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:: March 2006 Letter ::

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Dear Fellow Checker Cab Flyers,

Permit me to ask you a personal question: Do you tip your air taxi driver? My colleague Mark argues that a well-placed C-note ensures great service, particularly if golf clubs are involved. My colleague Steve says it’s covered in the fare and isn’t necessary at all.

Forgive me for writing as if air taxis were commonplace. But many folks seem to have reached exactly that conclusion. The 2006 FAA forecast calls for 5,000 Very Light Jets (VLJs) to enter service by 2017. Then there’s the 2005 Collier Trophy, awarded to air taxi wannabe manufacturer Eclipse Aviation. Most of all, there’s Flight International’s March 1 cover story, “Vision of Eclipse Aviation’s Vern Silences The Skeptics.” Here’s some skeptical non-silence.

The Collier Trophy award is a mystery. I won’t deny that the Eclipse is an impressive creation, with some great engineering behind it. But doesn’t the Collier usually go to programs like the V-22, C-17, and B-2? Why did it go to a small GA plane? The Eclipse 500 is neat, but is it in the same league? More importantly, the NAA says their coveted Collier goes to a program “the value of which has been thoroughly demonstrated by actual use during the preceding year.” (http://www.naa.aero/html/awards/index.cfm?cmsid=62) Huh? At what point during 2005 were air taxis “demonstrated by actual use?” (Kudos to www.avweb.com for pointing this out.)

The FAA’s motives are clearer: they worship growth. The RJ craze kinda petered out, so the FAA needs a new altar to worship this elusive deity. The FAA says VLJs “are believed by many to have the potential to…support a true on-demand air taxi business service,” resulting in a 10.2% annual increase in business jet flight hours. Fellow analyst John Walsh once gave a brilliant presentation explaining the FAA forecast as “something that is used to justify not only the agency’s budget, but its promotions and salaries, too.” How else to explain a VLJ flying hour forecast driven by air taxi utilization figures thoughtfully provided by wannabe air taxi service DayJet? And that phrase “believed by many” speaks to the kind of tough, rigorous analysis that we private sector forecasters can only envy.

The FAA’s forecast also helps justify NASA’s ongoing plans to fund a Small Aircraft Transportation System (SATS) (http://as.nasa.gov/factsheet/SATS_Fact_Sheet.htm). We’re from Washington, and we’re here to help. Oh, and to justify our budgets, salaries, and growth plans too.

(Sidebar: On behalf of my imaginary rich friends the NASA/FAA VLJ plans are a welcome change. For years I have watched my government squander cash on the neediest, with billions wasted on education and health care. What about the neglected wealthy, the folks who really need a helping hand? Why not give them a chance to pull themselves up by their VLJ bootstraps? Let’s invest public money into something that favors not just the very rich but the neglected moderately upper income types too.)

Flight International, though, gets a pass for three reasons: (1) I like Flight. (2) I like the author, Murdo Morrison. (3) Given points One and Two, I’m thinking this article might be a Trojan Horse. Two-thirds of the way through the article you can find this little nugget: “Eclipse will break even at 500 deliveries a year and will be ‘comfortable’ at 750, he says. That boils down to as few as two aircraft a day, although Raburn’s target is four.” Reality check. That’s total output at all the US bizjet manufacturers combined. It’s a statement that should set off warning sirens in the head of anyone affiliated with this program.

Take a moment to consider the air taxi customer, that oddest of ducks. He has more travel cash than an airline passenger, but not enough to be in a real business jet. Nor does he have enough to buy into a jet card program or to use existing air charter operators. He doesn’t want or need to fly more than two hours/1,000 miles at a time. And you need enough of him in enough markets to avoid a high percentage of deadhead flights, but not too many of him in these markets to justify decent airline service.

These plans won’t work with just any old plane. Never mind that you could prove the concept using thousands of depreciated, low-cost, service-tested jets and props out there. You apparently need a new VLJ to make air taxi magic happen. And of course you need enough enthusiastic investors to turn these unfunded air taxi plans into reality. VLJs might let a few new charter operators make some cash, but we’re talking a few score aircraft, not thousands.

Without significant Air Taxi demand, Eclipse is left with owner-operators. That’s potentially decent business, limited by the number of jet-qualified pilots. It’s probably good for 200-300 sales per year. Much of this will go to Cessna and Embraer. And there are other new players coming on line, basically waiting to be bitch-slapped by market reality. Without air taxis, the best case scenario for Eclipse is much lower production rates than anticipated, with higher prices and serious write-offs all around as a result. The worst case scenario: A dot.com, with wings.

This is why Teal Group has no Eclipse report, nor do we have an Eclipse line in our business jet forecast. Given the parameters and drivers of our forecast or those of any other widely accepted market forecast (including the FAA’s), there is no way we could give Eclipse enough planes to avoid bankruptcy.

At the other end of the size spectrum, March updates include the Commercial Jet Transport overview, the A318/319/320/321. 737/MMA, E-2, Harrier, Hawker 400, S-76, K-8, all the Gulfstreams, and a very special A300 epitaph update. Enjoy your month.

Yours, Nostalgic For An Age Yet To Come,

Richard Aboulafia

 

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  ~  Last updated on January 08, 2006