Karen Walker
Who would have thought that selling aircraft bit by bit could end up being bigger business than selling them whole?
Thanks to fractional ownership, that is where the business jet industry seems to be heading. It explains why some of the largest and most talked about orders being announced this week are fractional deals.
Already at this show, fractional ownership announcements are nearing the $3 billion mark.
Executive Jet, which triggered the whole fractional ownership phenomenon when it launched its NetJets programme in 1986, now accounts for 40% of the business jets on order with major manufacturers.
As NetJets' business has soared, others have scrambled to get a piece of the action. Bombardier created its own fractional ownership company, Bombardier Business JetSolutions, which operates the FlexJet programme. Another fractional ownership company, Flight Options, was in the news yesterday when it announced a $760-million order for 25 Fairchild Aerospace Envoy 7 corporate jets.
Helicopter
The announcement came hot on the heels of Raytheon Aircraft's signing of a $2-billion deal with Executive Jet for 50 Hawker Horizons plus 50 options.
And now helicopters are getting into the action. Sikorsky this week unveiled its Sikorsky Shares fractional programme that will be based initially in the northeastern USA, featuring S-76C+ aircraft.
Mike Moran, director of commercial programme marketing, says: "The helicopter fractional market is in its infancy. But it is important that we start to understand what customers want and how we can grow this business."
Gulfstream now has 68 North American orders and options worth $2 billion for its Gulfstream V and Gulfstream IVSP from Executive Jet, plus a $335-million order for 12 aircraft destined for the fledgling Middle East fractional scheme.
"In North America, everyone is very bullish about NetJets because they believe they have still only just scratched the surface," says Gulfstream vice-chairman Bryan Moss.
Bombardier Aerospace president Michael Graff is equally confident about the future for fractional ownership programmes. He says FlexJet has increased its customer base by 60% from 200 to 330 shareowners over the past year.
"It's a sector that continues to grow. It's fantastic," says Graff.
Cessna has also logged huge orders thanks to fractional ownership. Philip Michel, Cessna's vice-president of marketing, says 10-15% of Cessna's annual new shipments go into fractional schemes.
"There will be growth, proportional to the growth in the business jet market as a whole, which itself is in fine form," says Michel.
"There is a tendency for people to characterise fractional ownership as the tail wagging the dog, but that's not the case. The market itself is extremely buoyant and driven by strong economic growth."
Expansion
With fractional ownership, customers buy fractions of time on aircraft, usually in one-eighth increments. Consequently, such schemes have opened up business jet "ownership" to a whole new audience. Gulfstream says 60% of its 119 fractional shareowners had never before owned a business jet. "It's a significant market expansion idea," says Gulfstream president Bill Boisture.
Meanwhile, Executive Jet is looking to spread the fractional ownership word to the rest of the world. Having established operations in Europe and the Middle East, Santulli's company is evaluating opportunities in the Asia Pacific and Latin America regions.
They warn, however, that they will proceed with caution. "We spent 33 months planning NetJets Europe because we saw that as the blueprint for anywhere else in the world that we may want to go," says an Executive Jet spokesperson. "You don't just show up; there has to be a lot of planning."
Source: Flight Daily News
