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Monday, April 21, 2008

Embraer Forecasts High BizJet Growth

Sao Jose dos Campos, Brazil – Fresh from announcing the launch of the Embraer MLJ and MSJ programs in Washington, DC, Embraer’s Vice President Market Intelligence, Executive Jets Claudio Camelier said that its business sales would be unlikely to flag since high net worth individuals – those worth over $1 million – worldwide were growing at 10 percent per year and provide a major driver for increasing business aviation demand. He also cited the usual drivers – commercial aviation congestion, security hassles, lack of first class seats, and poor customer service
Perhaps the biggest driver, said Camelier, was, in addition to the different business models from branded charters to jet cards – “a new breed of companies that are further closing the gap between the costs of business and commercial aviation – on-demand air taxis.” Among Embraer’s clients are Jet Bird, Magnum Jets, Eagle Creek, Avantair, Wondair, Premier Aviation, and Invisionair.
“Since 2004, business jet deliveries have grown an average of 30 percent,” he said, “Operators have reported a 25-30 percent increase in movements in charter demand. But they also complain of cost pressures especially with fuel and airport fees, both of which have gone up in the last 12 months. The need for more convenient air transportation has increased the demand for new business models.”
Camelier also cited the new production launches – especially the very light jets – as a driver in the increasing demand for business jets not only to increase access to business aviation through lower costs but as a replacement for older business jets. “This new entry-level segment of business jets – the Cessna Mustang and the Eclipse and now, this year, the Phenom 100 – is experiencing very high demand. Phenom orders now top 700 firm orders and we haven’t even delivered the first aircraft. What was once seen as a luxury, is now accepted as a real productivity tool for business. Business aviation is not a luxury but a strong part of the economy. Indeed, the economy would not grow as much without business aviation as a tool.”
During the next decade, Embraer forecasts 13,150 executive jet deliveries, valued at $201 billion, for use in traditional business models. With the new business models, centered on the VLJ, another 2,500 to 4,400 will be added to that number, especially if VLJ acceptance by the public is high. Embraer expects more than 50 percent of the Phenoms will be flown professionally in charter companies, air taxis and by corporations.
“VLJs will be 26 percent of the market in terms of deliveries but only four percent of the dollars spent,” said Camelier. “And that is for the entire industry, not just Embraer. North America is still the largest market for business jet deliveries but at only 55 percent (7,220 aircraft) of the world market compared to the 70 percent it once was. Europe, the Middle East, Africa, Eastern Europe and Russia will constitute 28 percent of the market at 3,620 aircraft valued at $61 billion. Latin America will be five percent of the market with 710 aircraft and Asia will be 12 percent of the market with 1,600 aircraft.”
Given the demand, and a gap in Embraer products, the company launched its two newest products, the mid-size jet (MSJ) and the mid-light jet (MLJ) as part of its plan to achieve what it has already achieved on the commercial side, to become a major player in the aircraft market. Having already become the third largest commercial aircraft manufacturer, its goal is to become an equally large player on the business aviation side by 2015.
“These new projects close the gap between our very light jets and that of the Legacy and Lineage products giving us six business aviation products in our portfolio,” said Camelier. “With t his portfolio we can now offer a complete range of products allowing our customers to grow their needs with our aircraft.”
The decision to launch was based on global market surveys of more than 5,000 operators, testing more than 15 concepts. “The board approved the launch at the end of February and we will do the commercial launch at EBACE in May and start taking firm orders,” he said, adding the company is already taking letters of intent. It will also announce pricing during EBACE.
Both are clean sheet designs, unlike the Lineage and Legacy which were based on its commercial aircraft, the ERJ 170 and 190. Camelier boasted they were the only six-foot cabin with a flat floor. Interiors are being designed by the BMW Group Design Works. The range of the MSJ is 3,000 nm with four passengers and 2,800 with eight passengers, making them transcontinental and “with strong winter winds New York to Paris.”
The MLJ is a shortened version of the mid-size and as with its commercial aircraft, offers high commonality in engines, cockpit and wings with the only difference being fuselage length. It offers as range of 2,400 nm with four passengers and 2,200 with eight passengers affording Atlanta to the West Coast, or, from Paris, to cover the entire European region to reach the Middle East.
The two offer full fly-by-wire systems taking lessons learned from the ERJ 170 and 190 programs which include improved performance, smoother ride, reduced workload for the pilot and increased safety features.
They will have a side stick control and Rockwell Collins Pro-Line Fusion system “which brings all the functionalities needed for the modernization of ATC systems.” Engines will be Honeywell’s HTF7500s in the 6,000-7,000 take-off thrust class, an evolution from the proven HFT7000 series. Some 20 percent of the structural weight will be composite materials.
The MSJ will enter service in the second half of 2012 with the MLJ coming a year later. Embraer expects to invest $713 million in the programs but expects to share the costs with industrial partners and is currently in the selection process. It has yet to decide where the aircraft will be produced
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