The business aviation community is surfing a wave of prosperity that could continue well into 2007 despite deepening concerns about weak corporate profits, high fuel prices and onerous user fees that threaten future expansion.

Edward M. Bolen, president and CEO of the National Business Aviation Assn. (NBAA), says business flying worldwide is healthy and 2005 will be a better year for growth than was 2004. He cites a relatively stable U.S. economy that's growing at 3% annually, and increased flights to international destinations, according to flight planning services. In addition, shipments of new airplanes and helicopters have remained firm through the first three quarters of 2005 and this trend should continue in 2006.

Not everyone shares Bolen's optimism, however. "I don't think there's much growth left in the current boom, and given the fundamental weaknesses of the economy there's too much doubt to keep projecting growth beyond 2006," says Richard Aboulafia, an aviation analyst with The Teal Group, based near Washington.

Despite these contrasting opinions, business flying does face challenges that could adversely affect its future. These include the escalating cost of jet fuel and avgas, and in particular, the upcoming fight that's brewing on Capitol Hill over user fees, which many business aircraft operators say is a tax.

Cessna Aircraft Co. is on track to certify the Citation Mustang in the fourth quarter of 2006. The company has orders for more than 230 of the entry-level jets.Credit: CESSNA AIRCRAFT CO.

"Clearly, the high price of fuel is a concern for everyone, and I'm not sure what the long-term impact will be on the economy," says Bolen. As a result, some flight departments are adjusting their budgets to cope with higher costs at the pump, and many of them are flying to airports with at least two fixed base operators to reduce the chance of price gouging.

In Bolen's view, the chief threat facing the NBAA and the general aviation industry will be crafting of the FAA Reauthorization bill. Bolen predicts that it will be a highly contentious issue, with business aviation pitted against the airlines over how users of the National Airspace System will pay for services rendered by the FAA. He says the major airlines want the fees imposed to help spread their costs across all of the U.S. aviation industry, from a Piper J-3 Cub to a Gulfstream 550, and claim that general aviation does not pay its fair share.

The FAA appears to support that assertion. Administrator Marion Blakey has said the agency needs a different funding stream that ties revenue more directly to the cost of unit production, "which is the very definition of a user fee," Bolen said. Think tanks, such as the Washington-based Reason Foundation, also is calling for user fees to help pay for planned future expansion and upgrades to the nation's air traffic control system.

Bolen and other NBAA officials realize that the fees would have a negative effect on both business and general aviation. "The user fee fight is very real and very current, and I think it will be the main issue of FAA Reauthorization," says Bolen. Instead of implementing a fee-based program, which Bolen says would be costly for the federal government to administer, he favors maintaining the existing system that imposes a tax on each gallon of fuel. The tax has been in effect for many years and "does a great job of approximating how much you use the system," he says. In addition, there is no administrative cost involved. The tax is "good for the government and an efficient way for the government to get its money," he adds.

Another challenge centers on airport access. Business and general aviation won a key victory recently when the government began allowing restricted flights into Reagan Washington National Airport. No general aviation aircraft had been permitted to use the facility since the 9/11 attacks. Since the prohibition was relaxed last month, however, the number of flights into the airport have been few, chiefly because of the many strict requirements imposed by the government.

Large-cabin, long-range business jets, such as the Gulfstream Aerospace G550, are selling well as demand for international air travel increases.Credit: GULFSTREAM AEROSPACE

Although Bolen says access to Reagan is burdened with "onerous restrictions," regaining entry has been a "big first step" toward expanding access for business aviation. Only 12 major cities in the U.S. are approved as departure portals for flights into Washington National, and business aircraft approved to fly into the airport must be based at one of those portal cities. In addition, each flight must have an approved, armed law enforcement officer on board who has received training by the Transportation Security Administration; and a litany of other details must be satisfied before final approval for the flight is granted.

Despite these obstacles, Bolen remains hopeful abut the future prospects for increased access. "We believe that over a relatively short period of time the security community will develop a better understanding of business aviation operations, and better working relationships with the aviation community will result that may lead to some restrictions being modified." He says another reason the NBAA has expended so much energy during the past four years to resume flights at Washington National is to preclude establishment of a precedent that could spread to other primary airports in the U.S., further choking off access to business aircraft.

Dassault Aviation is progressing toward French certification of the Falcon 7X late next year, and is preparing to increase production to meet growing demand for its airplanes.Credit: DASSAULT/FRANCOIS ROBINEAU

In addition to leading the fight against user fees and airport access, Bolen is deeply concerned about the ramifications of a number of high profile accidents in the past year that have shed a negative light on business aviation safety. "NBAA is enormously focused on safety and these accidents have caused us to reevaluate everything we're doing in the area of safety." According to Bolen, in response, the association's staff has updated the flight department management guide, distributed a new brochure on how to charter an airplane, and developed a series of pilot training guidelines for the crop of very light jets (VLJs) soon to emerge on the scene (AW&ST July 25, p. 44). Bolen says his organization is working hard to "refocus the attention of the business aviation community back on safety, because that is the foundation upon which the entire industry is built."

While the NBAA works on these important initiatives, the market's hunger for new aircraft continues unabated. According to a report published by UBS Investment Research, deliveries of business jets (not including VLJs) are forecast to reach 800 in 2006 and 900 by the end of 2007. The chief reasons for the surge in demand are the need to replace aging aircraft, the increase in international business travel, and further expansion of fractional ownership programs. International buyers of executive jets are increasing about 10% annually, and UBS analysts say demand for new equipment will continue to rise for the next 24 months thanks to stronger economies in Eastern Europe, Russia, the Middle East, Asia and India.

Part of the growth will come from operators that are upgrading their fleets. According to UBS, the average age of a business jet is 15 years and about 4,700 aircraft, or 35% of the global fleet, are more than 20 years old. As for fractional operators, two of the leading companies--NetJets and Flight Options--could retire up to 200 jets in the near future. NetJets already is either replacing or refurbishing its Cessna Citation Vs, VIIs and Hawker 1000s.

Flight Options plans to focus its growth on the Raytheon Aircraft Hawker 400XP and 800XP, Embraer Legacy and the Cessna Citation X. Flight Options says it has sold out its 2005 inventory of the Legacy and is selling shares in the airplanes for 2006. To meet demand, the company will take delivery of two additional Legacy jets in February and May.

IN ADDITION, the card-based fractional programs--such as Marquis Jet, Vector, JetPass and Skyjet that sell flight time in 25-hr. blocks instead of buying ownership shares in a jet--are driving demand for new airplanes by exposing a larger segment of the population to travel by business aircraft. UBS estimates that about 500,000 households are able to participate in a card program compared with 100,000 that can afford fractional shares, and that the business already accounts for deliveries of 100 new jets each year. Analysts expect the card market to grow 25% annually and a majority of the potential market remains untapped.

As for 2007 deliveries, UBS projects that Bombardier Aerospace will deliver 180 airplanes, Cessna Aircraft 312, Dassault Aviation 86, Embraer 19, Gulfstream Aerospace 118 and Raytheon Aircraft Co. 179, for a total of 894 jets--up from the 720 expected to be delivered this year.

UBS says the Cessna Citation XLS, CJ1+ and CJ2+ will sell well and the Bombardier Challenger 300, Global 5000 and Learjet 45 will be strong products for the Canadian-based company. Dassault's 900DX and 2000EX will continue to have a loyal following. Dassault Aviation Chairman and CEO Charles Edelstenne says the company plans to increase total business jet production to 6.5 per month by the end of December, reaching seven per month in 2006. As of late last month, Dassault reported 55 orders for the new Falcon 7X.

First-time Falcon buyers are accounting for about 20% of demand for Dassault's jets, according to John Rosanvallon, president of Falcon Jet Corp., based in the U.S. He says the first nine months of 2005 have been strong and the fourth quarter looks promising as well, with more than 60 orders received this year for new Falcon bizjets.

For the first time in many years, he says, in 2005 demand for new jets from the international market will equal that in the U.S.--not because of any weakness in the American market but because companies in the former Eastern Bloc countries are beginning to discover the advantages of business aviation. He expects the trend will continue and eventually will help build a broader customer base for Dassault.

EADS North America and Sikorsky have teamed to offer a military version of the Eurocopter EC 145 for the U.S. Army's Light Utility Helicopter competition. A contract decision for more than 300 aircraft is expected in April.Credit: EUROCOPTER

The hot market for bizjets is fueling optimism for the future. "Business is very good," says Bryan Moss, president of Gulfstream Aerospace Corp. in Savannah, Ga. He attributes this year's surge in orders and sales to Gulfstream's being a beneficiary of "pent-up demand" stemming directly from the market downturn of 2001-02 when buyers walked away from the table and the future looked bleak.

THREE YEARS LATER, "those people have come back into the market with a vengeance, and Gulfstream has a quite respectable backlog, good order activity and pipelines that are reasonably full," says Moss. He attributes demand for new Gulfstream jets as coming chiefly from North American and international customers that need long-range airplanes to help them conduct their business on an increasingly global scale, as well as easing concerns about security of company officials on trips.

Moss says Gulfstream is satisfied with the current product line that includes six different models from the G100 to the flagship G550. The company is nearing certification of the new G150 that will broaden the product line. NetJets has placed orders for 50 G150s and is scheduled to take delivery of the first airplane next year, according to Moss. Although the product line "reflects what the market wants and what customers have said to us, there is a growing desire for more speed." In response, "Gulfstream's research and development department is working on that request," he says. In addition, he notes that in the future the company will be giving "at least some greater consideration to the use of composite materials" in its airplanes.

According to Moss, the prospect of a supersonic business jet coming to market in the next 10 years is slight unless the airplane can fly unrestricted above Mach 1 over land. Without that capability, "there is no justification in developing an SSBJ." He says that not only would an SSBJ project require an alliance of multiple companies with experience in supersonic flight, but that unless the problem of sonic boom and other regulatory issues can be resolved within reason, a supersonic executive jet will remain a fantasy.

Dassault--which has a long history and the expertise in supersonic flight that's necessary to design and build an SSBJ--is continuing work on the basic technical challenges involved in development of a Mach 1+ bizjet. The French company says there's a market for SSBJs. "If and when the time is right, we are the natural player in that field because of our experience in supersonic flight, but an SSBJ program would involve more than one company" to make the aircraft a reality, said Dassault's Rosanvallon. He estimates it will be at least 15 years before an SSBJ will take to the skies.

Meanwhile, back in Wichita, Kan., the world's largest manufacturer of business jets, Cessna Aircraft Co., is having a "really good year thanks to a very buoyant market in the U.S. and Europe that's spilling over into Asia, China and India," says Roger Whyte, senior vice president of sales and marketing. He predicts the high level of sales activity will continue, with some models of the Citation product line already sold out through 2006 and into 2007. Whyte says Cessna will deliver 240 jets and 850 piston-powered, single-engine airplanes this year; higher numbers are anticipated in 2006.

As for the future, Whyte would "like to see Cessna build a larger business jet" and asserts that supersonic flight is a "technology we continue to look at with great interest." He says Cessna would probably be a key partner in such an expensive and high-risk project. In the near term, he expects Cessna to be searching for more niche markets to fill with new aircraft such as the Citation Mustang. The Mustang is Cessna's entry into the VLJ market, and the twin-engine jet is scheduled to receive FAA certification at the end of next year. Two Mustangs are flying and have accumulated more than 400 hr. of testing, he notes. The first Mustang built will be on static display this week during the NBAA show in Orlando, Fla.

Another key player in the business jet market is Embraer. The Brazilian manufacturer is developing two new jets, a VLJ for entry-level operators and a lightweight jet for the air taxi industry. Company officials say detailed design of the VLJ is underway and work on the light jet will begin in the second quarter of 2006. The VLJ, which is powered by two Pratt & Whitney PW617F engines, is scheduled for certification in the fourth quarter of 2007. The light jet is powered by two PW535E engines.

Embraer recently announced a comprehensive support and training program for both airplanes, including 16 full flight simulators at eight locations in the U.S., Europe and Brazil. Maintenance would be done at 22 service centers in the U.S., South America, the Asia-Pacific region and Europe. According to Luis Carlos Affonso, manager of the business jet unit, at least five facilities in the U.S. and four in Europe will be operational when the VLJ enters service in mid-2008.

At Raytheon Aircraft Co. (RAC), Randy Groom, president and general manager of Beechcraft Business, says the introduction this year of four derivative models--the G36 Bonanza, G58 Baron, C90GT and the Premier 1A--has been a "significant accomplishment for Beechcraft" and the company is receiving "strong market response" for these airplanes. In addition, Groom says RAC has made major strides in further improving its customer support performance and has plans to reinforce that service in the future.

Avionics suite for Embraer's VLJ and light jet will include three flat-screen displays, a flight management system, three-axis autopilot and weather radar, as well as terrain awareness and advanced communication/navigation capabilities.Credit: EMBRAER ARTIST'S CONCEPT

Regarding the rotary-wing segment of business aircraft, Jeffrey Pino, Sikorsky's senior vice president for marketing and commercial programs, says 2005 "will be an amazing year for us." In the past four years, he says, revenues from Sikorsky's commercial helicopter business have experienced a "six-fold increase." The S-76 series is in the midst of a "resurgence," he adds, and 20 of the larger S-92 medium-lift helicopters are in service worldwide. He expects 2006 "to be even better, and we plan to increase commercial production by 25% next year." Increased demand for the S-76 and the S-92 are being driven chiefly by expanding offshore oil operations and the lack of used helicopters, according to Pino.

In addition to sales and deliveries of new aircraft, the used aircraft segment of the overall market also is doing well, especially at the top end, which is dominated by large-cabin jets such as the Gulfstream 550, Bombardier Global Express and Dassault 900EX. Richard E. Engles, president of Vance and Engles Aircraft Brokers Inc., based in Washington, says supplies of these airplanes are dwindling. In late October, only 4% of the Gulfstream IV-SP fleet was available for sale. The larger G550 is "hard to find, as is the Global Express, and there are no Falcon 900EXs available," says Engles.

Compared with the previous few years, 2005 has been "very good" for Vance and Engles, with revenues up 40% over 2004, according to Engles. "Some market segments are extremely active, particularly those involving long-range jets, and it's a very tight market for these airplanes," he says. Engles credits a stable economy and the fruits of U.S. trade agreements for spurring companies to buy large-cabin business jets for international travel and security. He expects Gulfstream, Bombardier, Boeing and Dassault to monitor demand closely in the coming months before making any decisions to increase production rates above current levels.

As for midsize-cabin jets, Engles says the Raytheon Aircraft Hawker 800XP and Bombardier Challenger 300 are hot sellers, but it's becoming more difficult to find loans for aging jets as major lenders are not willing to finance airplanes older than 15 years.

Michael A. Taverna contributed to this report from Paris.