The State of General Aviation

Turbine Market: Turbine Power

June 1, 2005

It's increasing, but there are limits

The ever-expanding turbine segment of general aviation reflects the burgeoning economic scene in much the same way as the piston-powered segment. The market is up, so sales are up, inventories are down, and optimism prevails. And a weak dollar makes airplanes purchased with euros good deals indeed. But it's a tentative optimism, a mood tempered by caution. Boom times have come and gone in the past, and executives who have seen them know how quickly fortunes can change. For the foreseeable future, though, some major trends are asserting themselves.

The State of General Aviation

One is a sustained high level of recent demand for turbine-powered airplanes — after the pronounced slump of three years ago. This in turn has pumped up the used-turbine market, as more buyers hunt down recent-model trade-ins. The so-called "super-midsize" business jets — large-cabin airplanes capable of flying in the Mach 0.80-to-Mach 0.90 range, for nonstop distances as great as 5,000 nautical miles — are another strong trend. These airplanes fill the gap between smaller jets with ranges that max out around 3,000 nm and the truly large jets having maximum ranges in the 6,000-nm range. These super-midsize bizjets include the Bombardier Challenger 300, the Cessna Citation Sovereign, the Falcon 2000EX, the Gulfstream 200, and Raytheon's Hawker Horizon. These have proven very successful, especially among fractional ownership firms.

Fractional ownership continues to account for an across-the-board 15 percent of new turbofan sales, and is yet another affirmation of the expanding appeal of this mode of business transportation. Still another trend centers around advanced avionics systems as standard equipment and, among certain companies, new airframe offerings. But while confidence is returning, it's in measured doses. No one in this segment of general aviation is taking a recovery for granted.

To some industry insiders, cracks seem to be appearing in the popularity of fractional ownership. NetJets, with more than 3,000 shareholders, 553 airplanes, and 75 percent of the fractional market share, has held the high ground since the heady days of the early 1990s. But AvData, an independent aviation research company, says that the fractional business has been slowing down in the past two years. "Lots of people have been getting out, and there's the feeling that the market is at the saturation point," said an AvData spokesman. "Many fractional customers are now at the end of their first five-year commitments, and they haven't renewed them," said Dassault Falcon Jet President John Rosanvallon. "Now the fractionals have to resell their shares."

In a recent survey, 70 percent of AOPA members surveyed said they believe that the political environment for general aviation today is "poor or not so good."

Or come up with alternative ways of marketing their services. This explains the recent debit-card style of aircraft usage. An owner prebuys a certain amount of travel time, then uses the card to deduct charges as they occur. NetJets' Marquis Jet card is one such card; Cessna's Citationshares Vector Jetcard is another. Fractional ownership companies have also taken to offering on-demand charter services, hence companies such as Bombardier's Skyjet.

Other players don't seem to be feeling any pressure these days. For the time being, EADS Socata Aircraft Inc. President Stephane Bernard is satisfied with the reception his company's TBM 700 single-engine turboprop is receiving. "We have no inventory — zero new aircraft available — among new TBM 700s today," he says. "So this is a good problem compared to 18 months ago, when we had six new TBM 700s unsold. If you bought one today, it would be three months at the earliest that we could deliver."

As for 2005's delivery projections Bernard says, "It should be the same as 2004, with 30 to 40 aircraft deliveries. We prefer to be cautious, be a niche player, and not concentrate purely on volume." He went on to say that the market for TBM 700s is strong, that one-fourth of customers are repeat buyers, that the airplane is very well known, and that "our number-one competition to new sales is the demand for used TBM 700s." Consequently, the value of used TBM 700s has risen. Bernard said that he's not ready to disclose any new product enhancements, but also said that "there should be no surprise that a glass cockpit is coming to the TBM 700."

Pilatus Business Aircraft Ltd. is also expecting more of the same for its PC-12 single-engine turboprop. "The same number of deliveries as last year — about 80 airplanes worldwide," said company President and Chief Executive Officer Thomas Bosshard. In a comment echoed by virtually all other turbine sales executives, he says, "The bonus-depreciation rule certainly helped our sales last year, but it's the interest in the airplane and the strength of the economy that sustains us."

If the PC-12 and TBM 700 are firmly established, Extra Aircraft is going slow with its new EA-500 single-engine turboprop. "We're unwilling to start production until complete financing is in place," said Extra President and Chief Executive Officer Ken Keith. "Too many others start with inadequate funding, then have to go back for more money — and that's harder to pull off." Certification of the EA-500 is expected shortly after the airplane's Honeywell Apex flight control/display system is approved in mid-2006.

"Our biggest challenge is with [FAA Administrator] Marion Blakey," says Gulfstream Aerospace President Bryan Moss. "Budget cuts could impact us, since we rely more and more on the research and assistance of the FAA to complete our certifications in a timely fashion."

Randy Groom, president and general manager of the Beechcraft business arm of Raytheon Aircraft Company, sees a growing market for the firm's King Air line of turboprop twins. "They have the versatility that light jets don't. They're like luxury SUVs, and the C90s are perfect as turbine 'starter' airplanes," Groom says. "We sold more King Airs in 2004 than in 2003, and we'll sell even more in 2005."

While turboprops seem firmly entrenched, the business-jet business transmits the most circumspection with regard to market developments. "This is a very nervous business," said Falcon Jet's Rosanvallon. "There are demand and production capacity issues affecting lead times, and we have to anticipate market ups and downs if we aren't to be caught with excess inventory." Rosanvallon says that 2003 was Falcon Jet's 10-year low point, with 40 sales of its $20- to $40 million large business jets; in 2004 there were 69 sales. "By year end, 2005 sales should be closer to 2004 than 2003," he says.

Dassault Falcon Jet is leading the way in new large-jet designs with its 7X, a 5,700-nm, fly-by-wire trijet now under development. More than 50 orders (secured by $1 million nonrefundable deposits) have been taken so far — a demonstration of the continuing strength of worldwide demand for big, new-technology business jets.

Meanwhile, Beechcraft's Groom promises the evolution of a design derivative of the Premier I — but no specifics — and says the company is "taking a hard look, and monitoring the very-light-jet market."

This appetite for advanced technology is further confirmed by the growing acceptance of Honeywell's new Primus Epic integrated flight control and display system — now used in the Falcons 2000EX (the company's bestseller) and 900EX, where it's dubbed the "EASy" cockpit; in Raytheon's new Hawker Horizon; and in Gulfstream business jets, under the "PlaneView" name. The use of enhanced vision systems (EVS) — heads-up displays that use infrared technology to let pilots see in nighttime or foggy conditions — is also growing. Gulfstream has also pioneered what it calls its BBML (broadband multi-link) cabins, which provide high-speed Internet, e-mail, and videoconferencing modes, in its top-of-the-line airplanes.

"We prefer to be cautious, be a niche player, and not concentrate purely on volume," says EADS Socata Aircraft Inc. President Stephane Bernard.

So business jet manufacturers seem to have further established themselves at the cutting edge of civilian avionics. Compared to many of today's airliners, late-model business jets continue to sport flight decks that are generations ahead in terms of integration, features, and capabilities.

While the immediate future seems sanguine, there are big challenges ahead, says Gulfstream Aerospace President Bryan Moss. "Our biggest challenge is with [FAA Administrator] Marion Blakey," Moss said. "Budget cuts could impact us, since we rely more and more on the research and assistance of the FAA to complete our certifications in a timely fashion." Moss said the Gulfstream's new model 150 is the company's next airplane up for certification, now set for the second quarter of 2006.

"But we're coming off a very good year for deliveries and orders," Moss continued. "We're pleased with the momentum, but backlogs are being pushed and this is becoming a factor in sales — which we don't forecast." Then he said why.

"We're hostage to the economy."


Editor at Large Tom Horne has been reporting on the turbine market since 1982. He has written many articles dealing with business aviation issues as well as turbine aircraft evaluations. From 1990 to 1992 he was involved in the marketing and promotion of Bombardier's Challenger 601-3A and Global Express business jets.


Turbine Aircraft Shipments
Manufacturer
AvCraft Aviation 9
Boeing Business Jets 3
Bombardier Aerospace 129
Cessna Aircraft 245
Dassault Falcon Jet 63
Embraer 13
Gulfstream 78
Maule Air 2
Pacific Aerospace Corporation 10
Piaggio Aero Industries 16
Pilatus Business Aircraft 70
Raytheon Aircraft 217
EADS Socata 31
The New Piper Aircraft 26
Grand Total 912
Source: General Aviation Manufacturers Association
See the General Aviation Manufacturer's Association (GAMA) 2004 shipment charts ( www.aopa.org/pilot/features/2005/shipments0506.html).

Dawn of an Era

Here come the jets

BY JACK OLCOTT

A confluence of sophisticated technologies is generating a new class of aircraft known as the very light jet, or simply VLJ.

Small turbofan engines such as the Pratt & Whitney Canada PW610/615 series and the Williams International FJ33, with outputs that range between 900 and 1,400 pounds of thrust and price tags about half that of the Pratt & Whitney PT6A-66, make them attractive for aircraft the size and weight of a Beechcraft pressurized Baron or a Cessna 421.

Advanced avionics from manufacturers such as Avidyne, Chelton Flight Systems, and Garmin provide highly capable flight-management systems and situational displays at attractive prices. Composites and new fabrication techniques, such as friction-stir welding, offer the promise of unique designs and production rates not previously found in high-performance general aviation aircraft. Indeed, the ingredients exist for new designs that will have a profound impact on the aviation community.

Not everyone, however, agrees that the introduction of the VLJ will proceed smoothly. Some are concerned about nonprofessional aviators operating high-performance aircraft at flight levels currently the domain of sophisticated corporate jets and airliners. The FAA questions how the National Airspace System will accommodate the influx of VLJs, which some estimate could double the number of new business jets delivered during the next decade. Insurance companies are reluctant to assume the risks of covering the first users. And with the exception of Eclipse Aviation, not all manufacturers are comfortable with calling them VLJs.

Vern Raburn, president and chief executive officer of Eclipse, is outspoken in his conviction that VLJ is the proper classification and that the technology incorporated in these designs will lower the cost of travel via general aviation. Raburn argues that the acquisition price and operating costs of today's business jets are beyond the reach of many entrepreneurs and small companies?and are simply too expensive for a personal aircraft.

In a recent survey, 72 percent of AOPA members surveyed indicated that their home airport did not have airline service.

His solution is the Eclipse 500, a five- to six-place aircraft with a maximum gross weight about the same as an Aerostar 600 and powered by two Pratt & Whitney Canada PW610F turbofans, each producing 900 pounds of thrust, and manufactured in sufficiently high quantities to offer the aircraft for about one-fourth the price of today's least expensive new business jet. The design, expected to have a max speed of 375 knots and a ceiling of Flight Level 410, features a new version of Avidyne's Entegra glass cockpit with integrated avionics and a digital-systems architecture that eliminates all but two mechanical circuit breakers.

Raburn believes jet performance acquired at the price of a conventional light recip twin, combined with lower maintenance costs associated with turbine reliability and digital systems, invigorate the general aviation market. He projects an operating cost per statute mile of about $1, as do several other manufacturers designing VLJs in this weight class. The Eclipse 500's $1.175-million price tag (in 2000 dollars) is based on a break-even production rate of about 600 annually and an anticipated output closer to 1,000 units. (Eclipse designed its tooling to produce as many as 1,500 Model 500s yearly, an unprecedented number for business-jet manufacturing.)

A new era of air transportation

The VLJ is expected to operate from runways as short as 3,000 feet. Nearly 100 percent of the U.S. population lives within 40 miles of a 3,000-foot-long runway, and more than 90 percent resides within 20 miles of such an airport. Thus these aircraft should provide a new level of access to swift transportation for many companies and individuals.

Attractively priced VLJs capable of operating from nearly every GA airport could stimulate charter services and possibly create a new era of high-frequency, on-demand air transportation, especially for communities not efficiently served by the approximately 35 hub airports that account for more than 70 percent of our nation's airline enplanements. Almost 40 percent of the U.S. population lives more than 100 miles from an airline hub.?(It is significant that a relatively few air-taxi operators are responsible for about half of the approximately 3,000 VLJ orders placed among all manufacturers.)

"Today's ATC system is a problem for all aviation. Finger pointing at VLJs is avoiding the real issues," says Vern Raburn, president and chief executive officer of Eclipse.

To generate supporting technologies and procedures needed to operate GA aircraft (including but not limited to VLJs) safely and efficiently into more airports, nearly $75 million in government funds, plus about half again as many private dollars, have been spent during a five-year public and private program known as the Small Aircraft Transportation System (SATS). NASA, along with the FAA, distributed public funds, and the National Consortium for Aviation Mobility was the governing body for private participation. Four overarching capabilities — self separation of aircraft approaching and departing uncontrolled airports during instrument meteorological conditions (IMC), lower landing minimums at more GA airports, enhanced single-pilot operations in IMC, and integration of more small aircraft into the National Airspace System — have been researched and will be demonstrated this month in Danville, Virginia.

Reality vs. dreams

Technologies that promised more performance per dollar and greater access to more locations led many companies to propose VLJ programs during the last two to four years. As realities of high capital requirements for engineering, certification, and manufacturing replaced dreams, however, the field of serious contenders diminished significantly, leaving only a handful of designs still in serious contention to be the first very light jet to enter service. In an arena that numbered at least seven serious programs two years ago, only four twins and one single-engine VLJ remain, although several companies are considering adding designs to this class of aircraft.

Among VLJs publicly announced, only the Cessna Mustang bears the name of a company that has certified a business jet. Powered by two Pratt & Whitney Canada PW615F turbofans, each delivering 1,350 pounds of thrust, the six-place aircraft is designed to cruise at 340 knots, have a maximum ceiling of FL410, a VFR range of 1,300 nm with a 45-minute reserve, and take off in 3,120 feet. The aircraft features Garmin G1000 avionics and will carry 600 pounds of payload with full fuel and a single pilot. First flight occurred on April 23, with certification expected in 2007. Orders for the aircraft number approximately 250, nearly all from owner pilots.

While technologies that led to the VLJ movement are found in the Mustang, Cessna Aircraft rejects the VLJ handle, preferring instead to identify the $2.5 million Mustang as a logical addition to the Citation line of business jets.

Like officials at Cessna, Adam Aircraft President Joe Walker is less than enthusiastic about the term VLJ, preferring instead to call the Adam A700 a personal jet.

First to fly with its intended engines (two Williams International FJ33-4As, each delivering 1,200 pounds of thrust at sea level), the design is a jet version of the all-composite A500 centerline piston twin, which is powered by turbocharged Continental TSIO-550Es. Although certification of the A700 at Colorado-based Adam Aircraft is taking a backseat to obtaining an FAA type certificate for the A500, the jet had flown 228 hours through March of this year, and development work is ongoing. The test aircraft, however, does not conform to the specific design that will be certificated, thus hours accumulated to date are for development and will not apply directly to meeting FAA Part 23 certification requirements.

Adam Aircraft designed the A700, which has a cabin only slightly smaller than a Beechcraft King Air C90 or Cessna CJ1 and is the largest of this new class of aircraft, principally for the owner-pilot market. The company reports about 50 orders from individuals for the $2.1 million jet, and it anticipates delivering about 100 per year following certification in late 2006. (The Adam A700 order book could increase since POGO, a start-up air-taxi company conceived by airline legends Don Burr and Bob Crandall, has discussed a multiaircraft purchase, as have other fleet operators.) About 95 percent of A700 order holders currently are aircraft owners — two-thirds with light recip twins and about one-third with turboprop aircraft, most of which are single-engine machines. Adam anticipates that its Avidyne Entegra advanced flight deck combined with a carefully monitored training program will assure a successful transition for owner pilots into the jet aircraft.

Without a doubt the highest performance aircraft in the VLJ movement is the ATG Javelin, a two-place aircraft powered by twin Williams International FJ33s and designed to have a maximum cruising speed of 528 knots. The aircraft, which looks like the blending of the Northrop T-38 Talon and the McDonnell Douglas F/A-18 Hornet, is expected to achieve a 12,000 fpm maximum rate of climb, a ceiling of FL450, and maximum IFR range of 1,200 nm, all within an aircraft certified to FAR Part 23 and capable of operating from a 3,000-foot-long runway. ATG and its strategic partners Israel Aircraft Industries and Lockheed Martin see a potentially large military trainer market for variants of the Javelin.

Departing from the design philosophy that a VLJ should have two turbofans and fly high, Diamond Aircraft is developing the D-Jet, a five-place personal and business aircraft powered by a single Williams International FJ33-4, equipped with an advanced glass cockpit, and featuring composite construction. Certified ceiling will be FL250, where the aircraft is expected to cruise at 315 knots and have a cabin altitude of 8,000 feet. With a targeted stall speed between 61 and 63 knots, the D-Jet will be capable of operating from runways as short as 2,000 feet.

Full funding for the D-Jet's development has been secured, according to Diamond Aircraft President Peter Maurer, and the advanced design work currently under way at Diamond's home base in Austria is being transferred to the company's facilities in Canada. The prototype D-Jet is expected to fly before the end of 2005, and North American certification is planned for late 2006 or early 2007. Approximately 120 unsecured deposits for $20,000 have been placed for the D-Jet, principally by owner pilots.

Advances in powerplants have always led to progress in aviation. The VLJ will be one such advancement, aided by highly capable yet low-cost avionics and relatively new fabrication techniques. In addition to ongoing programs, other companies are rumored to be considering jets in this weight class, and General Electric announced in its 2004 Annual Report that it has a strategic interest in turbofans in the 1,000-pound to 3,000-pound thrust range. Regardless of the operational challenges presented by many more owner pilots flying turbofan equipment and possibly a new level of air-taxi activity, and regardless of what name finally is associated with smaller jet aircraft, this category of general aviation promises to expand personal and business transportation.


Jack Olcott is type rated in several business jets and currently operates a Beechcraft Baron between Morristown Airport and consulting clients that include NASA and the FAA. He was president of NBAA from 1992 to mid-2003.