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10 Eclipse announced a price increase from $1.6 million to taxi market. Separately, press reports indicate that the company $2.15 million in mid-2008. A total of 260 units were delivered has revised its latest 10-yr market forecast for worldwide busi- through the end of 2008. ness jet sales, indicating faster growth in emerging markets and Although press reports indicated that the company had an slower growth in North America. Based partly on Embraer's order backlog of 2,600 units in June 2008, approximately historical pattern of sales and press reports of interest from 1,400 of those were from the air taxi startup DayJet, which other areas, it is expected that perhaps half of the Phenom pro- ceased operations in September 2008 after purchasing 28 duction will be destined for the U.S. market. This compares Eclipse aircraft. DayJet announced that it is unlikely that the with an aggregate historical average of about 25% non-U.S. company will operate in the future. This left approximately sales in the GA market overall. 1,200 orders on the Eclipse books. At various times, press reports had indicated Eclipse's pro- The Fractional Ownership Market duction goal to be anywhere between 2 and 4 units per day, with a break-even point of 500 units per year (although this was In addition to traditional GA sales for private, business, before the 2008 price increase). But in August 2008, Eclipse an- and corporate use, there are some indications that VLJs may nounced it was laying off 38% of its workforce. By October be a viable option in the fractional ownership market. But 2008, at least two industry analysts projected that Eclipse would there is little evidence that any of the major participants-- cease U.S. production of the Eclipse 500 entirely in 2009.7 Pro- NetJets, Flexjet (Bombardier), Sentient (fleet shares), or Flight duction actually stopped in October 2008, and the company Options (used aircraft)--has indicated direct interest in filed for Chapter 11 bankruptcy protection in November. By purchasing VLJs for their fleets.8 On the other hand, some March 2009, company management and a number of creditors smaller companies do have plans to include VLJs as an option were seeking a Chapter 7 liquidation. in their fractional ownership programs. In addition, there are a number of other fractional providers of high-end piston Cessna Citation Mustang and/or turboprop aircraft that compete near the same mar- ket space as VLJs. The Cessna Citation Mustang twin-engine VLJ was certi- Based on these and other reports of small GA fractional fied in late 2006. The current base price of the aircraft is ap- ownership plans, the GA fleet forecast below accounts for a proximately $2.8 million, and its primary target market does small but increasing number of VLJ sales for fractional use not include air taxi services. The company delivered a total of above and beyond the forecasts for specific manufacturers. 45 Mustangs in 2007 and 101 aircraft in 2008. The company announced in October 2008 that it had achieved its planned full-rate annual production level and expected to produce Baseline GA Fleet Forecast 150 units per year starting in 2009. Based on the competitive analysis and the projected over- all size of the net U.S. market as shown in Figure 2, the base- Embraer Phenom 100 line forecast for net U.S. VLJ shipments for GA use are based on the following assumptions: The Embraer Phenom 100 is larger than other VLJs; it is also somewhat faster in terms of cruising speed and has a fairly Overall market size will rise according to the estimates sophisticated wing design. It is clearly aimed at the upper end shown earlier in Figure 2. of the VLJ market, with a unit price of about $3.2 million. FAA By 2011, the approximately 120 annual Eclipse deliveries certification was achieved in December 2008 and two aircraft originally envisioned for the U.S. market will be replaced were delivered by the end of the year. Embraer has consis- by other manufacturers with ongoing VLJ development tently announced order statistics for the aircraft only in combi- programs such as Honda and Piper. nation with the larger Phenom 300. In June 2008, the company Shipments of the Cessna Mustang for GA use will reach the claimed close to 800 firm orders for the two jets. company's stated goal of 150 annually in 2009, with 40% The company announced that combined production for the eventually going to foreign customers.9 two Phenom aircraft could ramp up to the 120150 range in 2009. As with Cessna, Embraer believes there is a viable market 8 for their aircraft independent of the success or failure of the air CitationShares, which is a joint venture of Cessna and TAG Aviation, focuses on fractional ownership of smaller aircraft including the Cessna CJ1, which is considered part of the "light jet" category in this analysis. 7 9 Teal Group Corporation, "World Military & Civil Aviation Briefing," According to Cessna, 60% of current Mustang orders are designated October 2008; Forecast International, "Forecast International Projects for non-U.S. customers (http://www.very-light-jet.com/vlj-news/vlj- End of Eclipse 500 Production" press release, October 28, 2008. manufacturer-news/cessna-citation-mustang-fleet-reaches-100.html).