captain dad
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The softer side:
FARNBOROUGH, England — Given the misery of air travel these days, private jet makers may seem to have a built-in selling point, particularly among customers in the United States.
But manufacturers at the Farnborough International Airshow said this week that they were seeing signs that private jet sales in the American market were beginning to soften.
The American market, traditionally the world’s biggest for business jets, has slipped well below 50 percent of global sales in recent months, according to Honeywell, the world’s largest maker of avionics, the electronic systems that are used to operate planes.
At the end of 2007, American sales made up just 30 percent of global jet sales, Honeywell’s data showed.
That slump is attributed to worries about the American economy and the growth of other markets, like Russia, South Asia and the Middle East. Interestingly, manufacturers say the price of jet fuel, which has nearly doubled from a year ago, is not much of a factor.
To be sure, the drop is a recent development for the American market, which dominated jet sales for a decade. Makers of private jets — Bombardier of Canada, Dassault Aviation in France and Embraer of Brazil — are watching the market carefully.
“Already we are seeing a slowdown in business jets in the United States,” Federico Curado, the chief executive of Embraer, said at the Farnborough air show, outside London.
Pierre Beaudoin, the chairman of Bombardier, which makes the Learjet and the longer-range Global Express private jet, said he noticed a “softening” of the American market in April, though he stopped short of calling it a slowdown.
“The United States is still growing, but its significance as a market has been reduced,” David Dixon, head of business aircraft for the Asia-Pacific region at Bombardier, said.
“The initial indicator is in the charter market — that is increasing; discretionary calls to charters have shown some change,” Mr. Dixon said. In times of economic uncertainty, customers may hold off buying an aircraft, choosing to charter a plane or sign up with a fractional ownership company like NetJets, which allows them to buy travel time on corporate jets.
The European side:
Fractional jet ownership gains traction in lean times
NetJets CEO sees increased demand as boards cut down on expenses
An earlier version of this story incorrectly stated William Kelly's title.
FARNBOROUGH, England (MarketWatch) -- The current record-high fuel prices have led to an increase in demand for fractional ownership of business jets as big corporations find it more difficult to get their board's green light to purchase new aircraft, NetJets Transportes Aereos CEO William Kelly told MarketWatch.
"We've seen an increase in use by corporate customers," said the head of Europe's leading business jet operator in an interview on the sidelines of the Farnborough International Airshow, the aerospace industry's top annual gathering taking place this week just outside London.
Demand for fractional ownership of private jets continues to rise in spite of sharp increases in fuel prices according to William Kelly, CEO of NetJets Transportes Aereos. (July 15)
"Executives are squeezing in two or three business meetings in a day in different cities whereas before they may have just have flown to one destination," he explained.
While commercial airlines are witnessing a decline in expensive first-class and business travel, the credit squeeze and the worsening economic environment are boosting demand for fractional ownership of business jets, an arrangement that allows individuals or companies to buy a share of a private jet for less than the cost of buying a plane.
NetJets manages and operates the aircraft, providing crew management, trip scheduling, ground support and all maintenance.
The service is increasingly popular partly because company boards are becoming more reluctant to sign off on big expenses such as the purchase of a new aircraft for use by its top executives when aggressive cost-cutting is being pursued elsewhere, Kelly said.
Joe Nadol, an analyst at J.P. Morgan, recently told clients that with corporate growth under pressure in the first half of 2008, the U.S. is likely to witness a slowdown in deliveries of new business jets in the medium term.
The number of used business jets for sale as a percentage of the global fleet in the U.S. has crept up to 7.2% from 6.2% in January, he noted.
NetJets, meanwhile, has seen no weakening of demand. Its customer base rose 5% over the past year, with particularly strong demand from corporate clients.
Today about 40% of the company's customer base is pure corporate, 25% to 30% is private and another 30% is a mix of the two, with the jet used for meetings during the week and leisure at other times.
For customers not ready to splurge on fractional ownership, NetJets offers private and corporate jet cards, providing 25 hours of flying time over a given period. For the private card, prices start at 131,000 euros, or about $210,000, on a light jet.
These programs work as feeders to fractional ownership, with more than half of NetJets' fractional-share owners introduced via the corporate and private card programs.
Kelly is so confident in the strength of the company's business model and its ability to weather a downturn in the aerospace sector that he is expanding the fleet.
Last month he placed an order for 40 Gulfstream aircraft from a unit of General Dynamics (GD: General Dynamics Corporation
The purchases came as airlines around the world slash capacity by retiring or grounding older aircraft. Some have even deferred or cancelled orders for new planes placed years ago as they struggle with a lethal combination of record-high fuel prices and slumping demand as the economy deteriorates.
Still, NetJets is not completely immune to the recent turbulence in the airline sector. Kelly said that over the past few months, he has seen a small increase in the number of customers wanting to exit their contracts early.
NetJets currently operates more than 140 business jets and has more than 1,600 customers across Europe. Last year its owners took 73,622 flights to 917 airports in 136 different countries-- a 55% increase in flights in the past three years.
By the end of 2008 the company expects to have 1,750 customers in Europe.
The fleet includes Hawker 400 XPs and 4000, Cessna Citation Bravos and Dassault Falcon 7Xs among other aircraft.
Aude Lagorce is a senior correspondent for MarketWatch in London.
FARNBOROUGH, England — Given the misery of air travel these days, private jet makers may seem to have a built-in selling point, particularly among customers in the United States.
But manufacturers at the Farnborough International Airshow said this week that they were seeing signs that private jet sales in the American market were beginning to soften.
The American market, traditionally the world’s biggest for business jets, has slipped well below 50 percent of global sales in recent months, according to Honeywell, the world’s largest maker of avionics, the electronic systems that are used to operate planes.
At the end of 2007, American sales made up just 30 percent of global jet sales, Honeywell’s data showed.
That slump is attributed to worries about the American economy and the growth of other markets, like Russia, South Asia and the Middle East. Interestingly, manufacturers say the price of jet fuel, which has nearly doubled from a year ago, is not much of a factor.
To be sure, the drop is a recent development for the American market, which dominated jet sales for a decade. Makers of private jets — Bombardier of Canada, Dassault Aviation in France and Embraer of Brazil — are watching the market carefully.
“Already we are seeing a slowdown in business jets in the United States,” Federico Curado, the chief executive of Embraer, said at the Farnborough air show, outside London.
Pierre Beaudoin, the chairman of Bombardier, which makes the Learjet and the longer-range Global Express private jet, said he noticed a “softening” of the American market in April, though he stopped short of calling it a slowdown.
“The United States is still growing, but its significance as a market has been reduced,” David Dixon, head of business aircraft for the Asia-Pacific region at Bombardier, said.
“The initial indicator is in the charter market — that is increasing; discretionary calls to charters have shown some change,” Mr. Dixon said. In times of economic uncertainty, customers may hold off buying an aircraft, choosing to charter a plane or sign up with a fractional ownership company like NetJets, which allows them to buy travel time on corporate jets.
The European side:
Fractional jet ownership gains traction in lean times
NetJets CEO sees increased demand as boards cut down on expenses
An earlier version of this story incorrectly stated William Kelly's title.
FARNBOROUGH, England (MarketWatch) -- The current record-high fuel prices have led to an increase in demand for fractional ownership of business jets as big corporations find it more difficult to get their board's green light to purchase new aircraft, NetJets Transportes Aereos CEO William Kelly told MarketWatch.
"We've seen an increase in use by corporate customers," said the head of Europe's leading business jet operator in an interview on the sidelines of the Farnborough International Airshow, the aerospace industry's top annual gathering taking place this week just outside London.
Demand for fractional ownership of private jets continues to rise in spite of sharp increases in fuel prices according to William Kelly, CEO of NetJets Transportes Aereos. (July 15)
"Executives are squeezing in two or three business meetings in a day in different cities whereas before they may have just have flown to one destination," he explained.
While commercial airlines are witnessing a decline in expensive first-class and business travel, the credit squeeze and the worsening economic environment are boosting demand for fractional ownership of business jets, an arrangement that allows individuals or companies to buy a share of a private jet for less than the cost of buying a plane.
NetJets manages and operates the aircraft, providing crew management, trip scheduling, ground support and all maintenance.
The service is increasingly popular partly because company boards are becoming more reluctant to sign off on big expenses such as the purchase of a new aircraft for use by its top executives when aggressive cost-cutting is being pursued elsewhere, Kelly said.
Joe Nadol, an analyst at J.P. Morgan, recently told clients that with corporate growth under pressure in the first half of 2008, the U.S. is likely to witness a slowdown in deliveries of new business jets in the medium term.
The number of used business jets for sale as a percentage of the global fleet in the U.S. has crept up to 7.2% from 6.2% in January, he noted.
NetJets, meanwhile, has seen no weakening of demand. Its customer base rose 5% over the past year, with particularly strong demand from corporate clients.
Today about 40% of the company's customer base is pure corporate, 25% to 30% is private and another 30% is a mix of the two, with the jet used for meetings during the week and leisure at other times.
For customers not ready to splurge on fractional ownership, NetJets offers private and corporate jet cards, providing 25 hours of flying time over a given period. For the private card, prices start at 131,000 euros, or about $210,000, on a light jet.
These programs work as feeders to fractional ownership, with more than half of NetJets' fractional-share owners introduced via the corporate and private card programs.
Kelly is so confident in the strength of the company's business model and its ability to weather a downturn in the aerospace sector that he is expanding the fleet.
Last month he placed an order for 40 Gulfstream aircraft from a unit of General Dynamics (GD: General Dynamics Corporation
The purchases came as airlines around the world slash capacity by retiring or grounding older aircraft. Some have even deferred or cancelled orders for new planes placed years ago as they struggle with a lethal combination of record-high fuel prices and slumping demand as the economy deteriorates.
Still, NetJets is not completely immune to the recent turbulence in the airline sector. Kelly said that over the past few months, he has seen a small increase in the number of customers wanting to exit their contracts early.
NetJets currently operates more than 140 business jets and has more than 1,600 customers across Europe. Last year its owners took 73,622 flights to 917 airports in 136 different countries-- a 55% increase in flights in the past three years.
By the end of 2008 the company expects to have 1,750 customers in Europe.
The fleet includes Hawker 400 XPs and 4000, Cessna Citation Bravos and Dassault Falcon 7Xs among other aircraft.
Aude Lagorce is a senior correspondent for MarketWatch in London.
