This week's LABACE event in São Paulo takes place against a backdrop of a booming business aviation scene in Brazil and the rest of Latin America
Latin America is piquing the interest of the world's business aviation community. This emerging market is home to half a billion people south of the US-Mexico border and according to countless commentators has the potential to be the next hotbed of trade and economic growth.
Similarly the gross domestic product of this vast region, which encompasses 27 countries, is expected to grow much faster than the global average and the region's companies continue to expand, making healthy profits amid booming stock markets. These key drivers are prompting the biggest-ever order bonanza in the region for the world's business aircraft manufacturers and these rich pickings look set to be cultivated for years to come.
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| Business jets are feeding the burgeoning demand for regional and, increasingly, global travel |
"Latin America is growing at a faster pace than the mature markets of North America and Europe," says Luis Carlos Affonso, Embraer senior vice-president executive aviation. "The region represents around 5% of the market for new business jet sales [for Embraer], but over the next five years we expect this to rise to around 10%," he says. This prediction is mirrored by the historical fleet data for the region supplied by Flight's ACAS database. Since 2002, ACAS says, the civil turbine-powered business aircraft fleet has been rising steadily.
By the end of June the Latin American fleet totalled 1,083 jets and 1,095 turboprops, up from 1,690 turbine aircraft in 2002.
Compared with North America, where the turbine-powered business aircraft fleet totals more than 17,500 aircraft, Latin America is relatively small. Yet its influence is growing, as is its overall share of the new business aircraft market, which for most airframers represents the fourth-largest sales region after Europe and the Middle East.
BRAZILIAN BOOM
Affonso admits that the weak US dollar is helping stimulate interest in business aircraft throughout Latin America, particularly in Brazil, where "the US dollar was worth 2.6 reals two years ago, but is now around 1.85".
Brazil is widely considered the economic jewel in the Latin American crown. The world's third-largest market by country for business aircraft after the USA and Canada, Brazil has 600 turbine aircraft, says ACAS, and more than 1,000 helicopters - a popular form of transport for executives in traffic-clogged, security-conscious cities like São Paulo.
"As the economy has grown here the agricultural boom has generated businesses away from the country's industrial hubs, and consequently demand for aircraft is growing at its fastest pace in decades," says Adalberto Febeliano, executive vice-president of the Brazilian Association of General Aviation (ABAG).
A recent survey commissioned by the São Paulo-based trade body, which is hosting this week's annual Latin American Business Aviation Conference and Exhibition in São Paulo, forecasts 150 business aircraft deliveries in Brazil each year over the next three years, with the fleet reaching 1,950 in 2010. This could generate $400-500 million annually in private aircraft sales in Brazil in that period, says the report. "Brazil's fleet is growing at a rate of 10% a year compared with a 5% recent average for the country," Febeliano says.
A glance at infrastructure of this vast country and the reasons for this increased dependency on business aviation become apparent. Brazil, like the rest of Latin America, is hampered by its poor roads and railway system and an ineffective airline network. "Brazil has 5,563 counties, of which only 96 are served by the airlines," says Febeliano.
Furthermore, business travel, he says, is no longer limited to the key cities of São Paulo, Rio de Janeiro and Brasilia.
"Business aircraft are becoming the choice of transport for many more people in Brazil and across Latin America," says Embraer's Affonso, notably in Mexico, home to the region's second largest fleet, Argentina, Chile, Columbia and Venezuela.
ACAS data ranks Cessna as having the largest number of business jets in Latin America, followed by Bombardier. However, the prominence in the region of out-of-production types such as the Israel Aircraft Industries Westwind and Rockwell Turbo Commander has created a lucrative replacement market for airframers.
"This region still has lots of old aircraft," Affonso says, adding "more than 50% of the jets are more than 20 years old and mainly in the light to mid-size category". This gives Embraer, with its Phenom and Legacy range of business jets, and others an ideal market opportunity.
According to Hawker Beechcraft vice-president of international sales Sean McGeough, "sales of our business aircraft to Latin America are the strongest they have been for some time and all our products are selling well. While the traditional buyers continue to play an important role, the dynamic is shifting as a host of new customers continue to enter the market." Business aircraft are increasingly important to the economic growth of the region, he adds.
TURBOPROP DOMINANCE
The region's fleet of Hawker Beechcraft business jets is dwarfed by its tally of King Air turboprops. The ubiquitous twin accounts for nearly 600 of the 1,095 turboprops in service in a civil role in Latin America, according to ACAS. Turboprops have for decades provided a lifeline for agricultural and mining companies with bases in the remotest areas.
While the market in Latin America is primarily for light and mid-size business aircraft, the increase in globalisation is prompting a marked shift to the use of larger-cabin aircraft.
"An important market has begun to develop in Latin America over the past five years," says Gulfstream vice-president international sales for South America, Roger Sperry. "Businesses such as banking, farming, mining, oil and textiles have expanded globally and there is an increasing demand for long-range aircraft, such as the G550, to travel Africa or Europe."
Gulfstream, previously limited to high-end, long-range business jets, found a receptive market in Latin America when it introduced the mid-size G100 (now G150) and super mid-size G200 six years ago.
"Customers will buy a mid-size G150 or G200 as their entry-level aircraft to travel within the region or for one-stop flights to the USA, but they will also acquire a larger aircraft for longer legs," Sperry says.
Bombardier regional vice-president for sales Fabio Rebello echoes this view. "Globalisation has opened up the markets in Latin America, which historically has represented around 7-10% of our sales. This is having a significant impact on our sales of large-cabin and long-range aircraft," he says, adding that the Global 5000, which can easily connect São Paulo with Portugal's capital, Lisbon, is popular in Brazil and Mexico, while Argentinians are leaning towards the longer-range Global XRS. The Challenger series has also sold well across the region, accounting for 50% of the large-cabin business jet market in Latin America, Bombardier says. "Long-term investments by Latin American individuals and companies spell stability, and these individuals and companies are looking at outside markets more than ever," says Rebello
INFRASTRUCTURE INVESTMENT
While sales of business aircraft across the region look set to continue their upward trend for the foreseeable future, industry is working behind the scenes to develop and sustain the operating infrastructure to support the expanding fleet.
"There are a number of issues that have the potential to make a heavy impact on business aviation movements," ABAG's Febeliano says. Not the least of these is the stability of a region not renowned for its political harmony. "Of course we have no control over Latin America's political landscape, but we can help to support the region's economies by keeping business aviation flying," he says.
Access to airports and airspace are keyconcerns, and the crash in July of a TAM Airbus A320 at São Paolo's Congonhas airport has led to calls for business aircraft movements to be reduced there. "No decision is expected to be made for a few weeks, but we will make every effort to get our voice heard and to make sure we are not affected at Congonhas," says Febeliano.
He fears business aviation could become a victim of its own success and that restrictions such as those threatened at Congonhas could be repeated elsewhere. "Stories of business aircraft being denied access to airports and airspace in the region are popping up all the time, most recently in Argentina. We would like to see the creation of dedicated airports for business aircraft. That is something we are working to secure."
Source: Flight International
