Engine Maker PWC Laments Tight Financing, Pricing Pressures In Bizjet Market
Among the few economic forces behind the rather tepid recovery of the market segment covering small and medium-sized business jets, perhaps the most influential rests with the world’s financiers. While the large business jet segment remains buoyant due to its comparative immunity from the vagaries of liquidity availability, for the rest of the market a lack of attractive financing terms remains a serious problem, according Pratt & Whitney Canada (PWC) president John Saabas. “The risk profile associated with business jets–smaller business jets–has changed, in terms of the interest rate at which people will lend money,” he said. “That hurts the ability to sell.”
Saabas explained that following the banking crisis, changes to the rules governing the measurement of risk profiles of certain kinds of loans hit business jets particularly hard, while defaults on loan payments led to a glut of low-time airplanes for sale, resulting in plummeting values.
“I think after the last crisis there were a lot of airplanes not paid for…half paid for; they were dumped off at bargain prices,” he said. “[The number of] less-than-five-year-old aircraft for sale were never as high and the prices never as low. If you’re an OEM trying to sell, [and] the used price of something with 500 hours on it is thirty percent less than your list price, what are you going to do? You’re going to drop the price of the new to be able to sell. Or you have to add new features or give away other things.”
Still, Saabas expressed optimism for the future based on signs of gradual economic improvement in the U.S. and rising confidence in markets in general. But that doesn’t mean aerospace companies can sit still and wait for a recovery. Pratt & Whitney Canada, for example, continues demonstrator testing on its PW800, a large turbofan model designed for the now defunct Cessna Citation Columbus. Using the same core as PW1000G geared turbofan developed for the Bombardier CSeries, the engine remains vital to the company’s efforts to more effectively penetrate the heavy business jet market.
In the business aviation sector, PWC’s existing applications include the PW305 turbofan on the Bombardier Learjet 60 and the Hawker 1000, the PW306 on the Gulfstream G200 and Cessna Citation Sovereign, the PW307 on the Dassault Falcon 7X and the Learjet 85 and the PW308 on the Hawker 4000 and Dassault Falcon 2000EX/DX/LX.
Saabas named three factors that have helped companies sell airplanes like the Bombardier Global 6000, Gulfstream 650 and Dassault Falcon 7X trijet. First, he said, lenders still offer attractive financing rates for large business jets younger than 15 years old; second, the high-net worth individuals who generally buy such aircraft don’t necessarily need financing, and, finally, the growing number of private jet buyers in regions such as the Middle East and Asia generally want long-range equipment for intercontinental flights.”
“There are only 300 heavy, large, long-range jets made a year,” noted Saabas. “So even if that grew at a couple of percent a year, the number of billionaires is growing at 3 or 4 percent a year…You don’t have to make a whole bunch of sales to keep that part of the market strong.”
While stressing the importance of the PW800 to P&WC’s fortunes, Saabas balked when asked about reports of the engine possibly going on a new Gulfstream jet.
“We have no program to announce…we have a demonstrator program,” he said. “We don’t get money from UTC [parent company United Technologies] to launch a full program until we get a committed customer. We don’t have that…We’re in discussions with everybody. But until the skinny lady sings, there’s nothing.”