Kate Sarsfield/LONDON Arie Agozi/TEL AVIV
General Dynamics' (GD) acquisition of Galaxy Aerospace has resulted in orders and options for 100 Galaxy super mid-size business jets from fractional ownership pioneer Executive Jet, owner of market leader NetJets. The deal, if fully exercised, is worth $2 billion.
Executive Jet chairman Richard Santulli admits his company had been talking to Galaxy "for about a year" with a view to buying aircraft. He says: "We have always liked the Galaxy as it fills a niche in our programme. As our aircraft fly around 1,200h a year, we need a professional support service that will get problems fixed immediately. The acquisition of Galaxy by Gulfstream [GD] means we are going to get the same consistent, reliable service and support that we get for our Gulfstream products."
Santulli notes of the 940 aircraft ordered by Executive Jet in the last five years, Gulfstream accounts for 15% of total units and 42% of the dollar value. He adds: "Although the deal is for 50 firm orders [50 options] we are going to take 100 Galaxys. We don't buy an aircraft unless we are going to fly 100 of them, the economics don't make sense." The Gulfstream/Galaxy fleet will make up 27% of NetJets total and 45% of its dollar value.
GD's acquisition of Galaxy, formed in 1997 by the Hyatt Corporation and Israel Aircraft Industries (IAI) as an exclusive sales marketing and support entity for IAI's business jets, provides Gulfstream with an immediate entry to the mid-size and super mid-size market with the Astra SPX and Galaxy business jets respectively. It will also offer a "family of aircraft to compete across price points" from the $12.1 million SPX to the $44.5 million Gulfstream V-SP.
Bill Boisture, Gulfstream president, predicts that the business jet market will be worth $12 billion in 2004. He says the Galaxy acquisition will up the value of the market in which GD plays from 27% ($3 billion) to 72% ($9 billion).
The move also positions GD favourably in the mid-size move-up market, which is dominated by Bombardier and Dassault, each with around 40%. Boisture says: "At 20% Gulfstream's share of the mid-size move-up market to larger cabin aircraft is not where we'd like it to be."
IAI president Moshe Keret says the Galaxy fits Gulfstream "like a glove". He expects an increase in sales of both business jets, as a result of the deal. The Israeli firm becomes a revenue-sharing GD partner supplying the green aircraft.
Keret admits the search for a strategic partner has been going on for some time, saying: "The other executive-jet manufacturers became bigger and stronger through consolidation. Only our operation was left in its original size."
Keret claims the completion delays encountered at Galaxy's Alliance Airport, Texas-based facility were not behind IAI's decision to sell the company. IAI sources claim Galaxy failed to meet a "reasonable" completion time for the sold aircraft, affecting its ability to increase sales .
Including the Executive Jet deal, Galaxy's order backlog is $2.3billion prompting a production increase from two to three aircraft a month next year. Executive Jet will take its first Galaxy next year and 13-15 aircraft per year from 2003.
Source: Flight International
