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RECORD-SETTING NBAA-CONVENTION AT LAS VEGAS

by Norbert Burgner

This yearís convention of the National Business Aviation Association (NBAA) at Las Vegas broke all records. With a number of 31,300, trade visitors were up by 20 per cent, and with almost 1,000 companies present, the exhibitors were up by 10 per cent compared to last years' 50th NBAA anniversary in Dallas.

Never before had an NBAA been so dynamic. Never before so many new programs and huge contracts were announced than in this year. The message was clear: The business jet is being established more and more as a management tool and accepted as the means of transport for business trips. This has happened despite all prophecies of doom voiced from many sides.

According to a paper prepared by the leading systems supplier AlliedSignal for the fair in Las Vegas, a total of 6,500 new business aircraft valued at $78 billion will be handed over to customers by the year 2009.

Even after the next boost to the economy has been reached in 1999, the numbers of aircraft supplied will, according to Allied Analysts, stay at a record level. Towards the end of the next decade they will increase even further.

For the immediate future, i.e. until 2002, AlliedSignal predicts a requirement for between 2,400 to 2,700 business jets of all classes. This is an increase of 47 percent compared to figures for the last five years.

Joe Leonard, President of the AlliedSignal Aerospace Marketing, Sales & Service Division, claims that the relative strength of the North American Economy and the introduction of new technologically advanced aircraft are the factors driving this development.

Leonard maintains confidence in the current economic situation that is responsible for the remarkable growth rates in the area of shared ownership. Over 70 percent of new participants in the Fractional-Ownership Option had not previously owned a business jet. According to Leonard, range and luxury features, which can be realised in todayís generation of aircraft, are central decisive criteria.

The stimulation of demand has its greatest effects in the United States. North America is, and will remain, the strongest market for business jets. According to the paper, in the next five years no fewer than 80 percent of all purchased jets will be destined for the United States. North American Operators intend to renew and expand their existing fleets in this way.

Customers in Europe are definitely more reserved. Optimism, with regard to the future of the economy, is markedly more subdued in the light of impending monetary reform and high unemployment. European Operators only want to renew or substitute 17 percent of their current fleets.

However, those companies, which had been interviewed, admitted more intensive use of their ìmanagement toolsî. In 1996 companies indicated a 22 percent increase in use. However, for 1998 the increase is 41 percent. About 65 percent of European Operators expect to acquire a brand new aircraft within the next five years. Fractional Ownership is also receiving some interest in Europe, although unsolved problems with regard to taxation still hamper serious actions.

In Latin America, impending elections and problems with bank systems are impeding more forceful market developments. Still, according to AlliedSignal, operators in this region also claim an increased use of their business jets.

And what is happening in Asia? Only two years ago this continent was heralded as the market of the future. However, currently it is grappling with a financial crisis of its own making. Accordingly, sales prospects for business jets are bad. At any rate analysts are certain that market development will depend on the development of the gross domestic product. This is generally the case. At growth rates of around three percent the number of business jets will only increase slowly from 460 to 600 units. This will not happen over the next five but eleven years.

Trends in the Market Segments

• "Business-Liner"
  For the category "Business Liners" with a maximum take-off load of over 100,000 lbs, (Boeing Business Jet and Airbus A319CJ), the paper looks at a ten year time span from 1999 to 2009. A market potential of 170 units costing $ 7.6 billion is predicted.
• "Jumbo and Global"
  According to the survey the number of newly supplied aircraft of this type will rise from last year's 74 units to 89 this year. Compared with 1996 the annual amount of aircraft that are handed over will have tripled. AlliedSignal predicts a worldwide requirement for 843 units in this category by 2009. The decisive parameters for purchasing this kind of aircraft are cabin comfort, range and speed.
• "Super-Bizjets"
  are also entering the fractional ownership business. Among the aircraft in this segment are the Dassault Falcon 900EX, the Falcon 900B, the GulfstreamGIV-SP, the GV and the Bombardier Global Express.
• "Wide-body"
  The survey estimates the potential in this class for the next eleven years at around 520 units. Significant factors, which influence the customerís decision, are not primarily speed, but comfort, i.e. the size of the cabin, and range. Here the various Fractional Ownership Programs make up a significant segment of potential customers as well. Aircraft in this class are the Dassault Falcon 2000 and the Bombardier Challenger 604.
• "Super-Mid-Size and Medium"
  The survey predicts a relatively large market potential for aircraft in this category of up to 1,540 units. The majority will be allocated to aircraft in the Super-Mid-Size Category. The reason: These aircraft, (among them the Dassault Falcon 50EX, the Hawker Horizon, the Cessna Citation X, the Galaxy and most of all, the new Bombardier Continental), offer the customer excellent value for money. They have almost the cabin comfort of a Wide-Body, but are "medium-priced". Some aircraft found in the Medium Class, like the Hawker 800XP, the Citation VII and the Learjet 60 are not equipped with the latest technology. Here the new Cessna Citation Sovereign will definitely get a lot of attention.
• "Light, Light/Medium"
  This is the strongest of all business jet market segments. Allied Analysts predict a need of up to 2,100 new units by 2009. Among this type of aircraft are the Learjet 31A, the Lear 45, the Cessna Citation Excel, the Citation Ultra, the Citation Bravo and the Beechjet 400A. Cessna will probably get the biggest piece of the ìcakeî, due to the introduction of the new Citation Ultra Encore.
• "Entry-Level"
  In this class the main emphasis is on whether or not the aircraft is affordable, and whether there is a jet alternative to the classic turbo prop. The survey carried out by Allied envisages a sales potential of up to 1,400 aircraft in this category. Prices are around 2 million US dollars for the VisionAire Vantage, over 3.5 million US dollars for the Cessna CitationJet and her new version, the CJ1, up to 4.18 million US dollars for the Raytheon Premier I and 4.295 million US dollars for the new Citation CJ2. These aircraft make a segment of the Business-Aviation-Market, which is attractive because it represents good value for money.

All in all, things are looking bright in the BizAv-Industry: 6,500 units valued at 78 billion US dollars until the year 2009. According to a survey undertaken by Rolls-Royce, there will even be a potential for 9,880 aircraft valued at 130 billion US dollars.

Does this mean pure joy everywhere? Not entirely. The Business Aviation Sector will also follow the dip of developments in the world economy. Critical observers claim that the upper vertex of this curve has been passed. This is why some analysts are warning about the slow down of the US Economy, which is expected for the middle of the next year. Furthermore the possible introduction of high user charges for business jet operators has been under discussion by the US Congress for a number of years now. Inevitably a fall must follow the current boom. The positive thing is that the amplitude of this curve will not dip as dramatically as it did at the beginning of the 90s.

From page 30 of FLUG REVUE 1/99