:: March 2002 Newsletter ::
Like a lot of other busy aviation professionals, I frequently take time out from my busy executive-type day to stop, relax, and have a beer. Not just any beer—since my college days I’ve become something of a beer snob. I really like good beer. So do a lot of other people. Over the past decade or two, large brewery sales have been flat, while microbrew sales have consistently risen. But this trend has been accompanied by a curious development: the corporate microbrewery. Basically, Miller, Anheuser Busch, and other large companies started “second label” beers that had the trappings of microbreweries, an effort to co-opt a growth market. I’ve just returned from Colorado where the dreaded Coors offers a line of “Blue Moon” beers. They aren’t bad. But they really don’t have all the flavor (or caché) of true microbrew beers.
No, I have not decided to spend this month’s letter talking about beer. I’m merely trying to make a point using a beer anecdote. I would submit that United’s Avolar business jet scheme was analogous to one of those corporate microbreweries. That is why it failed. Even though Avolar was going to look like an elite service (with Gulfstreams, Falcons, etc.), there was no mistaking its pedestrian parentage. And like the corporate microbreweries, Avolar was an essentially defensive effort, a way of getting back (or at least retaining) the high rollers who were leaving for greener pastures (private aviation or tastier beer).
Avolar’s demise isn’t huge news in and of itself. It wasn’t surprising—Executive Jet had spent over 15 years carefully building its customer base and expanding its infrastructure. It only attracted a serious outside investor after it proved itself. Avolar wanted money from the word go—investors were asked either to believe that the market could resume its remarkable expansion (which basically peaked in 2000) or that Avolar could steal clients away from the existing players. This was unrealistic.
For United, the end of Avolar will result in a write off, and it was certainly something of a diversion from its usual corporate focus. But compared to their larger problems (a major cash hemorrhage and mechanics who now earn $35+ per hour), it’s a minor event. For the bizjet manufacturers that had received orders from Avolar (over 300 planes!), my impression was that they were going along with the act (it was in everybody’s interest to pretend that it was a sure thing). A few initial planes have actually been paid for. But I doubt anyone really booked the bulk of them as firm orders, or started cutting metal.
Yet the failure of Avolar raises numerous big issues, some of which I’ve written about before. Question Number One: What can the majors do? Many of their most profitable passengers have converted to private (it’s not the number of first class passengers; it’s the number of first class passengers that actually paid full price). Meanwhile, those discount carriers with their low cost structures and cheerful, worker-partner labor force, have taken much of the low end. As a matter of fact, they have started to garner more domestic business traffic than the majors want to admit. And unlike the regionals, these guys aren’t feeding anybody’s route network. Fortunately for the manufacturers, these low-cost guys (Southwest, Ryanair, jetBlue, etc) are taking increasing numbers of new jets.
As for new aircraft in the pipeline, the A380 certainly won’t provide the airlines with any answers. If configured along traditional lines, it adds backpackers, and if configured with duty free shopping, it greatly increases costs. Boeing’s Sonic Cruiser would solve the problem—it would restore panache
Looking at the issue from the other end, what can private aviation do to extend its market share? Obviously, the idea of expanding the high end has reached its limit. Avolar has failed, and Raytheon’s Travel Air was headed in that direction. We’re at a plateau. All hope now lies, bizarrely, with the low end. Specifically, can the new light jets, used as part of an “air taxi service,” coax more travelers away from the airlines? The new Eclipse/Nimbus product offers prices that are about half traditional bizjet prices.
I really don’t know whether they will succeed. The most common response was exemplified by a recent editorial titled “I Want To Believe…” The biggest question: what kind of numbers are necessary to make it go? Will a 500 aircraft production run and taxi service be a big success, or does it take much more than that to make the effort viable? And remember my favorite unfortunate maxim: New aircraft startups almost never succeed. But if it does succeed in a big way, the airlines will lose another key batch of customers, and we’ll have moved a notch closer to a new schism: private aviation and bus travel with wings.
Back to drinking beer. It’s not the only way to run from the loathsome hellscape of the modern workplace; there’s also the internet. One amusing site is jumptheshark.com, which tracks the exact point when good TV shows turn bad (when they “jumped the shark,” referring to a mediocre Happy Days
This month, we’ve updated both Fairchild Dornier reports, the Navy’s E-2C and AV-8B, Eurocopter’s BK.117/EC 145 and AS 365/EC 155, the CN-235/C-295, the K-8, Defender, S-76, and the PC-12. Next month, we’ll look at Europe’s fighters: Eurofighter, Gripen, and the Mirage 2000. We’ll also update the 737, V-22, T-45, and Challenger/Global Express. Get in touch with any priority updates.
Yours, ‘til I Stop Getting Stuck in the Back of 757s,
© Richard Aboulafia 1997-2006, All rights reserved.