The advent of Very Light Jet (VLJ) air taxi/air limousine services could lure business travelers away from the scheduled airline sector, according to a new report by Forecast International (FI), as part of its Market for Business Jet Aircraft, published last week. While most predictions center on the ability of VLJs to lure business travelers out of their cars, the Newtown, Conn.-based consultancy is the first to forecast that this revolutionary form of air service will exert a significant and lasting impact on the airline industry.

Forecast International predicted manufacturers would deliver 4,355 VLJs during the 2006-2015 timeframe, for $8.7 billion in forecast value. FI said these unit production numbers are the largest of the eight business jet market classes it tracks.

However, FI said the potential for siphoning passengers from scheduled services depends largely on the development and growth of VLJ-based air-taxi services offering the per- seat, on-demand and point-to-point travel option. "Success of this sector is "probably necessary if production of the new VLJs is to come even close to the rather optimistic projections of many of their manufacturers," FI reported.

Forecast International also predicted that the dozen plus proposed VLJ designs would filter down to a handful of aircraft with the most potential for achieving FAA certification and service entry. These aircraft include the Adam A700, Cessna Mustang, Embraer Phenom 100 and the Eclipse 500. Noticeably absent are the Diamond D-JET and the Excel-Jet Sport-Jet, although the report did cite them as part of the category it studied along with the Eviation Jet EV-20. Eclipse is scheduled for certification this month.

FI cautioned that regulatory issues could hamper such services in some locations and called scheduling a potential "nightmare" for some operators that could mean the difference between profit and loss. It further warned that issues surrounding insurance and training, especially given the expectation that many operators will be new to jet power, could be a limiting factor. Early last year, the National Business Aircraft Association (NBAA) issued proposed training guidelines for VLJs based on contributions from FAA, Eclipse, Cessna, and Adam, insurance underwriters and flight training providers.

VLJs also could suffer from airport access issues, although operators indicate they will stay away from congested airports. (RAN, June 12) The Air Transport Association (ATA), recently raised a host of safety issues with VLJs, particularly in relation to whether maintenance standards for privately owned aircraft are also appropriate for VLJs and whether smaller, regional airports can handle any safety incidents. (RAN, May 1) Other critics have suggested that corporations may require two- pilot operations for their employees to use such services.

As for insurance, FI said that insurers seem less concerned about single-pilot operations than they do about training. It is likely insurers will insist pilots have extensive training that meets strict requirements, including a considerable number of flight hours as well as simulator time. Indeed, FI sees the development of new training companies, as ex-airline and ex-military pilots establish training businesses specifically for the VLJ market. FI pointed out that Eclipse dropped plans for an in-house training program in favor of teaming with United Airlines Flight Training Center in Denver, which will train Eclipse 500 pilots.

Insurers may also require annual recurrent training and two-pilot operations for any commercial service, mirroring European regulations for such operations in commercial flight. The U.S. does not have the same regulatory requirement. FI pointed out that two-pilot requirements increase costs and loses revenue, because the right seat could otherwise be used for passengers.

"Still, the upside potential of the VLJ class is big," said FI, "and this class could be the engine of growth in the business jet market for some time to come. Out of the 12,629 business jets forecast to be produced between 2006 and 2015, more than one third are expected to be VLJs."

FI pointed to NASA studies that consider VLJs part of a new Small Aircraft Transportation System (SATS). SATS envisions air taxi services springing up at many of the 5,000 unused or under-utilized general aviation airports around the U.S. FI suggested that keys to their success were fares low enough to enable these new services to compete with coach airline fares, as well as state-of-the-art reservations systems, especially since operators must avoid flying empty or even half-full on return legs. It also expects timetable slippage common with such new programs. It noted that VLJ manufacturers are already claiming orders and options for about 3,000 aircraft, including "speculative orders" from a broad cross-section of the market.

"While NASA's SATS concept appears rather ambitious at this early stage, the VLJ revolution nevertheless represents a significant landmark in commercial aviation," said the company. "If [the air taxi/limousine services] become successful, it will lure ever-greater numbers of air travelers away from the scheduled airline sector."

Operators see the largest market opportunities in business travelers who now drive. Nonetheless, DayJet outlined service reductions when it announced its first DayPorts. (RAN, June 19) Given the fact that nonstop routes served by turboprops have dropped by 58 percent in the last decade and departures have fallen 69 percent, VLJs could play an important role in serving many small communities. Turboprop routes dropped from 1,347 to 565 between the second quarter of 1996 and the second quarter of 2006, resulting in a loss of billions of dollars in economic activity at these points, according to a report by BACK Aviation Solutions. (RAN, April 3) Given the expected economic impact of the DayPorts, pegged now at $94 million, these points will salivate over the prospect of attracting DayJet or similar operations to their airports.

The Eclipse 500, which leads the class with an estimated 2,226 deliveries scheduled during the forecast period, and Cessna Mustang are due for certification and service entry this year, followed by the Adam Aircraft A700.

FI pointed out that VLJs were greeted with skepticism when first proposed several years ago, largely because such companies as Eclipse were new and had never built an aircraft. Eclipse survived an early engine switch and has now posted more than 2,400 orders and options and expects to deliver 900 aircraft in its second full year of production. Once Cessna began plans to produce the Mustang, with the second largest order book in the class at 1,075 over the forecast period, the skeptics began taking such aircraft seriously, according to FI.

While many observers regard these aircraft as more general aviation than true business aircraft, FI predicted the type would be favored by corporate flight departments, charter companies and fractional programs. VLJ success among fractional owners has been the subject of much discussion, but FI expects them to join fractional fleets, initially with regional fractional providers rather than the large national and international fleets.

The company pointed to the Mustang, which took its first flight two weeks ahead of schedule, as a "very good bet" to enter service, largely owing to the manufacturer's solid reputation, a market filled with brand loyalty and skepticism regarding new companies. Embraer's Phenom enjoys more credibility for the same reason, accounting for the fact it expects to build 674 over the forecast. Indeed, FI split the VLJ segment into two tiers, with the Mustang and Phenom at the top of the VLJ category because they weigh and cost more. While competing with other VLJs, the two aircraft also compete with smaller aircraft in the light business jet class, such as the Cessna CJ1+, the Premier IA, and the Sino Swearingen SJ30-2.

The second tier includes the Adam A700 and the Eclipse 500, appealing to a different customer than the top tier offerings - the air taxi/air limo services and the individual owner/pilots. FI also sees the Adam A700, with 379 deliveries over the forecast, as likely to achieve service entry, although it considers its market more limited than the other three because it is a piston derivative from its A500.

FI said it is hard to overestimate the enduring value of the Cessna brand name. "Interestingly, Cessna has [indicated] some reluctance to identify the Mustang too closely with the VLJ segment in an effort to differentiate its product," said FI. "The reasons are not clear, but may well stem from some corporate concern over the ultimate size of the VLJ market as well as a desire to clearly position the Mustang as a downward evolution of the Citation family rather than as a distinct product. Customer perception of the Mustang as a Citation variant would better establish the Mustang as an entry point to the Citation product ladder. Cessna clearly hopes to move many of its single-engine piston operators into jets, and sees the Mustang as key to this process."

Cessna is engaged in a campaign to fill every market niche with its own products and consequently may produce both smaller and larger Mustangs, FI reported. This strategy indicates that the company is considering a smaller version to compete directly with the Eclipse 500 and may produce a larger Mustang to fill the gap between the current Mustang and the CJ1+. Contact: Forecast International, 203-426-0800; http://www.forecastinternational.com