Takeoff

On the back of a booming economy, business aircraft usage in Australia is growing faster than ever, aided also by a strong Australian dollar and a growing acceptance of the utility of aircraft as a legitimate business tool.

“Over the last three years the business jet population in Australia has grown by about 40 per cent,” David Bell, executive director of the Australian Business Aircraft Association (ABAA), told Australian Aviation. “There’s around about 112 business jets at the moment in Australia, of which about 80 per cent are used exclusively for business purposes – either charter carrying business people or private flights, where people own the aircraft themselves and use it for private purposes. ” Admittedly the business aviation industry in Australia is quite small, particularly compared to the massive US market, but the growth is impressive.

“It looks like growth will probably continue at the rate of at least 10 per cent per year for the next three years, there is enough confidence with the Australian economy doing extremely well,” Bell said.

“The industry is very strong right now, there are a lot of new products on the market, a lot of interest from people upgrading their existing aeroplanes, and we’re also seeing a lot of new buyers into the marketplace, which is good for the industry,” summarised Tony Jones, who is senior vice president of Hawker Pacific’s aircraft sales group, local distributors of Hawker Beechcraft and Dassault Falcon Jet aircraft.

“We’re seeing a period of incredible economic growth and we’re seeing people do business further afield than they have probably traditionally done, and there’s increased awareness as to the benefits of business aviation,” Jones continued.

Managing director of Aeromil, Australia’s Cessna distributor, Steve Padgett, noted that “Because there’s strength everywhere in the economy there’s a lot of people looking at ways of simplifying their travel. And all these people are people

“It looks like growth will probably continue at the rate of at least 10 per cent per year for the next three years. ”

who can really use aeroplanes. ” Padgett is a veteran of aircraft sales in Australia, and says the current climate is as good as he has seen it for corporate aircraft in Australia.

“I guess over the last two years it’s probably been the strongest we’ve seen in a long time,” Padgett said.

“It is partly related to the strength of the Australian dollar against the US dollar, but not as much as it used to be. I just think there is a strong demand for aircraft. ” ABAA’s Bell, who keeps a close watch on the health of the industry, estimates there will be as many as 20 new corporate jets on order for Australian customers by the end of the year for delivery over the next few years.

“There’s ever increasing reasons for people to operate their own aircraft, business jets or turboprops,” said Bell. “The airline service in Australia is largely no-frills these days, the airlines cancel flights, particularly the no frill operators. And a lot of business people just don’t want to fly on the airlines.

They provide a good service but it’s just not up to the level required by a lot of business people any more. ” A growing economy is giving individuals and businesses the confidence to invest in aircraft, while a strong Australian dollar makes aircraft far more affordable.

“At the moment it’s having a very positive effect on the purchase of aircraft,” said Tony Jones of the Australian dollar’s strength. “Every cent that we close the gap towards the US dollar the aircraft just gets cheaper in Australian dollar terms, so now is a very advantageous time to be buying aircraft because in Australian dollar terms it is just getting cheaper. ” Jones said it is hard to quantify the impact of the strong dollar, but “I think the dollar is probably helping people who are on the edge of making a decision or have been contemplating an aircraft, they’re now starting to stand up and be more active in their search for aircraft. ” But while a strong dollar helps affordability, new buyers will have to be patient waiting for their aeroplane to be delivered, as all the major bizjet manufacturers have very strong order backlogs.

“The unfortunate part about it is the Cessna order book on average is now out to 2010,” said Steve Padgett.

“The interest is strong, so I guess our biggest problem is getting aeroplanes. ” Aeromil even holds an order for a Citation CJ4 which won’t be delivered until 2014.

But strong demand for new aircraft in turn is pushing up the prices and residual values of good second-hand aeroplanes.

“We recently sold an aeroplane that was three years old for more money than it was paid for new,” said Padgett. “Aeroplane values, particularly Citations, are very strong. There’s still some aeroplanes out there that aren’t that strong, but Citations really just retain fantastic resale values – half of it is simply because you can’t get a new one. ” Hawker Pacific’s Jones is in the same situation. “The second- hand market is strong.

In times like this being able to source the right secondhand aircraft in the right condition at the right price is more difficult, and therefore it affects the values and the values follow the availability of the new aircraft. ” That’s certainly encouraging for those new to aircraft ownership.

“Everyone who owns an aeroplane these days is not going to say I’m going to buy it and then lose a heap ofmoney when I want to sell it like a motor car, they’re buying it knowing there’s going to be a very strong resale if they want to sell it,” Padgett related.

While the scarcity and price of even good secondhand aircraft makes finding an aircraft difficult, those conditions do have the benefit of facilitating financing.

“Financing is never an issue,” said Steve Padgett.

“We haven’t had a problem with any client we’ve had, and half of that is due to the strong resale value, the other half is obviously due to the credibility of the buyer. ” Hawker Pacific’s Jones agrees that the quality of the client is key to financing, but noted there are more financing options available than in the past.

“It stands up on the credit strength (of the applicant).

Just like every other transaction the same criteria applies, it’s just that there are more players offering it in the marketplace today. ” There are more credit providers just like there are more owners. While there are still few publicly listed companies that operate business aircraft, a broader range of companies and individuals are becoming involved.

“It’s very hard to draw a common theme through the buyers,” said Jones “The common theme through the buyers is that they’re currently in business and are very successful, they’re expanding their business or growing their business into areas that perhaps they previously weren’t participating in, and they can benefit from the use of the aircraft. There’s a variety of backgrounds, we certainly see a lot of activity in the resource sector, we’re probably seeing less activity from the property develop-ment sector. But across the board we are just seeing more activity from a variety of fields. ” The industry traditionally “has been a bit dogged about staying in the captive market, well we’re trying to talk to other markets, and being quite successful about it,” Padgett said. He cited Aeromil’s sponsorship of events like the Classic Adelaide car rally and even opening a shopfront in the Sydney CBD this month (December) as evidence of this approach to reaching new customers.

“We’re going to be displaying the ability to buy aeroplanes and charter aeroplanes and probably learning to fly to corporate clients,” Padgett said of the Aeromil shopfront. “It will be a very upmarket sales office, very similar to a Ferrari dealership. ” New aircraft types are also stimulating demand and drawing new customers, particularly the smaller jets like the new Citation Mustang.

“We’re also seeing a different type of client,” said Padgett. “For example we’ve 19 Mustangs on order and we’ve sold 11 of them, and they’re to different sorts of people – private individuals, middle sorts of companies, private companies. So it’s not just single pilot guys who are getting out of other aeroplanes. It’s a whole new market. ” But right through the manufacturers’ product ranges there is strong demand.

“An aeroplane like the Sovereign, a big cabin class aeroplane, which has fantastic performance and range characteristics, you can’t get them,” said Padgett. “We have one on order, which we were very lucky to get, for 2009, and there’s probably six or eight people very keen to see that aeroplane. ” Midsize aeroplanes like the Sovereign, Bombardier Challenger series and Hawker 850XP series are certainly growing in popularity.

“There’s quite a lot of midsize jets in Australia because most of them can fly non-stop around Australia,” noted David Bell.

And at the top end of the spectrum, Hawker Pacific reports good local interest in the Dassault Falcon Jet line.

“We have a 7X which is ordered for delivery in 2010 and we have significant levels of interest for the 7X and certainly the 900EX,” said Jones.

Despite all the growth in business aircraft activity, so far the industry seems to have avoided any real growing pains. There are several large maintenance organisations around the country to service corporate aircraft, such as ExecuJet at Sydney Airport, Executive Airlines at Essendon and Aeromil Pacific and Hawker Pacific at Bankstown, while the pilot shortage now gripping regional airlines has not really impacted the local business aviation scene.

“It is an issue but it hasn’t caused us any great drama yet,” said Tony Jones.

“You don’t get a lot of movement of pilots in business jet operations,” said ABAA’s Bell. “Most of the captains have been there for quite a long time and they’re quite mature people, they’re in their 40s and 50s, but there obviously has got to be replacements for them.

The first officers are usually younger, but even they are quite loyal. It’s quite surprising really. Some go off to the airlines but I think they really enjoy their jobs. ” Bell says there is also an awareness in the industry of the need to provide appropriate pilot training, particularly to first time jet operators that might be stepping to a new light jet like the Mustang.

“Some of those owner/ pilots may not be properly experienced, some of them will be fairly low timed pilots, and there is a scheme to have some older pilots sit in with them for a while. Quite a few of the manufacturers and their representatives in Australia are very aware of that and won’t let new owners go off if they’re not happy with them. ” In particular Aeromil is currently in the process of setting up its own Cessna Pilot Centre at Maroochydore aimed at teaching prospective owner/ pilots how to fly, another tool it is using to develop the business aviation market into the future – a future that looks very bright.

“The market is strong for next year and we already have a solid order book for next year, so I think it will be another big year for us,” said Tony Jones.

“I think the only thing we all have to keep our eye on is to make sure there isn’t any credit impediments as a result of the US (sub-prime mortgage credit problem) situation,” Steve Padgett concluded. “But I think because of the strong resale values of aeroplanes that certainly won’t happen. It would be the only slight ‘blip’ that I could see. Otherwise it’s very much blue skies. ”