Professional Pilot, October 2016

Oil prices and top half jet deliveries Oil prices bbl in 2012 Value of deliveries in 2016 billions US energy information administration annual average imported crude oil price in 2012 Teal Group research 100 80 60 As the turboprop manufacturers seek jet status theres 1 jet manufacturer seeking prop status or at least another position in the prop market Textron now has the Beechcraft King Air the worlds most successful twin turboprop business aircraft and the Cessna Caravan the worlds most successful single turboprop utility aircraft But strangely it never had a single engine turboprop business aircraft so the company is now planning to redress this with its Denali scheduled to make its 1st flight in 2018 The Denali looks like an interesting and very direct attack on the Pilatus PC12 A completely clean sheet design it is mainly distinguished by its use of General Electrics new Advanced Turboprop also known as the GE93 In many ways the Denalis fight with the PC12 will be a proxy battle Can the new GE engine contest Pratt Whitney Canadas longstanding market dominance with its ubiquitous PT6A On top of this last year saw the arrival of an incredibly rare creature a completely new market entrant Initial deliveries of HondaJets began after a gestation period of about 14 years While Hondas ability to be successful as a niche light jet producer may be in question theres no denying the deep pockets of Honda Corporation Its just a question of whether they can ever sell 40 or more aircraft per year Yes 40 is the magic number And if they cant the question becomes whether Honda will be willing to keep going ahead with production sale and service of the HondaJet Whether it will be successful or not Honda is the only completely new entrant this industry has seen since Embraer was created in 1969 Given the profusion of producers of jet and turboprop aircraft and the relatively weak state of the market its difficult to imagine another completely new player joining the club any time soon Seeking a more rational industry In fact given this mix of too many models available 18 PROFESSIONAL PILOT October 2016 and a sluggish demand some kind of industry rationalization would be useful There are now 5 large players and at least 5 smaller ones and this would appear to be too many for an industry thats stuck at around 22 to 25 billion in sales per year Historically there have been a few bright spots with industry consolidation Gulfstreams acquisition of the Israel Aerospace Industries Galaxy business jet unit was a stepping stone on the acquirers long road to becoming the number 1 market position a milestone finally achieved in 2013 Textrons absorption of Hawker Beechcraft certainly provided reasons for hope as well However these 2 events could be anticipated for years in advance And today its difficult to identify any likely changes in the industry What is the future of Learjet About the only real prospect for industry change at this time would be a Bombardier divestiture of Learjet which effectively had its future destroyed with the cancellation of the Lear 85 program last year But who would be the buyer If Bombardier doesnt agree to sell the aftermarket product support business associated with Learjets significant legacy fleet its hard to imagine anyone being interested in taking it off their hands If Bombardier does agree to sell Learjets aftermarket business theres still the problem of finding someone who would want to run a small niche business with aging legacy products Textron Cessna of course is always a possible acquirer and the company says it would be interested at the right price But this would be a repeat of the Hawker experience with those legacy jet programs immediately shut down After all Cessnas XLS at 1275 million is positioned directly between the 113 million Lear 70 and the 138 million Lear 75 Those are old designs too Starting as the Lear 45 theyve been in production for nearly 20 years 120 40 20 0 15 10 5 0 90 94 98 02 06 10 92 96 00 04 08 12 14 16 Value Oil prices