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:: April 2001 Newsletter ::

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Dear Future One-Sixteenth Bizjet Time Share Owners,

Spending my happiest moments, as always, staring at spreadsheets. I’ve been reviewing the business jet numbers (new overview next month—let me know if you want an advance copy) when I suddenly came to a shocking conclusion. Those enormous growth rates for the bizjet market? They had to come from somewhere.

The bizjet market grew four-fold over the past five years, and 400% growth is mighty unusual for an established industry. But these travel dollars didn’t just materialize out of thin air. Remember the first rule of air transport: hapless business travelers can neither be created nor destroyed. Given the recent downturn in First and Business class profits at the major airlines, I think we know exactly from where the business jet industry has gotten its customers. We also know that if this business jet market trend continues, the related loss of these high-end passengers will have a devastating impact on airlines.

If the airlines have been hurt, imagine the impact on the two jetliner builders. At the high end of their market, their ultimate end users are fleeing to bizjets. At the low end, they’re being stuffed into cheap and cheerless RJs. If the bizjet market resumes its growth after the current orders slowdown, and if scope clauses for regional carriers disappear, Boeing and Airbus could face a steady erosion of their core market.

For the airlines, the answer is relatively clear. Their first response—spiffing up First and Business class service with all kinds of amenities, like massages and sleeper chairs—has not stopped passengers from choosing private planes. After all, privacy and the ability to avoid crowded airports are two of the greatest luxuries, and airlines can’t offer either. So, it’s on to the second response—co-opting bizjets. Several airlines, most notably United, have announced plans to set up their own business jet operations.

The airlines might be a bit late, since the Big Three fractional providers have already developed and secured most of the market, but they have few other options. And if they can further lower the bar to private aircraft usage, they will probably succeed in continuing the bizjet industry’s explosive market growth.

If co-opting the bizjet market succeeds, the airlines will be happy, but Boeing and Airbus won’t be. Even if they succeed with A319CJs and 737BBJs, they will still have minority shares of the business market. Both the primary and secondary customers—airlines and travelers, will have forsaken them.

Airbus, for its part, thinks the A380 will solve the problem, with a large cavernous interior capable of holding numerous squash courts and Rain Forest Cafes. The A380 may have its virtues, but this concept isn’t one of them. The privacy and crowded infrastructure problem is still with them. And again, that initial airline response of creating mega-plush First and Business Classes was a resounding flop, so the answer probably isn’t more of the same.

Boeing’s Sonic Cruiser, if it is for real, may not be enough to take back all of the market gained by business jets, but it will certainly help redress the balance. It will have panache on its side, as well, which always appeals to the high end crowd. If coupled with a concerted effort by airlines and regulatory bodies to improve on-time performance and reduce infrastructure-related delays, a good portion of the upper end travel market could come back to scheduled airline service. So, speed may be the answer.

(Great Homer Simpson quote: “It reminds me of a movie I saw about a bus that had to keep going at a certain speed. If it didn’t go at this speed, it would explode. I forget the name of the movie; I believe it was called ‘The Bus That Could Not Slow Down.’”)

If Sonic Cruiser accomplishes this airline/airliner counterattack (and the jury is still out on this, which isn’t surprising, because the jury largely comprises techno-illiterates like me), the bizjet industry will have only one choice: a Supersonic Business Jet (SSBJ). Sonic Cruiser or not, it’s inconceivable that we won’t have an SSBJ in 20 years. The technology is largely in place, and the high end bizjet market is much less cost-sensitive than the airliner segment. If the bizjet industry really does need to compete against a faster airliner, an SSBJ could be on the market by 2010. Ironically, the technology developed for Sonic Cruiser will help its future arch-nemesis, the SSBJ.

Anyway, this month’s supplement contains updates of such minor, unimportant programs as the Joint Strike Fighter, A380, 737, V-22, and Eurofighter, so there isn’t too much of consequence. Seriously, with all the events of the last month or two, I’m reminded of why I’m in this business—you can wake up and wonder what exciting things will happen today. You can also wonder what mis-step will obliterate what’s left of your credibility.

Next month, in addition to business jets, we’ll look in on the Airbus narrowbodies, plus the A300/310, C-130, Hawk, P-3, and others. As usual, call with requests. And see you at Le Bourget.

Yours, Until A Gulfstream XII Lands On Mars,

Richard Aboulafia
 

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