A super-heated used business aircraft market has had more jet-A thrown on it due to new tax law changes and looming FAA equipment mandate deadlines. The tax law changes, embodied in the federal Tax Cuts and Jobs Act of 2017, extends 100 percent bonus depreciation to used equipment, including used aircraft.
Meanwhile, the 2020 deadline for ADS-B installation and an expensive airworthiness directive—estimated to cost up to $325,000 per engine—for certain Honeywell TFE731-4- and -5-powered aircraft could combine to purge up to 20 percent of the older bizjet fleet from the market in short order, according to the Dallas-based Engine Assurance Program (EAP).
At this year’s annual NBAA-BACE, members of the International Aircraft Dealers Association brought 20 aircraft for the static display, consisting of many relatively new, high-ticket models.
The percentage of the active fleet sold for the current half-year period compared with the year-ago period increased in key segments such as heavy jets and turboprops. Not surprisingly, the largest reductions in aircraft for sale as a percentage of the fleet occurred in newer and mid-age aircraft across the board. This and myriad other data already paints a picture of a used jet market starving for quality inventory, with buyers forced to spend more and settle for less. Brokers are becoming “finders” rather than “sellers,” according to Citi Research’s Jonathan Raviv.
“Even [Piaggio] Avantis are selling,” says Jason Zilberbrand, president of the aircraft valuation service Vref.
A series of aviation-related judgments each awarding $100 million to a single individual and the departure of several large reinsurance companies from the aviation sector have together shaken the aircraft insurance industry out of its soft market, according to various insurance experts. Aircraft operators should expect insurance premium increases of between 10 and 25 percent in 2019 as insurers try to refill coffers that were already depleted from a decade of artificially low premiums.
“We started out this year seeing five to seven percent increases as the norm,” said Steve Johns, president at LL Johns and Associates. “Then the last few months, it was 10 percent. Now we’re seeing up to 25 percent increases, especially for operators that are higher risk or have had a history of losses.”
Various factors enticed new insurance companies to enter the aviation market starting in about 2006, fueling intense competition that drove premium prices to pre-2000 levels. Total aviation premiums declined from $2.16 billion in 2005 to $1.65 billion in 2014. Since 2010, there have been at least five years where total aviation premiums collected were less than total claims paid out, but premiums stayed low as the new insurers continued to bring capital to the market.
Also fueling the recent premiums increase is reinsurers leaving the unprofitable aviation market, forcing the others to raise rates to cover losses.
2018 marked a significant year in the development of engine technologies for business aviation as a new wave of ultra-long-range jets either made their way to market or were deep into development.
Gulfstream Aerospace’s celebration of the first delivery of its G500 ultra-long-range jet in late September was a major milestone for Pratt & Whitney Canada (P&WC) as well: the entry into service of the first of a new engine family that has been in the works for most of the past two decades. The first of the PW800 family was the 15,144-pound-thrust PW814GA powers the G500.
At the same time, GE Aviation also was putting together parts, service teams, and production provisions as it prepared its 16,500-pound-thrust Passport turbofan powering the Bombardier Global 7500. That engine officially entered service with the first delivery of a Global 7500 on December 20, a milestone reached a decade after GE Aviation jumped fully into the business and general aviation market.
Meanwhile, competitor Rolls-Royce took the wraps off its new Pearl engine family with the first application, the 15,125-pound-thrust Pearl 15, for the new Global 5500 and 6500. Quietly in development for years, the Pearl builds on the BR700 family but incorporates research involving key technologies derived from Rolls-Royce’s Advance2 engine technology demonstrator program. This engine family will mark its in-service debut next year.
Touchscreens are nothing new, at least in consumer electronics, but now this technology is finally beginning to appear in more business jet flight decks.
Of course, Garmin’s touchscreen controls populate many jets with G3000 and G5000 avionics suites, but until recently, aircraft manufacturers avoided touchscreens for uses other than controlling non-touch displays. Gulfstream is the first business jet manufacturer to adopt wider use of touchscreen technology with the new G500 and G600. While the Honeywell panel displays remain non-touch, the G500/G600 make extensive use of touchscreens for systems management.
On the overhead panel in the new Gulfstreams are three Esterline Korry touchscreen panels. These touchscreens replace the cornucopia of switches, knobs, and buttons that confound many a new Gulfstream pilot trying to memorize the layout when learning to fly models like the G450, G550, and G650.
Touchscreen displays on the instrument panel have been slow to move into business jets, but we will soon find out if touchscreen panel displays become more acceptable in business jets because Nextant Aerospace and Collins Aerospace have received a supplemental type certificate for a touchscreen display avionics upgrade for the Challenger 604, part of Nextant’s 604XT package.
The buildout of SmartSky’s U.S. ground network suffered some delays due to blizzards in the Midwest, but the company expects two corridors of its air-to-ground airborne connectivity service to be running in early 2019. The New York-Florida and New York-Chicago corridors will be the first areas of service available for SmartSky customers, and these will be followed by service for 90 percent of the business aviation routes in the continental U.S., then by the end of 2019, full U.S. coverage. Testing of portions of the New York-Florida corridor took place in December, over Florida, Georgia, and South Carolina.
The SmartSky 4G LTE network allows in-flight VPN access, email with large attachments, simultaneous voice calling, texting, and video streaming by multiple users.
SmartSky is offering two airborne systems: SmartSky Lite for turboprops and small jets and the SmartSky 4G LTE system for larger aircraft. The Lite system includes a base radio (12.1 pounds) and a full-duplex quad antenna (6.5) pounds, while the 4G LTE system requires an additional high-performance blade antenna (13.5 pounds). Antennas are mounted on the fuselage bottom.
STCs for a variety of business aircraft are under development by SmartSky partners such as Bombardier and Textron service centers, Delta Engineering, StandardAero, Clay Lacy Aviation, Ventura Air, and Duncan Aviation.
Collins Acquisition Brings New Frontier for Suppliers
The $30 billion United Technologies Corp. (UTC) acquisition of Rockwell Collins earlier this month positions the newly formed entity to play a role in reshaping the aerospace industry, analysts believe. UTC announced on November 27 that it had completed the acquisition and merged Rockwell Collins with UTC Aerospace Systems to form Collins Aerospace, an organization that employs 70,000 people at 300 locations worldwide and combined for $23 billion in annual sales.
Ronald Epstein, managing director of equity research at Bank of America Merrill Lynch, said earlier in the year that the acquisition leads to the creation of a “super supplier” and added, “I think it’s going to be really important to the OEMs in how they partner with suppliers on future aircraft and how the future aircraft are integrated.”
“It may be high time to re-think the notion of an OEM,” agreed Rolland Vincent, president of Rolland Vincent Associates and JetNet iQ creator/director. “In aerospace, we usually think of the aircraft final assembler as the top of the pyramid, but with the new UTC Collins organization, there is a new player at the chess table.”
“Having a supplier this big raises important questions about the power balance between the primes and the contractors,” said Richard Aboulafia, v-p of analysis for Teal Group. ”We might see more friction between them, but more potential for new aircraft enabled by a large new player.” Aboulafia added that the joke making the rounds: “UTC just issued an RFP for a metal tube and wing.”
FAA Remains in Experienced Hands Without Permanent Head
As 2018 draws to a close, Dan Elwell remains at the helm of the FAA in an acting capacity with no permanent administrator confirmed to the post. Elwell, a veteran industry, government, and association executive, stepped into the acting post in January after Michael Huerta completed his five-year term as administrator. It was a nearly seamless move since Elwell had been appointed deputy administrator six months earlier. Once an FAA official, he returned to the agency with a breadth of experience and knowledge of aviation including with airlines and associations. Many thought he may be in line for the administrator’s role on a permanent basis.
But another name surfaced: President Donald Trump’s personal pilot, John Dunkin. When Senate leaders cast doubt on that choice, Elwell’s name once pushed again to the forefront. However, he is believed to have removed himself from contention.
Another candidate has since come up: Steve Dickson, who retired after a 27-year career at Delta Air Lines. Dickson’s selection would cement strong operational knowledge at the helm of the FAA. GAMA president Pete Bunce praised Dickson. “He is extremely knowledgeable about NextGen and how the system works. He is a great leader.”
Bunce expressed hope that Elwell would remain with the agency should Dickson become administrator. But, in a town full of rumors, the latest in Washington is that Trump held hopes of brokering a deal: Dickson as administrator and Dunkin as deputy.
Five airports in Sweden operated by the state-owned group Swedavia began conducting a biofuel trial this month. The fuel available at Stockholm Arlanda, Göteborg Landvetter, Bromma Stockholm, Visby, and Luleå airports was synthesized from used cooking oil by World Energy. It was purchased from the Fly Green Fund, which provides companies with the opportunity to use bio-aviation fuel for their flights, and delivered by SkyNRG in partnership with Shell. Use of the fuel can reduce carbon dioxide emissions by up to 80 percent compared to conventional jet fuel.
Since 2016, the company has purchased biofuel equivalent for its business flights. Swedavia aims to have all 10 of its airports fossil-free by 2020, 5 percent of all the fuel used to refuel at Swedish airports fossil-free by 2025, and all air travel in the country fossil-free by 2045.
“Air travel needs to be part of the transport of the future and it must be sustainable,” said Swedavia president and CEO Jonas Abrahamsson. “In the short term, biofuel is the solution that can provide the most benefit for the climate, so investments in this are absolutely essential.” He believes that with its forests to provide source material for the production of biofuel, Sweden has the potential for large-scale domestic production. “There is potential here for a new Swedish industrial sector and a showcase for the country,” he concluded.
Make Your Voice Heard in the 2019 FBO Survey
AIN’s FBO survey is open for year-round feedback, but the deadline to vote in the 2019 survey is February 8. The results will be published in the April issue. The survey takes only a minute, and you can do it while waiting for passengers, on the shuttle bus to/from the hotel or any other time that is convenient for you. Participants will be entered to win a $500 Amazon gift card. Log on to www.ainonline.com/fbosurvey to rate your experiences at the FBOs you visit.
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