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Friday, November 1, 2013

General Aviation Shipments Up, Brazil the Place for Growth

Shipments of business jets are down, but manufacturers could be 'right on the cusp' of a recovery, with several new product launches preparing for entry into service next year.

Woodrow Bellamy III

Shipments and billings of general aviation (GA) aircraft increased worldwide through the first three quarters of the year, according to the third quarter report released Thursday by the General Aviation Manufacturers Association (GAMA). 
[Shipments of business jets are down, but several manufacturers are planning entry into service of new jets next year, such as Bombardier's Learjet 85, pictured here in production. Photo: Bombardier]
GA manufacturers shipped a total of 1,513 aircraft, an increase of 6.6 percent compared to the same period in 2012 and total billings reached $15.4 billion, an increase of 24.5 percent. Business jet manufacturers are still facing challenges, as shipments of those planes are down from 430 last year to 421 for the first three quarters of 2013. Small and mid-size jets, which usually drive volume for business aircraft deliveries, are particularly struggling, as overseas customers increasingly prefer larger jets with more range that they can use for intercontinental travel. 
"From the start of the recession large business jets have faired well and they have delivered almost growing numbers throughout the recession, they have accounted for the really large growth that we've seen in the billings and the value," said Jens Hennig, vice president of operations at GAMA. "When it comes to counting the number of business jets that are sold, the volume really comes from small- and mid-size business jets, and small- and mid-size business jets segment very much rely on North America and European customers coming back to buying and that is something that we haven't seen get the needed traction just yet."
But that traction could be coming, according to Hennig, who said the industry is "right on the cusp" of a number of manufacturers preparing for entry into service of new aircraft. That is especially the case with small- to mid-size business jets, as the production lines for a number of popular models have run their course. 
Cessna is ready to introduce the Citation M2, new Citation X, Embraer is preparing to enter its Legacy 450 and 500 jets into service next year and Bombardier is in the process of delivering its first Learjet 75, and the first flight of the Learjet 85 is scheduled to occur prior to the end of the year with first deliveries of the 85 slated for 2014. 
Brazil Winning the BRIC Race
That's good news for emerging markets, or the BRIC countries (Brazil, Russia, India and China), especially Brazil, which Hennig said is a very interesting market. Unlike Russia, India and China, Brazil has the both the air and ground infrastructure to support growth and its business jet fleet is more than 1,000, as compared to the other three where business jet fleets have steadily been in the 100s, although they have been growing in recent years.
"Brazil, a long-running aviation country, is in itself its own economy, and they're actually seeming to be more and more interested in smaller airplane purchases," said Hennig.
"If you look at the aggregate business jet fleet, Brazil typically has ranked between third and fourth biggest in the world. So it’s an established market and as far as the BRIC countries economically growing, Brazil just continues to become more and more interesting," the GAMA vice president added. 
According to GAMA's 2012 year-end report, while North America still has the largest fleet of business jets, through the recession, the North American global market share of fixed wing GA aircraft declined from 62 percent in 2008 to 50 percent in 2012. During that same time, the market share in South America, driven by Brazil, increased from 7 percent in 2008 to 12 percent in 2012. 
Brazil is improving its air traffic management as well to help support future growth. A government-industry initiative, the Green Skies of Brazil program, recently completed a two-year research initiative evaluating the region's airspace efficiency using GE Aviation's flight data analytics to develop Required Navigation Performance (RNP) operational procedures at 10 Brazilian airports.
In May 2012 the first RNP flight procedures were approved for use at Rio de Janeiro's Santos Dumont airport, a flight environment complicated by surrounding mountains.  GE and DECEA, Brazil's air navigation service provider are now planning to deploy more RNP procedures at additional airports.
In comparison, Russia has been an up and down market in recent years and is hard to project as far as regional growth for business jet and overall GA aircraft purchases.
For India and China, although GA and business jet deliveries continue to grow year over year, there are certain infrastructure and air traffic management deficiencies that they need to overcome. Both countries are lacking in terms of the number of available GA airports, making it difficult to land aircraft at open slots. China also suffers from their airspace being heavily controlled by the military, in some instances only allowing one to two general aviation aircraft to fly within airspace at a time. 
"There's still a back and forth between what parts of the Chinese government controls the airspace. Right now many of the ATC functions reside with the military and their view of general aviation is not as positive as the one we see in the civil regulators there," said Hennig. "But we've seen progress. There's work on the way, each year we see more and more flying, each year we see more and more deliveries there; but while the Brazilian fleet is on the order of over 1,000 business jets, Russia India and China are each sitting around a couple hundred. So even though we're seeing year over year growth in each of those countries, Brazil is really the one that's very interesting to us."
Shutdown Recovery
The government shutdown isn't having as big of an impact on general aviation aircraft deliveries as was projected. During the shutdown, GAMA identified more than 150 newly manufactured aircraft worth more than $1.9 billion scheduled for delivery that were delayed because there simply weren't enough FAA employees to register them. 
In conversations with manufacturers working to clear their backlogs with the FAA's aircraft registry office in Oklahoma City, Okla. Hennig has received positive feedback. 
The workers are putting in long days, which is helping to reduce the backlog that piled up over the 16-day shutdown. This should allow companies to meet their goals for the fourth quarter, typically one of the busiest times of the year for GA manufacturers. 
"In the context of the entire mess that was the shutdown, just the post shutdown work from the FAA registry has been fantastic," said Hennig. "At the current rate of the FAA catching up, I'm hoping that we'll be back to normalcy in the next few weeks and that is well within the fourth quarter airplane schedule."


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