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Worlds apart

Submitted by Paul Maurer on Thursday, 03/31/2011 - 05:21

News continued to be positive for the larger cabin end of business aviation as emerging economies prosper. Over the past 3 years, India’s business jet fleet has grown by 50% (to 136 registered private jets); while China’s expanding airport infrastructure and loosening flight restrictions are enticing the world’s large cabin aircraft manufacturers into the region to make pitches to their growing cadre of billionaires (China’s private jet fleet consists of 200 aircraft vs. U.S. at ~11,000).

Not surprisingly, several manufacturers reported that 60-70% of their 2010 orders were from international markets where more large cabin jets are generally sold. The stark contrast is seen in orders for super large jets (think jumbos) where both Airbus and Boeing sell a vast majority to overseas operators. NetJets’ order for 120 long-range aircraft (Globals) from Bombardier this month signals that the global leader in business aviation sees greater market potential within the large cabin segment as well.

This is certainly welcome news for aircraft manufacturers since domestic business jet travel continues to be a mixed bag, up overall just 0.5% over last year, still well below pre-recession levels. Furthermore, bloated domestic inventory levels continue to depress aircraft prices (much to the delight of some corporations looking to take advantage) and a recovery is not expected until 2013 or 2014.

There are ominous signs of this growing disparity growing between the top and bottom segments of the U.S. business aviation industry. Following last November’s announcement by Hawker that its 400XP production would be stopped, Cessna announced that it will no longer produce the CJ1+ light jet. Cirrus (a single engine prop manufacturer) announced its potential sale to a Chinese company and Diamond Aircraft just suspended their single engine jet program. Finally, future production of the VLJ pioneer, Eclipse 500, remains uncertain.

The continued strength in international and large cabin segments may be good for manufacturers , but will they be good for U.S. travelers? For those seeking business aviation alternatives? For high income travelers who are increasingly frustrated with commercial air travel? It probably will have little effect. The disparity between commercial air travel costs, even with those ever-increasing fees, and business aviation travel remains too wide. However, I hope that advancements and profits from these segments will translate into investment in innovative, lower cost alternatives in the future.

(Excerpted from the March, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

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