GA avionics market as well as possible alliances between second and first tier players.

Challenges & Conclusions

Companies serving the GA market are joining forces to offer avionics solutions to their customers, and finding the right partners will become a major challenge for niche avionics suppliers in years to come, Frost & Sullivan concludes. Product innovation and affordability will grow as a key challenge in GA. Demand for aircraft continues to drive down the cost of avionics, but small suppliers will have to demonstrate significant credibility in order to carve out niches from the top players.

Issues for GA Avionics in 2001

Some issues facing the GA market:

  • How will Bendix/King counter the stiff competition from companies like Garmin?

  • Will BFGoodrich emerge as a new force in the GA sector, capable of competing in all segments?

  • Will Sandel Avionics build on its success with it terrain awareness warning system (TAWS) with other new products?

  • Will the benefits from Federal Aviation Administration/UPS Aviation Technologies’ Capstone project involving Automatic Dependent Surveillance-Broadcast (ADS-B) become more apparent to the GA community?

  • Will the FAA act on standardization and certification of data links in 2001–to enable ADS-B and flight information services, for example?

  • Will Sierra Flight Systems’ electronic flight instrument system (EFIS) emerge outside the experimental market?

  • How successful will Thomson-CSF Sextant’s new head-up display (HUD) for the corporate/regional marketplace be?

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