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Bombardier, Business Aviation, General Aviation

SUMMARY: Textron Aviation culls its smallest Citation, the $3.35M CE-510 Mustang after 11 years and 472 deliveries. In 2016, Gulfstream dropped its smallest product, the $15.7M G150 (an improved G100, originally the IAI Astra SPx, never a big seller with just +120 deliveries in total) and the $43.1M Gulfstream G450 (ex-GIV) which will be replaced by the new $44.6M G500. The Very Light jet segment has struggled since 2009 when deliveries hit 236 to a low of just 62 in 2013 and 89 last year by 4 OEM’s. With The Mustang gone, the entry level jet for Textron is now the $4.5M CE-525 M2 to take on the $4.16M Embraer Phenom 100E and the $5.0M HondaJet HA-420, which is now in full production mode after years of certification delays, and a surprising 15 deliveries in 1st Quarter 2017, where deliveries by the top 3 OEM’s of Very Light jets was up to 28 from last years 9, a 211% increase on 1Q/2016, and a sign of new life for a struggling segment ?

The latest news from Textron Aviation, that the company is terminating the smallest member of the Citation line, the $3.35M CE-510 Mustang (PHOTO below), which has had 472 deliveries by the end of 2016, since starting the line in 2006.

The Very Light jet market ($3.0M to $5.5M aircraft) has been in decline from 2009 when it hit its peak of 236 deliveries and hit a low of 62 deliveries (a drop of 74% vs 2009) in 2013 and now very slowly coming up with 89 deliveries in 2016.

Below Photos (left to right) Embraer Phenom 100E, Textron CE-525 M2 and HondaJet HA-420

The market is dominated by Textron Aviation ($3.35M CE-510 Mustang, $4.5M CE-525 M2), Embraer ($4.16M Phenom 100E), HondaJet ($5.0M HA-420), and much smaller ONE Aviation ($3.0M EA500 Eclipse), see Delivery Graph below.

The entry of HondaJet in 2015 after many years of delays is bringing the delivery rates up, but a long way from the peak of 236 over 8 years ago, at time when all “experts” were worried about a “flood” of new VLJ (very light jets) and yet, just this year, Cirrus started delivering the only VLJ to make to thru certification, the $2.0M SF-50 Vision jet (single engine jet with 7 seats and max. cruise just 300 kts, cruise just 240 kts, range just 690 nm) but slower than single engine turboprops and into production.

Sadly ALL all forecast about the size of the VLJ and light jet market were wrong, though Cirrus claims it has 600+ orders for its new SF-50 Vision ? a jet that flies slower than a turboprop ? why ?

The list of cancelled VLJ programs is long (Adam A700, ATG Javelin, Century Jet, D-Jet, Piper’s Altaire, Vantage Jet, Safire Jet, etc. etc.) and yet we still have others working on it still ? oh yes, Stratos 714, Spectrum S-33 and maybe the Diamond D-Jet now that Diamond Aircraft (Canada) is under Chinese ownership.

Anyway, below the graph of deliveries, the RED line is the total light jet market, the PURPLE shows the rise and fall of the Mustang, and its clear why it was culled, but one can also see the stagnation of this segment, and while HondaJet’s arrival will boost (apparently 100+ orders on the books) deliveries, the demise of the Mustang and eventually the ONE Aviation EA500 will make it a 3 way race, with my money on the M2 to dominate and Embraer will hang around, but it is more concerned with its Phenom 300 (soon to face the PC-24) and the Legacy 450/500’s these days.

The new entry level jet for Textron Aviation is the CE-525 M2, priced at $4.5M or 34% more than the outgoing Mustang, and says novels about the light segment, which will NOT reach anywhere near its past glory of 236 deliveries and most likely will NOT go past 150 deliveries for many years, with Cessna to still dominate the market with around 52% market share, followed by HondaJet with 27% and Embraer with 21% market share.

Lots of price discounting going on in the market, Textron complains about Embraer’s low prices while Learjets have been deeply discounted for some time, and even HondaJet has had to “adjust” its pricing, as it was always listing $4.5M since 2010, which should mean +15% at least $5.17M, but they have been pricing at $4.85M on their deliveries or 6% less, not much but still $320,000 “off”, by my calculations.

I do not believe ONE Aviation will find a market for its EA500 and the newer EA550 Canada comes maybe on line, but with more layoffs at the company, I see that program once again in trouble and maybe for the final time, as deliveries have been 27 in the past 3 years, not economical to produce anything at such a low rate.

Now, the culling of the CE-510 Mustang comes on the back of Gulfstream’s announcement in October that its dropping the smallest of its products, the $15.7M G150 (ex-GA-100 and IAI Astra SPx) of which +120 have been delivered and the $43.1M G450 (ex-G-IV) to make room for the new $43.5M G500 in certification now (along with the $54.5M G600 which will challenge the $50.4M Global G5000).

That is not the end of products to go, and below you will see a PDF of the current business jet product line, with several programs on the verge of being shut down, from the already mentioned ONE Aviation EA500, there is the Bombardier $11.3M Learjet 70 and the $13.8M Learjet 75, with production down to 24 in in 2016 with lots of discounting.

Then there is the fast Mach 0.92 Textron Aviation’s $23.3M C750 CX+ with just 19 deliveries in the last 3 years, this is personally sad to me, as in the mid-1990’s I formed a company to sell and manage Cessna Citations in Eastern Europe (Czech Aerospace and Crown Air), as ASR for Cessna, and I had the 1st operational C750 CX in Europe, and commercially under FAR Part 129 (foreign operation of a N registered aircraft under foreign AOC), first of two C750’s I operated.

Then down the road we have Bombardier’s $50.4M Global G5000 and $62.3M G6000 as they face new competition from Gulfstream’s G500/600/650ER and Dassault’s $57.5M Falcon 8X.

Now, below is my Customer Value (CV) Analysis of the current light jet market, and in short CV= Relative Performance – Relative Price, and allows a apples to apples comparison on the 3 main competitors. The HondaJet does well in performance as you can see, but its $5.0M price is 11% more than Textron’s M2 and 20% more than Embraer’s Phenom 100E.

The Best CV, goes to the Embraer Phenom, in that its relative price is 0.91 while its relative performance is 0.97, which means good value for money, while the HondaJet is worst value for money, but gives the best performance overall but you pay for it. Now I used $5.0M price on the HA-420, they have been advertising $4.5M (2010 price) for 7 years, but 2016 shows an average $4.85M price as all OEM’s are discounting and one reason Textron pulled the plug on the Mustang.

Business Aviation Product Line 2017

The GAMA figures for 1st Quarter 2017, show 28 light jet deliveries ( 3 Phenom 100E, 15 x HA-420, 1 x CE-510 and 8 x CE-525 M2’s) for a value of $127.9M something not see since 2009, which is a 211% increase on 9 deliveries in 1Q/2016, and shows promise for this struggling segment.

The big increase came from HondaJet, which is finally starting to produce more aircraft, as it delivered just 25 aircraft in the past 2 years, even though 12 aircraft were sitting around the factory waiting for the much delayed certification for almost 3 years.

That is the state of the Light Jet market today, later this week, a look a 1st Quarter Turboprop deliveries.

 

Till next time, cheers. and thank you for reading my Blog.

 

 

 

 

 

 

 

 

 

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About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 25+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (45+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems be in the business, and help with restructuring for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com and I comment a lot on Google+, my Facebook and LinkedIN.

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