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Greetings!
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
Perhaps
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.
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The Cessna Columbia A Cirrus Killer?
A 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.
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Speed Bump Ahead A Bit of Reality in the Excitement
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
A
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.
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