Market Analysis:

Charts
from: The Next NAS 2025 Demand Projections
by: Michael J. Harrison, Aviation Management Associates, Inc.
AvWeb
- 8-31-06 - Delays and security rules at the airlines could prove a
real boon to the VLJ market. James Coyne, president of the National Air
Transportation Association, said charters experienced 20-percent growth
since 9/11 and a 20- to 70-percent bump since Aug. 10, when carry-on
liquids were banned from airline cabins. Tim Spahr, director of charter
sales for Pinnacle Aviation based at Scottsdale (Ariz.) Airport, told
the Arizona Republic that sales have jumped 45 percent since the latest
rules took effect. "It's incredible," Spahr said. "And we've had a
significant number of first-time callers who specifically sight [sic]
airport security hassles as the reason for considering charter."
Aviation Week and Space Technology,
April 25, 2005.
.. “Taxi Please” -
Newcomer DayJet’s huge ambitions include a large fleet and a whole new
market -- The
business model for DayJet is to use VLJ’s to offer a product that is
less expensive than traditional charters but quicker and more flexible
than airline or surface transportation. For
VLJ taxis to work, they will have to be careful not to waste resources
competing with airlines on city pairs where the fares and travel times
are reasonable.
Aviation Week and Space Technology, May 9, 2005.. “Small
Birds, Big Goal”
- Adding light aircraft to its product line, Embraer
aims to be a force in bizjets.-
Embraer expects to capture as much as 30% of the new
vlj market that is projected to create demand for at least 3,000
airplanes in the next 10 years. This
figure does not include air taxis. If air
taxis succeed Embraer sees the little jet market through 2014 hitting
6,000.
Aviation
Week and Space Technology, May 30,
2005. “Lightweights” – Single-pilot
commercial operations, insurance, training head list of concerns about
VLJs. Greg Thomas, chairman/CEO of
Privatair, said he doesn’t see a business case for VLJ commercial ops,
regardless of the number of pilots, at least among high-end charter
operators. However, with an expected
influx of pilot owners with little or no business aviation experience,
the potential of the new models for aircraft management business, he
thinks, is huge. Despite rosy projections,
Dassault Aviation Chairman/CEO Charles Edelstenne cautions that the
entire concept will be closely tied to affordable insurance. “Two or three accidents in the early years
could kill the market,” he says.
Aviation Week and Space Technology. . June 13, 2005, “Good Start for SATS” (Small
Aircraft Transportation System) – If supporters are right, less means
more efficient use of airspace, airports and aircraft.
-- The SATS system is aimed at expanding the use of
national airspace through new technologies to create affordable,
point-to-point air travel. Specifically,
the SATS vision is to allow 4-10 seat passenger aircraft access to
under-used rural and suburban airports, particularly in low-visibility
conditions. 98% of our country population
lives less than a 30-min. drive from any one of 5,400 small airports –
which will be a major part of our integrated next-generation
transportation system. The NASA-led
five-year project is partnered by the FAA, and the National Consortium
for Aviation Mobility (NCAM).
Aviation Week and Space Technology. June 2005. According
to a report by Boeing “Worldwide economic growth will average 2.9% a
year, but market demand for commercial airplane services will more than
double the world’s fleet by 2024. That’s
based on average annual growth rates of 4.8% for passenger traffic and
6.2% for freight.” This growth will cause
further congestion in our nation’s largest hub airports, increasing
delays and causing passengers to seek out alternative means of
transportation. The map below shows the
airports and metro areas most at risk.

AOPA magazine June 2005 – “Dawn of an
era” – Here come the jets. Eclipse
Aviation has geared it’s production at a break even point of about 600
jets per year with an anticipated output closer to 1,000 units. Eclipse designed its tooling to produce as
many as 1,500 Model 500s yearly. It is
significant that a relatively few air-taxi operators are responsible
for about half of the approximately 3,000 VLJ orders placed among all
manufacturers.
The FAA, Federal Aviation Administration, expects
that 20% of business travel will be by small jets by 2015.
This
chart shows how the Pentagon plans to boost spending to meet the need
for upgrades in the air traffic system. AW&ST Feb 28, 2005 pg 50

Bruce
Holmes, wrote: “Viable business concepts are emerging to fill the void
being created by the exodus from airline travel,” Holmes
also stressed that the air-taxi model would be attractive for reasons
beyond mere convenience. It could also
improve, rather than compromise, security against terrorism. … This is because: a) the
vehicles aren’t big enough to represent either a viable target or a
viable threat to the ground, b) the
distributed system does not have the dependencies of the centralized
system, making multiple paths from origin to destination possible and
practical much like in the internet. A
“distributed” system, with no main headquarters (or target zone), can
respond to stress more resiliently than a highly centralized system can. Free Flight, by James Fallow, page xviii.
Vern Rayburn, of Eclipse Aviation said
that if the SATS/air –taxi model fully succeeded, it would create a
market for some 50,000 small jets. Free
Flight, by James Fallow, page xxi.
Time-and–motion studies conducted by
NASA in the late nineties found that for airline trips of 500 miles or
less…your average speed from when you left your home to when you
arrived at your destination is only fifty or sixty miles per hour. Bruce Holmes calculated an average speed for
his personal trips of 500 miles or less at 75 knots. For trips of 1,000
miles he averaged 125 knots and for trips of 2,000 miles, he averaged
200 knots. Free Flight, by James Fallow,
page 7 and page 75-76.
Bruce Holmes says “..More than 98
percent of the U.S. population lives within a thirty-minute drive of
over 5,000 public-use landing facilities. This
infrastructure is an untapped national resource for mobility.” Free Flight, by James Fallow, page 80
In the late nineties fuel additive
companies stopped producing some of the ingredients necessary to
distill 100LL fuel. When the existing
stock of additive runs out, some time between 2005 and 2010, that will
be it for the fuel on which most current piston engines run. Free Flight, James Fallow, pg 175.
In it’s fund raising presentations
Eclipse estimated that the air-taxi market might amount to 30 million
trips a year, within a decade. That would
be less than 10 percent of the projected airline total for that time,
but it would still mean a fleet of 35,000 small jets.
This in turn would mean businesses to schedule the
trips… Free Flight, James Fallow, pg 198.
There are two reasons why people have
not used air taxis much in the past, according to Patrick
Margetson-Rushmore, chief executive of the small charter firm, London
Executive Aviation. "Firstly, there is lack of knowledge - people have
not thought about air taxis as an option," he said.
"Secondly is perception - September 11 has acted as
a catalyst and people are looking for viable alternatives."
Original Equipment Manufacturers
(OEMs) of the VLJ can’t agree on what the light jet should be named.
Jack Pelton, CEO and president of Cessna Aircraft, favors “entry-level
jets,” while Rick Adam, CEO of Adam Aircraft Industries, prefers
“personal jets,” and Vern Raburn, CEO of Eclipse Aviation likes “very
light lights.” However, since insurers have been referring to them
simply as “VLJs,” for “very light jets,” OEMs have now used the same
term. They all agree on one other thing. Microjet, minijets, babyjet,
compact-jet or Barbie-jet are names to avoid. Adam said he’s not
particularly fond of the term “microjet” because the “public doesn’t
like getting in small planes, thinking they’re not safe.”
The
hottest issue facing OEMs, owner/operators and Part 135 charter
operators is insurance. Senior
underwriter Ann Thickey, from Global Aerospace, one of the world’s
largest aviation insurers, warns OEMs that numerous pilots who have put
down deposits for a VLJ will be told in the end they don’t have enough
flight hours, training or type ratings—regardless of
what OEMs try to convince them. “A lot of pilots are going to realize
that they’ve been drinking their own bath water…” she said. “All of the
manufacturers claim they’re building the most efficient, most durable
and most insureable VLJ—regardless of the fact that many of them
haven’t progressed past a design sketched on paper.”
W. Brown & Associates Insurance, headquartered
in Irvine, Calif., the underwriting arm for XL Insurance Specialty,
anticipates taking a very cautious approach underwriting VLJs. We don’t
plan to underwrite anyone’s VLJ until one year after production,” he
said. “Cessna’s Mustang is the exception, but that’s with a six-month
cautionary period at this point. “Aircraft won’t be insured until OEMs
provide the insurance industry with solid training programs. --- --
“Behind the VLJ Frenzy”—What Insurers, OEMs and Charter Providers Are
Saying
By Karen Di Piazza. SEPTEMBER
2004
-----After the writing
of this article Global
has agreed to underwrite Eclipse’s 500 Jet and they have approved their
six-phase, curriculum-based factory-training program. However, they
haven’t agreed to underwrite Adam’s A500 twin piston or their twinjet,
the A700 AdamJet; they would consider it, but Adam hasn’t provided
anyone with details of what their training program will
entail.
---------------------------------------------------------------------------------------------------------------------------------------
From Roger's
notes:
----------------------------------------------------------------------------------------------------
Click here to
view some FLIR technology in action. This is the kind of stuff
going into VLJs.
------------------------------------------------------------------------------------------------------------------------------
I think there is a possibility to make a one pilot
operation work if we can get the public past their fear of
flying. I believe that will take a few years of consistently safe
air taxi operations on a national level. This business model is very
dependent on the professionalism of it's early pioneers. There is no
doubt that a single pilot can operate an air taxi cheaper and provide
more payload capability than a two pilot operation. I think
that when the public starts to realize that they can save a lot of
money by flying with only one pilot they will begin to overcome their
fears. New technology such as "highway in the sky" and the
"Virtual Mentor Pilot" will make single pilot operations safer and the
public will eventually embrace the cost savings over their fears.
I would plan on a two pilot operation to start and
consider single pilot operations on a limited basis to test the waters
------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
As the price of
fuel increases the cost of operation of any vehicle increases but the
vehicle that uses the least amount of fuel per distance will in the
long run be the most economical. A jet like the Eclipse 500 will
become more economical, as opposed to existing bizjets, as the
price of fuel increases.
Recent fuel price
drops make older fuel hungry aircraft more competitive with
new efficient models while providing a roomier cabin and often speed
advantage. If the cost of fuel stays low there will be reduced
enthusiasm over fuel efficient models. Considering that the reserve of
available fossil fuel on the planet Earth is expected by some
scientists to be completely exhausted in 25-30 years I would
expect fuel prices to rise again unless alternative fuels sources are
found.
------------------------------------------------------------------------------------
FAA definition of "Air Taxi:"
"An aircraft operator who conducts operations for hire or compensation
in accordance with 14 CFR 135 (for safety purposes) or FAR Part 135
(for economic regulations/reporting purposes) in an aircraft with 30 or
fewer passenger seats and a payload capacity of 7,500 pounds or less.
An air taxi operates on an on-demand basis." http://www.transtats.bts.gov/DatabaseInfo.asp?DB_ID=115&Link=0
There seems to be a new definition of the term "Air
Taxi" emerging: Air Taxi may become known as a service
where the client pays for a seat, portion of the aircraft or the
entire aircraft for only the time the client actually occupies the
aircraft. The operator accepts responsibility for any
inefficient use of the equipment and covers cost of inevitable
inefficiencies by raising the hourly rate of
occupancy. This is a distinction from Air Charter
which is considered to be a contract for the entire aircraft with
responsibility for inefficient use resting on the pocketbook of
the client.
------------------------------------------------------------------------------------
Here are some
government statistics that might come in handy in planning for
your Air Taxi operation:
Here are some govt. statistics on
personal income levels of various areas: