The long awaited recovery of business jet deliveries in North America, which is by far the largest market in the world, now seems to be taking place and the outlook for the sector in 2015 is good.
As North America economic growth improves, the business jet market will experience a number of secondary effects. The most notable is that used aircraft inventories are returning to levels that are consistent with more stable pricing and a better used aircraft market.
What's also hot is the long-awaited delivery of new products. Several of the original equipment manufacturers (OEM's) have "clean sheet" design aircraft that are announced or are being delivered, and this is further stoking interest in the sector. These new models will deliver in volume within the next 36 months.
The introduction and roll-out of new products both reflects OEM confidence and creates a positive tone within the industry. These introductions are causing a reassessment by buyers of what plane to select for their future aircraft needs.
For example, immediately prior to the National Business Aviation Association's annual convention last year, Gulfstream announced the G500 and the G600. These new products are definitely having an impact on buyers' approach to new purchase decisions. The 500, for instance, fits between the 450 and the 550. The 600 is a little bit longer and larger than the 550, but its advertised range initially looks to be slightly less than the 550. The 500 and 600 fly faster than the 450 and 550, and they've got updated technology in the cockpit. So the 500 and 600 are not strict "comparables" to the 450 and 550. As a result, when one looks at the Gulfstream line-up, it remains to be seen whether all four models can co-exist or whether (as in the past) the introduction of the 500 and 600 will ultimately result in a phase-out or discontinuation of one or both of the 450 and 550.
More generally, these new Gulfstream products are indicative of the focus that all of the OEMs are devoting to their larger cabin aircraft lineup. Across the board, OEMs are examining whether they have the latest technology and capabilities with respect to speed and fuel efficiency in this very important segment of the market.
In addition to Gulfstream, other OEMs are rolling out new products at a fast clip. Bombardier's Global 7000 and Global 8000 will be hitting the market within the next few years, offering impressive range and cabin space. Dassault's 5X is an interesting new entrant, with a large cabin and 5,000+ nautical mile range. Dassault's 8X is an upgrade to the popular 7X and will fly about 500 nautical miles further. At Embraer, the Legacy 500 is an exciting new entrant in the super midsize sector. Cessna has its Latitude and Longitude models in the 3,000-4,000 nautical mile segment respectively, reinforcing the point that corporate jets are ready to soar as every single major OEM has a robust pipeline of new product innovations that they're going to be bringing to market in the next three to four years.
Mike Kahmann is Group Head and Managing Director of CIT Business Aircraft Finance. The Business Aircraft Finance group provides financing and leasing programs for owners of business jet aircraft and turbine helicopters, both in the U.S. and in many international jurisdictions. Kahmann holds a bachelor's degree from Claremont McKenna College and an MBA from the New York University Stern School of Business.
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Large markets in Asia, such as China and Indonesia, were big contributors to business aircraft order books. However, with the recent economic slowdown in the Far East, it's likely that this rosy picture will not return for some time.