Four Industry Hopefuls Weigh In On State Of Small Jets
The current state of the very-light
jet segment -- as well as its uncertain future -- were the subjects
of a well-attended forum Monday at NBAA 2008, as four industry
leaders hoping to see their companies profit from the sale of small
jets offered their thoughts on the matter.
Among the topics discussed were the difficulties in certifying
any new aircraft, and in particular VLJs... as well as the overall
health of the segment, especially as the global economy appears
headed for a pronounced downturn.
Below are samplings of those comments from Epic Air CEO Rick
Schrameck; Mike McConnell, newly-named President and GM of the
Customer Division of Eclipse Aviation; Jack Braly, CEO of AAI
Acquisition; and Cláudio Galdo Camelier, Vice President of
Market Intelligence, Embraer Executive Jets.
Rick Schrameck, CEO of Epic Air --
"I think that we will all, for the
next 18-24 months, struggle with financial issues. Certainly,
you're going to have to go outside of the North American market for
financial partners. The other option, certainly, is hooking up with
an existing company that already has products and
infrastructures... or a couple of the new guys getting
together.
"As far as the order book, and our
customers, we are seeing absolutely no decrease in orders at all.
We still sit with backlogs over $100 million dollars. I think
they're in it for the long run, they really want to travel in the
VLJ space. That's the perfect airplane for them, it fits the
mission profile they want to do.
"The one thing that I am seeing is the
people that can buy, say, a three-million-dollar-and-lower
aircraft, which is the market segment, the price point of a VLJ...
instead of paying cash for them, we are seeing people that are
holding their cash position and financing them. Our particular
customers are not in a position where they have difficulty doing
that.
"So I think for the company going to
certification it's an issue. For the customers, I think it's less
of an issue."
Michael McConnell, President and General Manager, Customer
Division, Eclipse Aviation --
"The uncertainty that's created with
the financial atmosphere in the globe today causes inaction. What's
interesting is that over the last two-to-three years, we've seen a
phenomenal increase in the demand for air travel, and that is
certainly global. It's tied to high-net-worth individuals, it's
tied to GDP growth, it's tied to stock market growth.
"All of these things showed a very
heightened need for air travel, places in the Middle East, in
India, the proverbial China... certainly the US is stumbling
financially, but as we look at the markets, it's unclear today. It
certainly feels like the demand continues, and air travel is still
needed, but it is unclear whether that risk will still be taken. We
have a number of orders that hinge upon certifications and we
haven't seen anybody walk away. We still see high interest in the
company and in the product.
"I think it goes to regardless if you
have uncertainty in the world, uncertainty in the financial
markets, if your product is still something that is unique and it
provides an alternative that has never been seen before, and in the
case of the Eclipse 500 it is an opportunity to operate an aircraft
far, far, far more economically than anyone could ever have
operated a jet airplane before, without any tradeoffs in
performance or functionality, if those things remain consistent and
your product remains at the top of the choice, then you should be
able to weather whatever the financial uncertainties are.
"But make no mistake, there are
financial troubles in the world today."
Jack Braly, President & CEO, AAI, Inc. --
"I think I can answer the question a
little differently, in that we are in the very unique position of
not selling airplanes yet. So, we're here to basically let
everybody know that we got the A700 back into production and we're
on a certification path that should have it certified in another
year-and-a-half, simply because we were able to pick up where the
Adam Aircraft company had left off. But until we get the bill of
material fixed...we haven't priced the airplane and we're not
really looking to sell airplanes.
"But the obvious question becomes, how
'bout your investors? How is the financial crisis affecting them
and their investment, because we still have along ways to go.
"We had a press conference earlier
today, and our investors were there, and they assured everyone that
the money for the program...we budgeted 200-million dollars to
complete the certification and put it into production...that the
money is secure and it's all available for us. From our
perspective, then, a very warm feeling that our financial situation
is secure."
Cláudio Galdo Camelier, VP Market Intelligence,
Embraer --
"An Embraer perspective, what we have
seen over the last few years in terms of sales, if we look at
book-to-bill ratios, we're about two companies building strong
backlogs. We believe that those times with very high sales are
gone. This year, next year, and probably (20)10 will be a slow year
in terms of sales. Delivery levels will keep high, 'cause backlog
levels are extremely long, and we foresee some stabilization in the
market in terms of deliveries over the next few years.
"But in the long term, the industry
pillars...are strong. The basics of the very light jets or the
business jet market are strong, and we do believe in the recovery.
So, sales will be down, in our view, over the next two years.
"There are issues related to customers
getting financing. What we are hearing from the banks is that the
financing rates...are already going up, getting the credit may be a
little bit more difficult. I believe that's the biggest
challenge.
"In particular for Embraer, on the
Phenom family, we have over 800 airplanes sold with firm orders. We
had no cancellations at all, no defaults on payments. Out of these
airplanes, about two-thirds are Phenom 100s, which we'll be
starting delivering this year. Probably next month, we'll be
delivering the first airplanes. We expect to deliver between 10 and
15 airplanes this year, and between 120 and 150 airplanes from the
Phenom 100 and 300 next year."
ANN's Daily Aero-Linx (04.15.24)
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