A Crowded Market
Jeremy looked out the window and considered his many years at Roll-Royce. In fact, Jeremy could remember when his colleagues in the LCA used to brag that “Men sell engines. Real men sell big engines.” He could also remember when his own unit was the unrivaled provider of high-thrust engines for the long-range business jet sector. This year, rival Pratt & Whitney unveiled their PW800 turbofan at the National Business Aviation Association (NBAA). Even more telling, the engine was developed for Gulfstream who broke an exclusive 60 year history with Rolls-Royce to go with Pratt. It will also be a Pratt engine, the PW1200G that will power the Mitsubishi Regional Jet while Embraer has opted for the International Aero V2500 for the KC390. GE who acquired Avio Aero is on the hunt in this segment as well.
The business jet industry had certainly seen its ups and down since Jeremy started at Rolls-Royce. The latest down came after the Global Financial Crisis (GFC) of 2008 whensales dropped sharply. In fact, shipments dropped from 4,276 in 2007 to 2,279 by 2009. While the top half segment of the market recovered well, the bottom half has continued to slump. The former top half is now the top 76% of the market with Gulfstreams G650, cessna’s Latitude and M2, Bombardier’s Learjet 85, and Embraer’s legacy 450/500 leading the way
Table 1
Region Registered aircraft Deliveries
North America 21,185 616
South America 2,967 162
Europe 4,073 213
Middle East 81
Asia 2,025 180
South Pacific 622
Source: Business Aviation and the world’s top performing companies. Available at http://www.nbaa.org/business-aviation/NEXA-Report-Part-5-2013.pdf
Still, Jeremy consoled himself that Rolls-Royce has an installed base of over 3,000 aircraft worldwide with all the Original Equipment Manufacturer (OEM) work that this entails. Their assembly lines were busy with deliveries of the BR700 and AE3007 to various corporate clients. Unfortunately, this was not the future that the company had envisions six years ago when it laid its plans to power the next generation of business jets. With the GFC of 2008, Dassault put its super-midsize jet the SMS on hold and then chose Snecma’sSilvercrest to replace the RB282. Rolls then lost the Bombardier Global Express to the GE Passport. Then, of course, came the news about Gulfstream. In short, it had been a couple of rough years in the trenches of the bizjet unit at Rolls.
Jeremy knew that Rolls was not going to take the losses lying down. Research was under way on the next generation of long-range aircraft for the coming decade with the Advanced and UltraFan designs and Rolls had announced research and technology investment of US$1.8 billion to maintain its market leading position in business aviation propulsion.
Table 2
Manufacturer Aircraft
Airbus ACJ318, ACJ319, ACJ320
Boeing BBJ2, BBJ3
Bombardier Learjet, Challenger, Global
Cessna Mustang to Citation
Dassault-Falcon Falcon (SMS)
Embraer Phenom, Legacy
Gulfstream Aerospace G280-G650
Hawker Beechcraft Premier 1A, Hawker 4000
Piaggio Aero Industries Avanti I & II
Platus Business Aircraft PC-12 to PC-24
Cirrus Aircraft SR-22
Diamond Aircraft DA42
Eclipse Aerospace E-559
Honda Aircraft HA-420
Piper Aircraft PA-28
Questions:
1) Check out the General Aviation Manufacturers Association site for the 2013 General Aviation Statistical Databook& 2014 Industry Outlook (http://www.gama.aero/files/GAMA%202013%20Databook-Updated-LowRes.pdf). What is the outlook? Where is the growth?
2) What are the challenges facing business aviation?
3) Where are the growth markets and what is holding them back?
4) What does Rolls-Royce need to do to stay on top here?
References
Aboulafia, R. (2014) Business jet market bifurcation goes into overdrive, Forbes, March 11. Available at http://www.forbes.com/sites/richardaboulafia/2014/03/11/business-jet-market-bifurcation-goes-into-overdrive/
Norris, G. (2014) Turning Tide: The rise of a new, large bizjet engine contender spells the end of Roll’s long-range dynasty, Aviation Week & Space Technology, October 27, pp. 26-27.
