For the three main rivals in the large-cabin, long-range segment, 2017 has brought encouraging news from a programme perspective. After a near three-year hiatus caused by problems with its Safran Silvercrest engine, Dassault’s Falcon 5X made its first flight in July – with a preliminary version of the powerplant. At the same time, the French manufacturer reiterated that its latest type will be delivered by its new target in-service date of 2020. As the launch platform for an all-new Safran engine, the 5X was always going to be a guinea pig, although the impact on Dassault has been hard.
Meanwhile, Bombardier says its $73 million ultra-long-range Global 7000 remains on track for service entry around the middle of next year, despite a 15 August in-flight flameout on the second flight test vehicle’s Passport engine, which the Canadian airframer and GE Aviation have described as “an isolated event”. Bombardier has been flying the newest, largest and longest-legged member of its Global family since late last year and now has three flight test examples in the air. A proposed sister Global 8000 is waiting in the wings, although it is unclear if it will ever reach the market.
Barring last-ditch issues, Gulfstream will be the first of the trio to bring a clean-sheet programme to service when customer deliveries of its G500 begin in early 2018. The US manufacturer flew the first G500 in May 2015, with the larger G600 following in December last year. Service entry for the G600 is expected in early 2019.
Gulfstream is thought to be offering heavy discounts to sustain G550 sales
Gulfstream
The Savannah-based airframer, which is about to add its 10th flight test example of the two Pratt & Whitney Canada PW800-powered types, launched its latest jets in 2014 and, characteristically, has not wasted time getting them into customers’ hands.
However, the airframers may be wondering what sort of market their latest designs will begin operating in. While demand for the latest equipment is always keen, ensuring busy production lines for a few years, sales of existing product has been sluggish, with Dassault admitting that its orderbook will outstrip this year’s expected deliveries by just 15 units. And with Gulfstream announcing last year that it was ending G450 production, there is speculation the G550 might soon meet the same fate. The airframer is believed to be offering heavy discounts on the type, as is Bombardier on its rival Global 6000.
Latest figures from the General Aviation Manufacturers Association (GAMA) show all three manufacturers had a difficult first half. Although deliveries of Dassault Falcons edged up from 15 in the first six months of 2016 to 17 this year, Gulfstream’s shipments for its large-cabin types stood still at 46 units. Meanwhile, Bombardier delivered 23 Global 5000 and 6000 aircraft, five fewer than in the first half of 2016. The company’s woes are partly offset by the strong performance of the super-midsize Challenger 350, although here too shipments were down significantly on 2016.
In terms of billings, Dassault banked slightly more from its first half deliveries – $795 million against $656 million last year, the sort of revenues from its business aviation activities that would be close to pushing the company into crisis were it not for its healthy military fighter unit. Bombardier billings across its entire range, including the Learjet and Challenger families, fell from $2.83 billion to $2.47 billion, putting further pressure on the cash-strapped company, while Gulfstream’s total – which includes the G150 and G280 – held more or less steady at $3.29 billion.
“It’s tough at the top,” remarks Flight Ascend Consultancy’s business aviation specialist Daniel Hall. “Large cabins remains a difficult market.” He notes that new Global 6000s and G550s have been selling for “low forties” millions of dollars compared with “low fifties” around two years ago. Dassault’s decision to hold firm and not follow Bombardier and Gulfstream in discounting heavily may have protected its margins, but the French manufacturer has “paid the price” in terms of unit sales and a depleted backlog that “is causing concern”, says Hall.
Gulfstream has been reluctant to call time on its G550, 14 years after its service debut, despite the launch of the G500 and G600 as likely replacements. Instead, prices have come down, forcing its rival to respond. “Bombardier might be hoping Gulfstream cancel the G550 so they can start pushing [Global 6000] prices back up to low fifties,” says Hall. At the same time, while G500 and G600 pricing is “quite strong”, he notes that backlogs for the new types seem not as robust as Gulfstream might have hoped. “You can still get quite a good position today for 2018-2019 delivery,” he says.
So are there any better tidings for the large-cabin manufacturers? A glut of second-hand aircraft across all segments looking for buyers, following the strong deliveries of 2012 to 2014, has helped depress values, discourage operators from buying new aircraft, and made it harder for the airframers to sell at list prices over the past two years. However, the tide may be turning. “If we compare the first half of 2017 to the same period in 2016, we’ve seen a 10% increase in transactions,” says Hall.
Global 7000 is on track for mid-2018 deliveries, but longer-range 8000 may not reach market
Canadian Press/REX/Shutterstock
This might partly be a result of buyers who would have traditionally sought new aircraft being tempted by the pre-owned market, he suggests. “There are a lot of good quality second-hand aircraft that meet compliance mandates and come fitted the latest IFE [in-flight entertainment] and communications,” he says. The stronger market has seen the percentage of the business aircraft fleet for sale fall to around 10%. “It is difficult to say when we will fall below 10%,” says Hall. “But that’s generally recognised as the tipping point between a buyer's and seller's market.”
While Ascend has still to produce its annual assessment of aircraft values, Hall believes 2018 could see a much gentler decline compared with recent years. “There will of course be some calendar year depreciation, but it is going to be much lower. This year we saw an 11.6% drop across the market, with up to 18% on some of the larger types. I’m expecting a much lower change in January,” he says. That, together with statistics such as the strongest European traffic figures for August since 2008, point to a slow recovery in the market after the “reset mode of the last two years”.
The emergence of new buyers for large-cabin jets in the period following the financial crash had much to do with their appeal as a long-range business tool and status symbol to a new breed of billionaires in the dynamo economies of Brazil, Russia, India and China. The fall in commodity prices put the brakes on that orders surge. However, as these economies regain strength and confidence returns, Falcons, Globals and large Gulfstreams could once again be in demand among the high-flyers of Sao Paulo, St Petersburg, Bangalore and Shanghai. For the big three manufacturers, that moment cannot come too soon.
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Source: Flight International
