Medium'Sized Business Jets – The Next Sales Frontier? Although much focus in business aviation is on the strength of Large Jets and the relative softness of Light Jets, the Medium Jet segment has faced some of the strongest headwinds in the post;recession industry. Buffeted by spikes in unsold inventory and sharply reduced utilization, prices and values, Medium Jets represent almost 1/3rd of the world business jet fleet, and are operated by a broad spectrum of customers, from charter operators to private entities to large corporate flight departments. As we enter the 3rd quarter of 2014, could relief finally be in sight for long;beleaguered aircraft manufacturers, aircraft sales professionals, owners / operators, investors, and other key stakeholders that focus on the middle of the market? The answer: A qualified “Yes”, but first, some definitions. Although there are many different ways to slice and dice the marketplace, we classify the Medium Jet segment as all aircraft from the “Super Light Jet” (Citation XLS+ / Learjet 75) up to and including the “Super Mid; size Jet” categories (Citation X+, Challenger 350, Gulfstream G280, Embraer Legacy 500). These aircraft have 2014 list prices that span from $US 13M to $26M, maximum takeoff weights from 20,000 to 40,000 lbs., 4;passenger NBAA IFR non; stop ranges from 1,700 to 3,600 nm, and standard seating layouts that accommodate 7;8 passengers. Note that we exclude the $26;28M Embraer Legacy 600 and Dassault Falcon 2000S from the Medium Jet category, as these aircraft tend to have characteristics more associated with Large Jets. The Medium Jet fleet includes 6,440 aircraft as of mid;September 2014, or 32.5% of all business jets currently operating worldwide, according to JETNET databases. Half of all Medium Jets in today’s fleet are in the traditional Mid;size Jet category, including some of the most versatile and popular models, including the Hawker 700/800/900 family, Citation VII and Sovereign, and Learjet 60 / 60XR. The sales environment for Super Mid;size Jets is expected to be the most robust of the Medium Jet segment, based on high; probability purchase intentions as measured by quarterly JETNET iQ Surveys of fixed;wing turbine business aircraft owners and operators over the past 12 months. Prospective buyers who currently operate Medium Jets indicate that their most important purchase criteria are cabin size and non;stop range performance, respectively, and they are clearly attracted to the new and recently certified offerings in the Super Mid;size Jet segment, specifically the Bombardier Challenger 350, Gulfstream G280, and Embraer Legacy 500. Purchase interest is highest amongst North American buyers, where 72% of the Super Mid;size Jet fleet is based. Each of these aircraft offers a stand;up 72”+ cabin and 3,100 nm+ NBAA IFR range with 4 passengers, enough to meet virtually all transcontinental U.S. missions and even the occasional trans;Atlantic crossing from the U.S. Northeast. NAVIGATING 360° ROLLAND VINCENT ASSOCIATES, LLC September 2014 Source: www.embraerexecu/vejets.com
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Medium'Sized*Business*Jets*–*The*Next*Sales*Frontier?*!
Although!much!focus!in!business!aviation!is!on!the!strength!of!Large! Jets!and! the! relative! softness!of!Light!Jets,!the!Medium!Jet!segment!has!faced!some!of! the! strongest! headwinds! in! the! post;recession!industry.! ! Buffeted! by! spikes! in! unsold! inventory!and!sharply!reduced!utilization,!prices!and!values,!Medium!Jets!represent!almost!1/3rd!of! the!world!business! jet! fleet,! and! are! operated! by! a! broad!spectrum!of!customers,! from!charter!operators!to!private! entities! to! large! corporate! flight!departments.!!As!we!enter!the!3rd!quarter!of!2014,!could!relief!finally!be!in!sight!for!long;beleaguered!aircraft!manufacturers,!aircraft!sales!professionals,!owners! /! operators,!investors,!and!other!key!stakeholders! that! focus!on! the! middle! of! the!market?!!!The!answer:!A!qualified!“Yes”,! but! first,! some!definitions.! ! Although!there!are!many!different!ways! to! slice! and! dice!the! marketplace,! we!classify! the! Medium! Jet!segment! as! all! aircraft!from! the! “Super! Light!Jet”! (Citation! XLS+! /!Learjet! 75)! up! to! and! including! the! “Super! Mid;size! Jet”! categories! (Citation! X+,! Challenger! 350,!Gulfstream! G280,! Embraer! Legacy! 500).! ! These!aircraft! have! 2014! list! prices! that! span! from! $US!13M! to! $26M,! maximum! takeoff! weights! from!20,000!to!40,000!lbs.,!4;passenger!NBAA!IFR!non;stop!ranges!from!1,700!to!3,600!nm,!and!standard!seating!layouts!that!accommodate!7;8!passengers.!!Note! that! we! exclude! the! $26;28M! Embraer!Legacy! 600! and! Dassault! Falcon! 2000S! from! the!Medium!Jet!category,!as!these!aircraft!tend!to!have!characteristics!more!associated!with!Large!Jets.!
!The!Medium!Jet! fleet! includes!6,440!aircraft!as!of!mid;September!2014,!or!32.5%!of!all!business!jets!currently! operating! worldwide,! according! to!JETNET! databases.! ! Half! of! all! Medium! Jets! in!today’s! fleet! are! in! the! traditional! Mid;size! Jet!category,!including!some!of!the!most!versatile!and!popular! models,! including! the! Hawker!700/800/900! family,! Citation! VII! and! Sovereign,!and!Learjet!60!/!60XR.!!!The! sales! environment! for! Super! Mid;size! Jets! is!expected!to!be!the!most!robust!of!the!Medium!Jet!
segment,!based!on!high;probability! purchase!intentions! as! measured!by! quarterly! JETNET! iQ!Surveys! of! fixed;wing!turbine!business!aircraft!owners! and! operators!over!the!past!12!months.!!Prospective! buyers! who!currently! operate!Medium! Jets! indicate!that! their! most!important! purchase!criteria! are! cabin! size!and! non;stop! range!
performance,! respectively,!and! they! are! clearly! attracted! to! the! new! and!recently! certified! offerings! in! the! Super! Mid;size!Jet! segment,! specifically! the! Bombardier!Challenger! 350,! Gulfstream! G280,! and! Embraer!Legacy!500.!!!Purchase!interest!is!highest!amongst!North!American! buyers,!where! 72%!of! the! Super!Mid;size! Jet! fleet! is! based.! ! Each! of! these! aircraft!offers!a!stand;up!72”+!cabin!and!3,100!nm+!NBAA!IFR! range! with! 4! passengers,! enough! to! meet!virtually! all! transcontinental! U.S.! missions! and!even! the! occasional! trans;Atlantic! crossing! from!the!U.S.!Northeast.!!!
NAVIGATING!360°%ROLLAND%VINCENT%ASSOCIATES,%LLC%
September(2014(
Source:(www.embraerexecu/vejets.com(
Although( new( purchase(intentions( do( not( always( lead(to( actual( purchase(
behavior,(customer(
interest( in( the(new(Super( Mid:size( Jet( offerings( from( Bombardier,(Gulfstream(and(Embraer( is( consistent,( suggesting(that( these(OEMs( are( poised( to( capture( a(wave( of(new( orders.( ( We( expect( that( these( orders( will(position( this( middle( market( segment( for( its( first(year:over:year(growth(in(new(deliveries(since(the(onset( of( the( Great( Recession,( reflecting( a(market(recovery(but(also(the(returns(on( investment( from(product( strategies( that( have( been( years( in( the(making.((((In(the(pre:owned(market,(asking(prices(for(5:year(old( Challenger( 300s(with( typical( levels( of( annual(utilization(are(hovering(in(the(65%+(range(relative(to( 2009( new( list( prices.( ( Just( 6%( of( the( fleet( is(currently( available( for( sale,(with(average(days(on(market( hovering( around( 200( days,( according( to(www.controller.com(and(JETNET.((These(numbers(reflect( an( active( and( healthy( marketplace( with( a(good(balance(between(buyers(and(sellers.(((Customer( interest( in(larger( cabins( is( no( doubt(driven( by( a( desire( for(more( comfort.( Tight( cabins(and( low( ceilings( are(
understandably( commonplace( in(the( light( jet( segment,( where( the(aircraft’s( frontal( area( is( a( huge(component(of(the(drag(calculation.((Nevertheless,( times( –( and(passengers( –( are( changing.((According( to( the( U.S.( Department(of( Health( &( Human( Services,( the(weight( of( the( 95th( percentile( U.S.(male( has( increased( by( 24%,( or(
more( than( 50( pounds,( in( the( 40+( years( spanning(the( era( of( the( earliest( business( jet( designs( to( the(pre:Great( Recession( period.( ( Passengers( are(simply(bigger,(and(missions(are(growing(in(length(and(duration,(so(seats(and(interiors(are(necessarily(evolving(to(meet(these(realities.(((Swiss:based( charter( operator( VistaJet( has(recognized(the(potential(of(the(Challenger(350(as(a(flexible,( long:range( aircraft( with( relatively(attractive( operating( costs( compared( to( its( larger:
cabin(siblings.( ( VistaJet,(with( 20( Challenger( 350( orders(and(20(options,(recently(introduced(a(new(interior(concept( that( offers( 3( lie:flat( berths,( a( bulkhead(door(at(the(front(of(the(cabin,(and(a(forward(galley(flight(attendant(seat(for(additional(privacy.((Textron( Aviation’s( new( $16M( Citation( Latitude,(expected(to(be(certified(in(2015,(will(offer(a(larger(cabin( cross( section( in( the( traditional(Mid:Size( Jet(segment,( although( range( is( targeted( at( a( more(modest( 2,500( nm.( ( Industry( rumors( are( that( the(
Sources:))1960.62:)Weight,)Height)and)Selected)Body)Dimensions)of)Adults,)1960).1962,)US)Dept.)of)Health,)EducaEon)and)Welfare,)NaEonal)Center)for)Health)StaEsEcs)Series)11)No.)8;))2003.2006:)Anthropometric)Reference)Data)for)Children)and)Adults:)United)States,)2003–2006,)NaEonal)Health)StaEsEcs)Report:)Number)10n)October)22,)2008.)
95th%Percentile%Male 1960%1962 2003%2006 Change %/Change
Weight/(Pounds) 217.0 269.1 52.1 24.0%
Height/(Inches) 72.8 73.5 0.7 0.9%
Sources:)1960.62:)Weight,)Height)and)Selected)Body)Dimensions)of)Adults)/)US)Dept.)of)Health,)EducaFon)&)Welfare)/)NaFonal)Center)for)Health)StaFsFcs;)2003.2006)Anthropometric)Reference)Data)for)Children)and)Adults:)United)States)/)NaFonal)Health)StaFsFcs)Report)
Challenger)350)Interior)Source:)businessaircra7.bombardier.com)
Legacy'500'Interior''Source:'www.embraerexecu8vejets.com''
VistaJet(Challenger(350(Interior(Layouts(–(Day(and(Night(Configura<ons(–(Source:(www.vistajet.com(
company( is( currently( evaluating( a( change( to( the(design( of( the( in:development( 4,000:nm( Citation(Longitude,( which( may( include( additional( range(and( cabin( volume.( ( At( some( point( in( the( future,(Textron(Aviation(may(decide(to(offer(a(larger(cabin(light( jet,( but( we( would( suspect( that( capital(approval( is( highly( unlikely( at( this( time( given( the(current(state(of(the(lower:end(jet(market.(((The(Super(Mid:size(Jet(segment(appears(to(be(alive(
and(well,(especially(in(the(relatively(vibrant(North(American( market.( ( This( is( a( welcome( sign( for(OEMs,( aircraft( salespeople,( their( customers,(investors,(and(other(stakeholders,(who(have(been(anxiously( awaiting( good( news( of( better( days(ahead.!((
Rolland Vincent Associates, LLC, an aviation consulting firm, draws from over 30 years of aviation experience,
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to help you understand customer needs and preferences, design products and services to delight your customers,
and discover and seize business opportunities. We provide you with practical, intelligent solutions to unleash the
power of your business and navigate for global aviation leadership. Since 2010, we have partnered with JETNET on
JETNET iQ, a syndicated quarterly research and forecasting service for business aviation. Proprietary quarterly
surveys of business aircraft owners and operators worldwide are cornerstone features of JETNET iQ.(
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