First Class

Private Aviation Climbs Above Economic Turbulence

By Blair Watson, Special to Aviation.com

posted: 07 March 2008 3:12 p.m. ET

: So strong has business been for U.S. business-jet fractional-ownership company XOJET that it has ordered 26 more Cessna Citation X business jets to add to the 21 it already has in service. XOJET also ordered 20 Bombardier Challenger 300s. Credit: Cessna Aircraft Company

For business airplane manufacturers and fractional aircraft operators, the downturn in the U.S. economy is like bad weather far below jets climbing in smooth, clear air. Orders for aircraft are robust and many well-to-do individuals are joining the thousands who enjoy the convenience and superlative service of private jet transportation.

In January, Cessna Aircraft announced an order backlog of $12.6 billion, the largest in general aviation history. Last year, Cessna delivered 1,274 airplanes, including 387 business jets and 80 turboprops. The fleet of more than 5,100 Cessna Citation business jets—nine models seating four to eight passengers—is the largest in the world.

“From 2005 to 2007, our Citation deliveries increased by 130 jets, a 50 percent increase,” said Jack Pelton, Cessna’s chairman, president and CEO. The company plans to deliver 470 business jets in 2008.

For the fourth consecutive year, the Canadian aerospace giant Bombardier, builder of Learjet, Challenger, and Global corporate jets, saw an increase in orders and deliveries, resulting in a record year in 2007. Bombardier Business Aircraft delivered 232 jets last fiscal year, compared with 212 in the previous year.

Domestic and international growth

Private jet transportation continues to grow at home and abroad and evidence of the expansion abounds. For example, Hawker Beechcraft announced last month that BJETS of Mumbai, India and Singapore placed an order for 11 Hawker 900XP and nine 850XP business jets, worth more than $450 million.

India’s Invision Projects is buying 18 Embraer Phenom 100 and two Phenom 300 executive jets.

“Asia, and India in particular, represent exciting growth markets for business aviation,” said ExecuJet Group managing director Gerrit Basson at the Dubai Air Show in November.

Based in Savannah, Ga., Gulfstream Aerospace announced in February that it received type certification from the General Administration of the Civil Aviation of China for five of its business jet models.

“There is no question China is one of the most significant emerging markets for business jet aircraft,” said Joe Lombardo, president of Gulfstream Aerospace, last month.

According to the European Business Aviation Association, Europe’s fleet of business aircraft will increase to approximately 4,000 units in 2011, up from 2,851 aircraft two years ago.

XOJET's $2.5 billion biz jet order

With a current fleet of 21 eight-passenger Citation X business jets, XOJET of San Carlos, Calif. has been experiencing growth strong enough that its senior management decided last year to buy 26 more of the model. XOJET will have its new Citation Xs by the end of 2010.

In addition to the $600-million Citation X order, XOJET is purchasing 20 Challenger 300 airplanes—worth $1.9 billion—with options for 60 more of the 10-passenger aircraft. Deliveries started late last year and will continue through to 2011.

XOJET is a relative newcomer to the fractional aircraft industry, having started in January 2006. The company believes that its “hybrid” business model is superior because it combines fractional ownership and guaranteed aircraft availability for its core customers with excess capacity being sold in the charter market.

According to Nick Solinger, XOJET’s chief strategy and marketing officer, the company’s paid-flight utilization is 95 percent to 97 percent. In the industry, paid-flight utilization of 75 percent or less is common due to the need of fractional aircraft companies to frequently ‘deadhead’ (reposition) airplanes to pick up clients/part-owners, which can be as many as 16 per airplane. Fractional ownership of each aircraft in XOJET’s fleet is limited to three customers.

Fewer part-owners means better availability. For example, the entire XOJET fleet is reserved for “guaranteed” owners on peak travel days. “You always have access to a private jet — we guarantee an aircraft with 12-hour notice,” states the corporate website.

XOJET’s greater operational efficiency is also achieved by using sophisticated flight scheduling software. Based on the numbers given by Solinger, XOJET charges about 27 percent less than the typical fractional aircraft company hourly fee.

Fast-growing XOJET is just one player in a dynamic industry that began more than 20 years ago in the U.S. and has expanded enormously. The increasing need for private jet transportation globally has resulted in a diversified business environment that may well remain impervious to the economic slowdown in the United States.