Avgroup log
Fall, 2007
Vol 2, Issue 6
Observations on Our Industry
Thoughts and Comentary
In This Issue
XOJET
The Cessna Columbia
Speed Bump Ahead
Greenwich Aero Group
Quick Links

Greetings!
Pen & Ink logo

The NBAA convention and trade show, held this year in Atlanta in late September, was as popular as ever.  While some say it did not set a record for attendance (32,000), it seemed like a record crowd to me.  The number or exhibitors, over 1,000 did set a record.  But it was not the crowd that caught my attention.  It was who was in the crowd.  It was a more international crowd than I have ever seen before.  Everywhere there were groups discussing some aircraft or service provider in a language I did not understand.  One language I did understand was the lingo of Wall Street.  Professional investors were walking the show looking for the next-new-thing as never before.  I will comment briefly in the articles below on some of the highlights of the show.  As always I will be expressing my thoughts throughout the year on Hangar Talk.

I don't work in a vacuum and I welcome your thoughts and comments on what I write. I welcome your ideas.  Please comment on Hangar Talk, drop me an email, or call me with your thoughts on our industry including the opportunities and emerging trends.

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XOJET
The new man in town

XOJETPerhaps the biggest announcement during NBAA week was the $2.5 billion orders for new business jets from XOJet.  Some might say, "XO who?"  (I will answer that in a moment.)  On day one, Monday, XOJet ordered 30 Citation Xs, and on day two, Tuesday, they announced an order for 80 Challenger 300s.  This was the biggest order ever for the very popular super-midsize Challenger 300.

XOJet was founded by Paul Touw, a successful Silicon Valley software entrepreneur and active pilot.  Touw owned a Citation X and liked it so much he bought a fleet.  XOJet is a fractional operator and it isn't.  Customers can own a whole aircraft or a half of one.  XOJet launched their business in early 2005 with six Citation Xs.  In the first year they averaged 1,100 hours per aircraft.  This year David Bonderman, one of the founders of Texas Pacific Group, became an investor in XOJet.  Bonderman, a prolific user of business jets, appreciated the growing business aviation market and the management talent at XOJet.  I believe this well-managed and well-financed company has a better than average chance of success.

The Cessna Columbia
A Cirrus Killer?

New CessnaA few days before the throngs arrived in Atlanta the word spread that Cessna was making moves on Columbia Aircraft.  Some could not believe what they were hearing as never before had Cessna marketed an aircraft that had not been born in Cessna's engineering department.

In 1985 Cessna suspended production of their entire piston engine line of aircraft.  In 1985 the airframe technology was old and most of the aircraft could trace their heritage back to the 1940s and 50s.  When piston production began again in the 1990s all but three of the models were dropped and the revamped versions of the new 172, 182, and 206 were new only on the inside with updated avionics and some interior redesign.

Along came Cirrus with a sleek composite airframe and the interior of a Porsche.  Cessna's position as king of the single engine market fell to second place.  Rumors abounded about a buyout of Cirrus by Cessna but nothing ever came of it as Cirrus's market share continued to rise.  In the meantime, the engineers in the Cessna "Skunk Works" were madly working on a Cirrus killer, but when it flew over the crowd at Oshkosh (see above) it looked to some like a strutless 172.  (Remember the Cardinal?)  Perhaps the Columbia will be the long awaited Cirrus killer.  If not a killer, at least a good competitor, if only Cessna can overcome the "not-invented-here" syndrome.

Speed Bump Ahead
A Bit of Reality in the Excitement
Speed sign

While sitting in a meeting at the NBAA trade show I heard an announcement that the User Fee meeting would start in 10 minutes.  Only a few minutes later I overheard someone grumble that NBAA was proposing a dues increase in order to fight ATA's (the airline trade association) $11 million battle to shift more of the cost of ATC to business jets.

I have written about the serious system capacity problems in Hangar Talk several times, most recently Of Vacuum Tubes and Sealing Wax.  The delays that everyone who has flown anywhere this year are legendary.  While I was in Atlanta President Bush called the DOT Secretary, Mary Peters, to the White House wood shed and said, "Fix it.The last time we had a serious airspace capacity problem was when Reagan fired the striking air traffic controllers.  The solution was called GAR, General Aviation Reservations.  All general aviation including business jets were required to reserve space in advance for their flights.  The airlines flew as scheduled.  The FAA has a solution but it won't be ready until 2025, and considering the FAA's track record, I would not bet on that date.

If you are interested in learning how the views of some experienced and respected individuals outside of government feel the problem can be solved, read Of Vacuum Tubes and Sealing Wax.  Alfred Kahn, the father of airline deregulation, led off with a powerful argument in favor of changing the governance of ATC.  I was humbled and honored to be a part of this distinguished group.  If you click on the link above to read what I had to say, be sure and click on the links contained in the article.

New Arrival
More Consolidation
Greenwich logoA new company, Greenwich AeroGroup, Inc., exhibited this year at NBAA.  Actually it really wasn't really new as Greenwich is the holding company of two old line firms, Atlantic Aero and Western Aircraft.

While the new name and Website for Greenwich were new, both finalized only days before the show opened, Greenwich was a metamorphosis of Berkley Capital's aviation investment interests.  Berkley Capital is part of
W. R. Berkley Corporation, a very successful large causality insurance company listed on the New York Stock Exchange.  Like another successful investor with an insurance company, whose name also begins with B, Bill Berkley, Chairman of W. R. Berkley, uses business jets regularly and understands the growth of the industry.

(Now pardon a short commercial.) The Aviation Group was approached by Berkley and asked to develop an aviation investment strategy.  We did that and in the first six months of this year we found and assisted in the closing of their first two aviation acquisitions.  Are more in the wind?  Stay tuned.
 

Thanks for reading,

Jim Haynes