AvBuyer Magazine February 2015

AVBUYERB U S I N E S S A V I A T I O N I N T E L L I G E N C E

February 2015

proudly presents

2014 Gulfstream G650Serial Number 6088

See pages 32 - 35 for further details

Aircraft Finance Review

Engine-MaintenanceManagement

Aircraft ComparativeAnalysis Phenom 300

Safety Focus:When No is Necessary

THIS MONTH

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Avjet FC February 2015_FC December 06 22/01/2015 10:44 Page 1

Project2_Layout 1 30/01/2015 10:04 Page 1

AIRBUSA318 Elite . . . . . 44A319-115 . . . . . . 44A319 CJ . . . . . . . 156A320 VIP . . . . . . 156

BOEING/MCDONNELLDOUGLASBBJ . . . . . . . . . . . 19, 33, 35, 41, 52, 75BBJ2 . . . . . . . . . . 44CRJ-200 ER . . . . 19, CRJ-200 LR . . . . 52, 156CRJ-900 . . . . . . . 75 S27-200 VIP . . . 75 737-200 VIP . . . . 41

BOMBARDIERGlobal 5000 . . . . 10, 44, 52, 139, 156Global 6000 . . . . 61, 73, 156Global Express . 10, 41, 52, 83, 156Global Express XRS . 44, 156Challenger300 . . . . . . . . . . . 12350 . . . . . . . . . . . 61 600 . . . . . . . . . . . 25 601-3A . . . . . . . . 73, 94 604 . . . . . . . . . . . 26, 44, 52, 75, 77, 79,. . . . . . . . . . . . . . . 83, 94, 156605 . . . . . . . . . . . 44, 52, 72, 156850 . . . . . . . . . . . 31, 52, 79, 156Learjet 31A . . . . . . . . . . . 79, 9531ER . . . . . . . . . . 6935A . . . . . . . . . . . 94 36A . . . . . . . . . . . 149 40XR . . . . . . . . . . 14345 . . . . . . . . . . . . 13, 21, 47, 58, 73, 79,. . . . . . . . . . . . . . . 9545XR . . . . . . . . . . 13, 35, 73, 79, 15660 . . . . . . . . . . . . 21, 35, 52, 73,60SE . . . . . . . . . . 95, 15660XR . . . . . . . . . . 53, 73, 95, 133

CESSNACitationII. . . . . . . . . . . . . . 43V. . . . . . . . . . . . . . 13, 73X . . . . . . . . . . . . . 12, 26, 35, 37, 47, 73,. . . . . . . . . . . . . . . 155XL . . . . . . . . . . . . 12, 43, 131XLS . . . . . . . . . . . 37, 58

XLS+ . . . . . . . . . . 37, 43, 156CJ . . . . . . . . . . . . . 69 CJ1+ . . . . . . . . . . 13, 37CJ2 . . . . . . . . . . . . . 13, 39, 43, 83CJ3. . . . . . . . . . . . 58, 69, 83, 144Bravo . . . . . . . . . 39, 94, 148Encore . . . . . . . . 13Encore +. . . . . . . 13Jet . . . . . . . . . . . . 150M2 . . . . . . . . . . . . 43Sovereign. . . . . . 12, 155SII . . . . . . . . . . . . 68Ultra . . . . . . . . . . 68, 73, 145414A . . . . . . . . . . 43

EMBRAEREMB-145 EP . . . 41Legacy 600 . . . . 53, 94, 135, 156Lineage 1000. . . 53Phenom 100 . . . 73

FAIRCHILD DORNIER328 . . . . . . . . . . . 43 F300 . . . . . . . . . . 148

FALCON JET7X . . . . . . . . . . . . 3, 11, 45, 47, 68, 1547X EASy II . . . . . 83 10 . . . . . . . . . . . . 9420E . . . . . . . . . . . 83 20F 5BR . . . . . . . 73 20-5F. . . . . . . . . . 155 50 . . . . . . . . . . . . 12, 73, 77, 155, 15450-40 . . . . . . . . . 15550EX . . . . . . . . . . 3, 12, 58, 154900B . . . . . . . . . . 11, 12, 25, 61, 73, . . . . . . . . . . . . . . . 94, 142, 155, 156, . . . . . . . . . . . . . . . 154900C . . . . . . . . . . 68, 154900DX . . . . . . . . . 45900EX . . . . . . . . . 11, 21, 154900EX EASy . . . 53, 155, 156, 1542000 . . . . . . . . . . 3,11, 26, 45, 47, 73, . . . . . . . . . . . . . . . 94, 1292000LX . . . . . . . . 3,11, 26, 37, 58, 156, . . . . . . . . . . . . . . . 1542000S . . . . . . . . . 3, 11

GULFSTREAMIV . . . . . . . . . . . . . 10, 11, 35, 73, 148IVSP . . . . . . . . . . 19, 51, 134, 156

V. . . . . . . . . . . . . . 61, 72, 97, 130, 148100 . . . . . . . . . . . 37 150 . . . . . . . . . . . 61, 73200 . . . . . . . . . . . 10, 25, 45, 79, 95, . . . . . . . . . . . . . . . 155280 . . . . . . . . . . . 137300 . . . . . . . . . . . 61 450 . . . . . . . . . . . 7, 10, 19, 35, 53, 95, . . . . . . . . . . . . . . . 142550 . . . . . . . . . . . 7, 10, 20, 34, 44, 51, . . . . . . . . . . . . . . . 61, 73, 83, 138, 156650 . . . . . . . . . . . 1, 10, 32, 61

HAWKER BEECHCRAFTBeechcraft 400A . . . . . . . . . . 39, 94Premier 1 . . . . . . 73King Air200 . . . . . . . . . . . 94350 . . . . . . . . . . . 73, 77B90 . . . . . . . . . . . 94B200 . . . . . . . . . . 37, 39, 69C90 . . . . . . . . . . . 83, 150C90B . . . . . . . . . . 13, 150F90-1. . . . . . . . . . 69Hawker400XP . . . . . . . . . 39, 73, 79, 150800A . . . . . . . . . . 68800SP . . . . . . . . . 148800XP . . . . . . . . . 7, 25, 47, 73, 77, 132, . . . . . . . . . . . . . . . 149900XP . . . . . . . . . 121000B . . . . . . . . . 1564000 . . . . . . . . . . 79

IAIAstra . . . . . . . . . . 95Astra SP . . . . . . . 77Astra SPX. . . . . . 73

SABRELINER65 . . . . . . . . . . . . 94

PIAGGIOAvanti P180 II . . 83

PILATUSPC 12 NG . . . . . . 141

PIPERCheyenne II . . . . 83Meridan . . . . . . . 69

SOCATATBM 700B . . . . . 95TBM 700C2 . . . . 95, 140TBM 850. . . . . . . 39

HELICOPTERSAGUSTAWESTLANDA109E Power. . . 13, 14, 156A119 KE . . . . . . . 83AW139 . . . . . . . . 14 Grand . . . . . . . . . 83

BELL206 BIII Jetranger 14206 L4 . . . . . . . . . 149212 . . . . . . . . . . . 149407 . . . . . . . . . . . 136 412 EMS . . . . . . 149427 . . . . . . . . . . . 73

EUROCOPTERAS 350 B3 . . . . . 83BK 117C1 . . . . . . 83EC 120B . . . . . . . 83EC 130 B4 . . . . . 37, 75EC 135 T1 CDS . 83

SIKORSKYS-92A . . . . . . . . . 21 S-76C+ . . . . . . . . 14S-76C++ . . . . . . 14, 21

CORPORATE AVIATIONPRODUCTS & SERVICESPROVIDERSAircraft Engine /Support . 57, 65, 113,. . . . . . . . . . . . . . . . . . . . . . . . 119, 152Aircraft Perf & Specs . . . . . 78Aircraft Title/Registry . . . . 105, 107, . . . . . . . . . . . . . . . . . . . . . . . . 109, 111, . . . . . . . . . . . . . . . . . . . . . . . . 115Ground Handling . . . . . . . . 119

Aircraft For SaleAIRCRAFT PAGE AIRCRAFT PAGE AIRCRAFT PAGE AIRCRAFT PAGE

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find one todaywww.AvBuyer.com

4 AVBUYER MAGAZINE February 2015

P004 AC Index Feb15 22/01/2015 14:33 Page 1

n aviation parlance, we call it turbu-lence. The financial community callsit volatility. As the first month of theNew Year played out, volatility was

very much in evidence. At mid-month, theDow Jones industrial average swung byover 425 points in just a few hoursupsharply in the mornings opening tradesand then plummeting, bouncing back tosettle almost flat for the day. Whats aninvestor to do?

When faced with turbulence we, in avia-tion, rely on technology and intelligence tofind calmer skies. Weather services as wellas onboard radar identify the best route toa smoother ride. Knowledge of the air-crafts maneuvering airspeed provides theassurance that structural integrity will bemaintained. Advanced avionics enablepilots to pinpoint their location in even themost adverse conditions. Special safetysystems alert pilots to windshear. The keysare knowing what to do and when to act -and having timely information to apply thatknowledge effectively.

Making the right management decisionsregarding business aircraft also requirestimely information as well as perspectiveregarding how best to use suchintelligence.

AvBuyer is dedicated to bringing youtimely information that aids your under-standing of the factors shaping BusinessAviation, and helps you make the bestdecisions regarding acquisition, operationand overall management of businessaircraft. Within this edition, youll find

indicators of the marketplace, case studiesto reflect real-world conditions, and infor-mation about products and services. Weanalyze aircraft in detail and discuss flightdepartment leadership. Your informationalneeds define our editorial mission.

We employ print as well as electronicmedia online, and we broadcast email tokeep professionals such as you informed.Such is our commitment to you.

This month, Ken Elliott continues hisseries on aviation mandates with the aim ofproviding clarity to a very important butconvoluted subject. Dave Higdon address-es engine maintenance. This forms one ofa group of Flight Department section arti-cles centered on powerplants this month.

Reflecting Daves skill as an experiencedobserver of the Business Aviation commu-nity, he also surveys the changing nature offinancing for business aircraft a specialfocus for our BizAv Indicators section.David Wyndham adds his perspectives onfinancing options within our Boardroomsection.

Not to be missed this month, Pete Agurand George Dom provide key insights foraviation managers, while Mario Pierobonchallenges aviation professionals to consid-er when saying no to the boss is in thecompanys best interests.

AvBuyeryour source for BusinessAviation Intelligence.Jack OlcottEditorial Director & Publisher,AvBuyer

I

Finding Smooth Air

WelcomeEditors

February 2015 AVBUYER MAGAZINE 5Advertising Enquiries see Page 8 www.AVBUYER.com

EDITORIALEditorial Director / Publisher

J.W. (Jack) Olcott1- 201 572 9284

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Commissioning & Online EditorMatthew Harris1- 800 620 8801

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Editorial Contributor (USA Office)Dave Higdon

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Possibly the worlds most recognized experton the value of Business Aviation, JackOlcott was President of the NBAA from 1992through 2003, and today Jacks network andpersonal knowledge of Business Aviationuniquely qualifies him as Editorial Directorand Publisher, AvBuyer. [email protected]

Editor Welcome_JMesingerNov06 20/01/2015 12:39 Page 1

Editorial Focus

Aircraft Finance ReviewFinancing business aircraft seemed more

flexible in 2014 than in recent years,notes Dave Higdon. Could 2015 be an optimal time for an aircraft purchase?

22

8 AVBUYER MAGAZINE February 2015 Aircraft Index see Page 4www.AVBUYER.com

Owned Aircraft Sales TrendsMarket Indicatorstification

Engine-Maintenance ManagementWhats the best way to manage the maintenanceneeds of aircraft powerplants, ensuring they per-form at their optimum level for your corporation?

Aircraft Comparative Analysis-Phenom 300

How does Embraers Phenom 300 performagainst the Citation CJ4? Find out in thismonths Aircraft Comparative Analysis

The Main IngredientRani Singh discovers how Business Aviation

is the recipe for success to Brad Pierces restaurant equipment business.

54

96

102

Contents Layout Feb15 21/01/2015 17:44 Page 1

ContentsVolume 19, Issue 2

February2015

BizAv Intelligence15 Market Indicators: Analysis,

Reflections, Trends and Comment

28 Finance vs Cash: The key trendsfor new and used aircraft transactions

30 Residual Values: The effect onaircraft financing

36 Turbine Trends: Update on new and in-development business jets

Flight Department46 Aviation Mandates: What you

should know about CPDLC within NextGen (Part 1 of 2)

62 Engine Audits: Discover the key for avoiding a nasty surprise!

66 Engine Pre-Purchase Inspections: Understand an aircraft engines status and costs

70 Your Aviation Services: Are you aiming too low? (Part 2 of 2)

74 Experience or Proficiency: Which pilot attribute would you choose?

80 When No is Necessary: Haveyou ever had to tell the bossNo?

82 Just Say No: Three small wordswith very big safety implications

84 Retail Price Guide: Twenty-year Medium Jet price guide from Bluebook

88 Specifications: Medium Jet performance and specifications comparisons

Boardroom104 Cash, Finance or Lease: How

should you obtain your next airplane?

108 Flight Department Liquidation: What happens when flight department closure is necessary?

112 That Better Aviation Insurance Deal: Is it really such a gooddeal?

116 Chartering your Company Aircraft: Have you considered the tax issues?

Community121 BizAv Review: Dassault Falcon

8X Roll-Out, News,Appointments & Events

Next MonthGAMA Year-End 2014 Shipment Analysis

Safety: Keeping Pace withTechnology

Global & Domestic Flight Planning


Contents Layout Feb15 21/01/2015 17:45 Page 2

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December 2014s Month-Over-Monthflight activity followed the usual holidaytrend and posted a decrease fromNovember to finish the period down -2.2% overall. Operational categorieswere on the negative side, with theexception of the Part 135 sector, whichsaw a 1.7% increase from November. ThePart 91 and Fractional markets posteddecreases of -5.0% and -1.1%respectively.Looking at the aircraft categories, allposted a decrease for the month withlarge cabin aircraft reporting the largestdrop, down -3.3%. Small and mid-sizecabin aircraft posted declines of -2.1%and -2.7% in that order. The turbopropsegment posted a decrease of -1.3%month-over-month. There were a fewbright spots in the monthly numbers: Part135 turboprop activity increased 5.8%over November, for example.

Year-Over-YearReviewing year-over-year flight activity(December 2014 vs. December 2013),TRAQPak data indicates that December2014 posted an increase for thethirteenth month in a row, up 1.6%. Theresults by operational category weremostly positive with Part 135 reportingthe largest growth, up 3.3%. The Part 91market finished the period up 1.6%.

The Fractional market saw its firstdown month since March 2014, with adecline of -2.7% from December 2013.

Flight activity by aircraft category waspositive for all aircraft, with turbopropsleading the way, up 3.0%; the fourthstraight month of increases for thatmarket.

Small and mid-size cabin aircraftposted year-over-year increases of 1.9%and 0.1% in that order. The large cabinmarket finished the period up 1.1%. Thelargest year-over-year gain for anindividual segment occurred in the Part135 turboprop market, which saw anincrease of 11.4%.

MI www.argus.aero

BizAv Activity - US & CanadaBizAv Activity - EuropeThere were 50,825 European Business Aviation flightsin December, according to WINGX. Thats a -0.6%decline year-on-year (YOY). This completes 2014activity, with the full-year ending -0.5% short of 2013(equivalent to 4,399 fewer flights during the year).Flights in Western Europe in December gained 3% YOY,with the number one market - France - gaining 5.2%YOY (+500 flights). Both the UK and Switzerland wereup 4%, and Turkey bounced back with 8% gains. Themonths overall activity was offset by small declines inGermany and Spain, a larger drop in Italy, and still-accelerating falls in activity in Russia (-18%) andUkraine (-56%). Flights from the CIS to Europe weredown -23% during 2014.

Russia and Ukraine activity is Heavy Jet oriented,and its rapid decline has influenced the overall demandfor business jets (down -3%) in December, andparticularly for heavy jet charter (down -13% YOY). Demand for Turboprop flights increased in

December, up 9% in Netherlands; 12% in Austria;and 15% in Germany.

Super Light Jets gained some charter activity,Very Light Jets increased private missions by>25%, and ULR jets flew >10% additional sectorsin both private and commercial operations.

Midsize and Light Jet segments lost activity inDecember, respectively -10% and -5% in hoursflown. Light Jet charter flights slightly increased,but were offset by heavy declines in private flightactivity in this segment.

According to Richard Koe, Managing Director ofWINGX Advance, Activity in Western Europe haspicked up over the last few months, and transatlanticconnections have been strong all year, but flights out ofEastern Europe are falling around 15%, andconnections with CIS territories were down 24% for theyear.

A positive 2015 outlook depends on the avoidanceof a deflation-led triple dip economic recession in theEU, a rapprochement with Russia, and the transmissionof resurgent business optimism from the US to theEuropean continent.MI www.wingx-advance.com

December 2014 vs November 2014 PPart 91 PPart 135 FFractional AAll TTurboprop -5.2% 5.8% -10.2% -1.3% SSmall Cabin Jet -3.6% -1.2% 2.3% -2.1% MMid-Size Jet -5.3% 0.5% -2.5% -2.7% LLarge Cabin Jet -6.4% -0.5% 5.1% -3.3% AAll Combined -5.0% 1.7% -1.1% -2.2% DDecember 2014 vs December 2013 PPart 91 PPart 135 FFractional AAll TTurboprop -2.0% 11.4% 1.7% 3.0% SSmall Cabin Jet 3.2% -1.7% 8.6% 1.9% MMid-Size Jet 5.0% -0.2% -6.8% 0.1% LLarge Cabin Jet 2.4% 0.7% -3.6% 1.1% AAll Combined 1.6% 3.3% -2.7% 1.6%

!

MARKET INDICATORS BIZAV INTELLIGENCE


Trends, Forecasts, Analysis & Opinion

MarketIndicators _Layout 1 21/01/2015 11:54 Page 1


2015 BizJet Deliveries to Soar!The business jet market is expected to grow by double digitsin 2015, according to J.P. Morgans latest Business JetMonthly update.Deliveries increased by about three percent in 2014, markingthe first measurable growth since 2008, J.P. Morganestimated. Deliveries should jump by 13 percent in 2015,buoyed by the introduction of models such as the EmbraerLegacy 450/500, Cessna Citation Latitude and HondaJet.Inventory data, used-pricing stabilization and increased flyingin the U.S. all support optimism for a return to growth, J.P.Morgan added.

Despite this optimism, J.P. Morgan sees a softening inemerging market demand both from government restraintsand lower oil prices. The weakening of emerging marketsparticularly affects large-cabin aircraft, since two-thirds of thedemand for this category is outside North America.

Only one-third of the demand for light jets comes from

outside North America.This distribution of risk is a reversal from the prevailing

market dynamic for most of the time since the financial crisis,in which non-U.S. demand has supported large-cabin aircraftproduction while light jets have lagged, J.P. Morgan noted.MI www.jpmorgan.com

BIZAV INTELLIGENCE MARKET INDICATORS

The environment in the Business Aviationindustry within the CIS has beensomewhat ambivalent, according toKlasJet. The regions traffic to Europealone has dropped up to -23% while theaverage oil price for 2015 is expected tobe $85/barrel.

Owing to the challenges of the recentfew months, traffic within the CIS hasexperienced an overall yearly decrease of5-10%, according to WingX. While theeconomic and political environment willlikely continue to stunt marketdevelopments in 2015, KlasJets CEOVitalij Kapitonov believes it is too soon tostart panicking, noting theunprecedented reduction of oil prices asa positive factor.

It is still too soon to speak about theworsening of the overall businessconditions, he insists. After all, duringthe last few months Russia has seen atleast one new player SetFly Group -entering the market, which meansdemand for private travel remains high.What has changed, however, is theportrait of the potential customer

Kapitonov observes clients can beexpected to become even more cost-conscious, especially as regards choosingtheir business travel provider. Localcompanies have already become morereluctant to pay for short-haul businessclass flights, and this trend can beexpected to strengthen. Competitionwithin the segment has intensified with

business travel operators and legacycarriers both competing for premium-class clientele.

More business jet owners areexpected to search for an optionallowing them to reduce the risksassociated with the high-costs of aircraftownership. Some will try to sell their jetswhile others will seek aircraftmanagement providers to make the mostof their machines.

All in all, while political unrest andweakening of regional economies willundoubtedly present a whole set ofchallenges for the market players, mostconsumers will be able to benefitsubstantially from the stronger industryperformance as lower industry costs andefficiencies are passed through,concludes Kapitonov.MI www.klasjet.aero

Changing Face of the CIS Canadian BusinessAviation EconomicImpactThe Canadian Business Aviation Associations (CBAA)Business Aviation Economic Impact Study clearly showsthe size and importance of Business Aviation to theCanadian economy.Providing both a description of how businesses use theiraircraft and crucially, the dollar value contribution to theCanadian economy some of the study highlights reveal:

Business Aviation contributes $3.1 billion in directeconomic outputs and $650 million in taxes everyyear;

Employs 11,500 people directly, with $800 millionin annual wages;

Provides higher wages: Business Aviation annualwages average $69,000, well above the nationalaggregate average of $47,000;

Canada is home to approximately 1,900 BusinessAviation aircraft, including fixed-wing (76%) androtor (24%), spread across Canada with themajority based in Quebec, Ontario, Alberta andBritish Columbia;

Business Aviation is responsible for almost one outof five flights, or 18% of all domestic airmovements in Canada;

Furthermore, Business Aviation in Canadacontributes an estimated $2.6 billion and $5.4billion, in total gross domestic product (GDP) andtotal economic output, respectively.

To obtain a full copy of CBAAs study, contact theassociation direct.

MI www.cbaa-acaa.ca


Oil prices have fallen some fifty percent oflate, and if sustained its bound to havesome implications for an industry thatrelies on it, predicts Brian Foley. But not asyou might expectOne might initially think that a drop in oilprices would benefit the entire civilaviation industry, but as Foley drills a littledeeper there are actually two aspects toit: The obvious benefactors of this

windfall are the airlines who onlyrecently had fuel bills that accountedfor close to a third of their totaloperating costs. While the initialbenefit of lower jet fuel may bediminished or postponed whileunwinding from fuel hedgingcommitments, this will eventually havea huge overall impact on profitability.

Cargo and package carriers are in aposition to reap the benefits of lowerfuel prices (although it will beinteresting to see how much longerthey can justify the add-on fuelsurcharges).

The low-end of General Aviationwould benefit, from small pistons andhelicopters through small- andmedium-sized business jets (CessnaCitations and Bombardier Learjets).Lower fuel prices will further act as asales catalyst since the smallersegment is very price elastic.

MRO and parts providers would see anincrease in activity if airlines keepcurrent aircraft longer rather thantaking new ones. And FBOs, charter

and fractional providers could get aboost from increased flying activitydue to lower fuel operating costs andan improving economy.

Theres a flip-side to lower oil prices thatnegatively affects a much larger swath ofthe industrys overall delivery value. Airliner OEMs and suppliers risk

weakened business cases for theirnew, premium-priced, fuel-efficient jetsfor which there are thousands oforders pending. With cheaper fuelmaking for a smaller component ofoperating budgets, airlines may re-evaluate their new jet orders, in somecases favoring retaining their relativelyyoung fleets even if theyre burningmore low-priced kerosene.

The cost to extract energy for offshoreoil and gas is typically higher than onland. Oil crews are flown to rigs onlarge, expensive helicopters whichrepresent a big percentage of the civilrotorcraft industrys yearly deliveryvalue. Demand for this type ofequipment will languish if new drillingis put on hold and rigs not breakingeven are idled. In an unfortunatetiming of events, a number of newhelicopter models have justundergone costly development by themajor OEMs to serve this market.

A final change will be seen in the salesdistribution of business jets. Ever sincethe recession the only signs ofstrength were from the biggest, mostexpensive models, generated by China

and other emerging markets. Nowwith lower oil and commodity pricescoupled with weaker economies, thesemarkets have been greatlycompromised. In place of big cabinprivate jets, the decimated small- andmedium-sized jets will rise to theoccasion since this segments salescenter of gravity is aligned not withcommodities, but with the fortunes ofthe US economy.

Major structural changes are alreadyquietly afoot, and the effects will beprofound, Foley summarizes.MI www.brifo.com

MARKET INDICATORS BIZAV INTELLIGENCE

The Template for Success(Part 2)Last month, Richard Aboulafia outlined seven areas of success that have helped Embraernot only break into the top five Business Aviation OEMs, but do so with excellence. Thismonth, he looks at the challenges it faces to stay there

1. What next? The combination of product launch discipline and sheer luck we discussedlast month resulted in some exceptional programs, like the Legacy and Phenom businessjet series. But I have no idea what Embraer could do next. Competing with Airbus andBoeing directly is a charmless idea, while Marco Tulio Pelligrini, Embraer Executive JetsCEO, makes the smart point that Dassault and Gulfstream are flooding the segments righton top of Embraers niche with some impressive new products. After its crop of newprograms kicks in, Embraer might need to live in a world where its harder to outperformthe broader market.

2. Brazil. Nice people, awful government. The bureaucracy is wretched, and badgovernance produces world-class scandals (Petrobras). And then theres the economy.

Once the first letter in BRIC, Brazil has been flirting with recession for several years now.All of this is difficult for Embraer, which is at least somewhat dependent on home countrydefense spending and general political support.

3. KC-390 orders. Getting 28 Brazilian Air Force orders and a few dozen letters of interestwas like picking low-hanging fruit. To get more than these orders, Embraer needs tocompete directly with Lockheeds C-130J - a big challenge.

4. E2 pricing. Of the three jetliners about to be re-engined, the E-Jets had the shortest lifein their current incarnation, and the lowest production numbers. The E2 will dominate itsniche, but given those circumstances Embraer might find pricing a challenge relative tothe larger jets (although direct competitors Mitsubishi and Bombardier have that problemto even worse degrees).

Summary: Given the companys track record, I would bet Embraer overcomes the aboveheadwinds. Theyve faced greater challenges, and have come to dominate almost all of thesegments theyve chosen to attack. I cant remember the last time I visited an airframerthat impressed me with so much competence and professionalism

MI www.tealgroup.com

Unexpected Oil Price Impacts

!




BIZAV INTELLIGENCE MARKET INDICATORS

In-Service Aircraft Technical Condition & PriceAn Asset Insight Index analysisconducted on November 30, 2014covering 76 fixed-wing models and1,493 aircraft listed For Sale revealedthe following Overall Market assetquality figures compared to theprevious month (reference Table A)

Maintenance Rating (ATC Score): Anexcellent Asset Technical ConditionScore (an aircrafts rating relative to itsOptimal Maintenance Condition achieved the day it came off theproduction line) was recorded, with theRating improving eight AI2 basis points,to register 5.467 (compared toOctobers 5.387). That rating was wellabove the Mid-Time/Mid-Life 5.000level on the ATC Score scale of -5 to 10.

Financial Rating (ATFC Score): A verygood Asset Technical FinancialCondition Score (evaluating scheduledmaintenance event cost based on theaircraft Maintenance Rating) was alsorecorded, with the Rating remainingvirtually unchanged and above the Mid-Time/Mid-Life 5.000 level (on the zeroto 10 ATFC Score scale). Novemberregistered 5.015, versus Octobers5.012.

Asset Exposure (ATFE Value): Theaverage Asset Technical FinancialExposure Value (an aircraftsaccumulated maintenance financialexposure) worsened by nearly $115k forNovember as trades of quality assetsincreased the average aircrafts accruedmaintenance expense to more than$1.443m the highest/worst figureachieved during the past 12 months.

Exposure to Price Ratio (ETP Ratio):Spread in the ratio of Asset Exposure toaircraft Ask Price (ETP Ratio) for theaircraft tracked widened again thismonth, increasing by 45.5 percentagepoints, and the average worsened,increasing from 44.7% to 46.3%, thesecond highest figure of the past 12months (Table B). Asset Insightconsiders anything over 40% torepresent excessive Asset Exposure inrelation to Ask Price, and the 1.6percentage point ETP Ratiodegradation was due to increased Asset

Exposure and a decrease in Ask Pricefor all groups except Medium Jets(Table C).

Market OutlookOverall, Asset Insights analysis revealedongoing sales of quality assets, withavailable inventory decreasing by 21aircraft. By asset group, the findingsrevealed: Large Jets: Outstanding asset

quality; slightly lower Ask Price;higher Asset Exposure; best ETPRatio of all groups.

Medium Jets: Excellent asset quality;12-month peak Ask Price; slightlyimproved Asset Exposure; high ETPRatio.

Small Jets: Very good asset quality;12-month low Ask Price; worst ETPRatio among all groups.

Turboprops: Good asset quality;lowest 12-month Ask Price;increased Asset Exposure;worsening ETP Ratio.

Average Ask Price registered a slightimprovement (Table D), but that figurecan be slightly misleading, as the gainresulted from weighted averaging and

Medium Jet pricing (the group with thelargest fleet of aircraft and the only oneto see a price improvement).

Large Jet asset quality is outstandingat this time, and it will be interesting tosee how many of these aircraft tradeduring the final month of the year (seeMarch edition). For the secondconsecutive month, Medium Jet Ratingswere excellent, placing them in secondposition. However, the groups relativelyhigh Asset Exposure value is likely toimpede the successful completion of anumber of transactions.

Small Jet Asset Exposure remains tooclose to the average Ask Price toencourage transactions, but assetsenrolled on an engine Hourly CostMaintenance Program are likely togenerate acceptable offers.

Turboprops continue to offer goodasset quality, even with the secondhighest Exposure Value posted duringthe past 12 months. When combinedwith the groups sixth consecutive AskPrice decrease, Turboprops continue tooffer prospective buyers the ability tocreate good value.

MI www.assetinsightinc.com

Table A Table B

Table C Table D

View the latest pricesfor jets for sale at


Gulfstream 450 S/N: 4190 Price $25,950,000 Total Time: 954 hrs Landings: 435 Engines Enrolled on RRCC Synthetic Vision Broadband High Speed Data System Forward Galley 14 Passenger Interior

Boeing BBJ S/N: 29273. Reg: VP-BBJ $25,950,000 Total Time Airframe: 3743:34 Hours Landings: 917 Delivered with Fresh C1 HUD (Heads Up Display) SATCOM Pats 9 Tank Fuel System Basic Operating Weight: 95,096 Lbs SFR88 Mod CVR/FDR Airshow Network

Gulfstream GIVSP S/N: 1283 Price $5,950,000 Total Time: 9842 hrs Landings: 4220 APU on MSP Honeywell Avionics covered through Honeywell HAPP MSG-3 Maintenance Program with CMP No Damage History Collins SAT-906 SATCOM Secure-A-Plane 13 Passenger Interior

CRJ-200ER S/N: 7508. Reg: VP-BER TTAF: 4036; Landings: 2671 No Damage History EASA compliant RVSM capable Winglets CVR/FDR TCAS II Chg7.0 2012 32 pax Interior

Boeing BBJ S/N: 36714. Reg: VP-BFT $58,950,000 Into Service 2009 Total Time Airframe: 2849 Hours Landings: 741 Basic Operating Weight: 101,611 Lbs Pats 6 Tanks, 5 aft, 1 fwd Airshow Network- Aero H+ Satcom

Swiftbroadband- Iridium 5 external cameras - EFB 18 Passenger Interior/ Andrew Winch Design

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2008 Gulfstream G550 S/N: 5176 US$32,950,000 Total Time: 3444 hrs Landings: 949 Engines on RRCC APU on MSP Honeywell APP & Parts Programs BBML Securaplane External Camera System Airshow 4000 18 passenger interior Fwd Crew Rest

Gulfstream G550 S/N: 5231 1059 AFTT Engines on RRCC APU on MSP Enhanced Nav w/Synthetic Vision Honeywell Planeview Cert F Head-Up Guidance System Fwd Galley 19 passenger configuration

2014 Gulfstream G550 S/N: 5449 Price $49.950,000 Total Time: 122 hrs Landings: 71 Engines Enrolled on RRCC Planeview Avionics Enhancement Enhanced Navigation SecuraPlane Three Camera System Enhanced Sound Proofing Aft Galley 16 Passenger Interior

Gulfstream 550 S/N: 5319 Price $41,950,000 Total Time: 814 hrs Landings: 381 Engines Enrolled on RRCC Part 135 Compliance Synthetic Vision Crew Area Fwd/Aft Lavs Forward Galley 14 Passenger Interior


Sikorsky S-76C++ S/N: 760757 $8,500,000 TTAF: 211.54 hours Lowest Time Pre-Owned S76C++ on the market Excellent Condition Single Pilot IFR EGPWS CVR & MPFR Emergency Float System

Learjet 60 S/N: 128 New Price US$2.495M Beautifully maintained 8 seat interior Airframe time - 6987 Hrs Cycles - 4587 APU - 806 Hrs Engines - Both 6860 Engines P&W ESP 100% covered

2012 Sikorsky S-92A S/N: 920193 TTAF: 82 hours 210 Landings Most Recent Pre-Owned S-92A on the market Airline Configuration 19 Forward Facing

Passenger Seats General Electric Engine CT7-8A APU: Honeywell RE220. P-339 88 Hours 380 Cycles Rockwell Collins Avionic Management System Automatic Flight Control Systems (AFCS)

Falcon 900EX S/N: 87 $11,950,000 TTAF: 4638 hours / Landings 2371 Engines & APU on JSSI Avionic: Honeywell Advanced Protection Plan Honeywell SSFDR & SSCVR Satcom Collins SRT-2000 Airshow 400/Genesis 14 passenger w/forward crew and aft lavatories

Learjet 45 S/N: 167 Make Offer AFFT: 6156.28 hours. Landings: 4988 Engines on MSP Gold Smart Parts Plus APU on MSP Honeywell Primus 1000 TCAS II with Change 7 EGPWS Airshow 400 Forward and Aft Monitors


he final month of the year is often countedon by retail business owners to make theiryear. Within Business Aviation, forexample, tax and revenue considerationstypically bring on a year-end rush in

business aircraft closings that make Decemberbeneficial to attorneys, title-assurance andtransaction-closing specialists, along with those whomade the sales.

Improved conditions in the economy, continuingprofits, steady growth, a surging stock market, lowinflation and low interest rates all contributed tomake 2014 a better year for buying and sellingbusiness aircraft. Correspondingly, todays market ismore appealing to firms that supply buyers with thefinancing needed to buy or lease aircraft - in waysthat are most fiscally beneficial to buyers.

Since the financial crisis that erupted in the fall of

2008, borrowers needed an existing relationship orunusually high down-payments to secure financing.Terms today, however, better reflect moderationfrom both the exuberance of pre-recession days andthe newly conservative climate of just a few yearsback. Some financing firms promote a return toequity financing, based on the value of the asset aswell as the assets of the borrower.

And not only are buyers finding more hospitableterms, some lenders are broadening theiracceptable age range with condition andequipment central as always. The broader scope ofcandidate aircraft means terms available again toaircraft exceeding 10 years in-service to as far out to20 years. As before, more-conservative terms remainavailable for older business aircraft particularlythose eligible for value-enhancing upgrades (if notalready equipped).

Dave Higdon has coveredall aspects of civil avia-tion over the past 35years. Based in Wichita,hes a renowned journal-ist, and an active instru-ment-rated pilot withmore than 5,000 flighthours in everything fromfoot-launched wings tocombat jets. Contact himvia [email protected]

Financing business aircraft seemed more flexible in 2014 than in recent years, notes Dave Higdon. Could

2015 be an optimal time for an aircraft purchase?

Aircraft Finance Review:A Happier New Year

with Buyers to Benefit?


T

BIZAV INTELLIGENCE AIRCRAFT FINANCE

Aircraft Finance 1_Layout 1 21/01/2015 11:46 Page 1

Discussions with finance industry insiders indicatethey're also benefiting from the changes thanks totheir ability to qualify more buyers with better termsfor a broader range of aircraft.

Happy New Economy!One lender quietly offered a Happy New Economyas his year-end greeting. In some circles where wedo business, enjoying better times is an OK topic,he told AvBuyer. But being 'happy' with today'seconomy clashes with the political sensitivities ofsome of our clientele. So around them we simplyavoid acting thrilled to be doing better and more but we are thrilled!

The same applies to buyers who are now able toexercise their aircraft ambitions on terms that don'tmake outright cash buying the attraction it was a fewmonths ago. Recession-inspired banking regulationsforced lenders into a period of adjustment as theymet new requirements on available capital and indealing internationally. The regulations still make forcontentious debate, but lenders adapted to continuecompeting.

We first and foremost want to keep our doorsopen, noted one finance executive. But we also

wanted to reduce risks, so we narrowed our focus onnewer aircraft.

With multiple forecasts predicting double-digitgrowth in new airplane deliveries this year and next,all parties involved in business aircraft transactionsstand to benefit from continued growth. J.P. Morgan,Bombardier, Honeywell and other forecasters expect2015 will mark a major gain over year-end estimatesof barely 3 percent growth in 2014. [Note: last year's2.5-3% gain still stands as the first significantexpansion of new jet deliveries since 2008.]

Thankfully, the market changes make for morebusiness with well-qualified buyers, explained anexecutive with an investment banker that's workedwith clients to buy and underwrite aviation assets.When a buyer finances, he's already engaged intransactions with other businesses, not just the seller- and more will be involved before the asset finallylands in his hands.

A good finance package serves as the key thatunlocks all the other transactions from the seller,the title-assurance company and the escrow people.With the ripples set off by increased new airplanedeliveries, expect increases in attractive, availablepre-owned aircraft.

A Monetary MetamorphosisSometimes change isn't apparent; sometimes it'samong the more subtle elements that help drive theaviation business largely below the surface. Manycritical elements to finance slowly morphed for thebetter during the past 24 months. The roots of thismonetary metamorphosis run across many lines

While written for the commercial market, someobservations in Boeing Capital's Current AircraftFinance Market Outlook 2015 also ring true forBusiness Aviation. For example: The strength wereseeing in aircraft finance is largely the result of ahealthy and balanced global demand for newaircraft, driven by anticipated passenger trafficgrowth, record airline profitability, and thecontinuation of a replacement cycle to improve thefuel and performance efficiency of a large portion ofthe global fleet.

Words from the floor of the National BusinessAviation Association Convention in Orlando last yearreflected a similar theme, particularly for businessoperators enjoying strong balance sheets and apenchant for keeping its tools cutting edge, asone marketing executive put it. Consider the marketstrength of the larger business jets in production asExhibit A, he said. Also note the strengthening oftransactions for pre-owned turbine businessaircraft.

New airplane transactions by existing operatorsgenerally create a ripple that begins when therecently displaced aircraft splashes into the pre-owned market, where its purchase may continuethe ripple by sidelining yet another aircraft,possibly older but maybe only smaller, slower orshorter-legged.

Manycritical

elements tofinanceslowly

morphed forthe betterduring the

past 24months.


!


Most of the same factors that help drive new airplane salesinfluence buyers of pre-owned hardware and the financialimpact for a company can help make for a better tax return.

Speaking of returns, many noted the record-low cost ofmoney for the larger lenders. From auto and other consumerloans to mortgages whether short- or long-term, variable orfixed - interest rates remain attractively low. And so it is withaircraft finance particularly in the market segment showingreal growth: Business turbine aircraft. Not that the enthusiasmfor today's economy is universal and unfettered

Boeing makes note of those factors in its Current AircraftFinance Market Outlook 2015: Concerns about fuel prices,interest rate hikes, currency volatility, political unrest and healthepidemics are responsible for some market angst. However, aslong as these variables do not undermine global economicgrowth, the current trends for new airplane demand shouldcontinue in 2015, supporting continued strength and balancefor the global aircraft finance industry.

Interestingly, just as this article became a digital documentbusiness-turbine pilots and aircraft owners began reporting thelong-awaited fall of Jet A at their local FBOs. With highwayfuel prices down nearly 50 percent from December 2013,aviators and aircraft owners alike smile more broadly knowingtheir direct operating costs are, for once, declining.

Leasing, which generally involves a finance underwriter,remains popular among companies that prefer to limit theirinvolvement while still realizing some solid tax benefits and theadvantages of using a business aircraft for travel.

The State of PlayHave you been dreaming of that a first-generation Citation thatcaught your eye? That mid-to-late 1970s model with someupgrades? You may have your work cut out for you trying toobtain financing but it's not an impossible dream these days.You should be prepared to find terms with a higher up-frontpayment, shorter maturity date and higher interest rates.

Perhaps youve got something under 20 years old in yoursights. If so, you can expect better terms, from lowerdown-payments to lower interest rates; maybe even a standardseven-year note, depending on the aircraft.

Or maybe youve been eying a turbine aged 11 or younger?If so, you can get close to the same terms as for new! Many

lenders no longer insist on you establishing an account,opening up options for both them and you.

Upgrade ValueSome upgrades may help improve the finance terms offered while others will do less so. Consider the following as nice-to-have upgrades that lack a long-term improvement toresidual value: Paint and external trim. Unless undertaken to repair sheet

metal and/or corrosion issues, external improvements carrymore cosmetic impact than tangible effect on loan value.

Interior and trim accouterments. They look good andprovide an emotional reaction when the potential buyerencounters that new airplane smell, but it's perishable andprobably won't carry as much weight as it costs.

The following upgrades do provide a tangible boost to theaircraft value that most lenders happily factor into their offers: Avionics. Replacing the cockpit systems with new, more-

modern, possibly lighter instruments wins points for valueretention, while likely providing a necessary upgrade tomeet existing and future regulatory requirements. Reducedmaintenance needs can add to that benefit.

Engines. Here operators often see bottom-line gainsthanks to lower fuel consumption, possibly improvedspeed and/or runway access (e.g. wider utility), longer lifeand lower maintenance costs particularly for upgradedpowerplants with longer inspection cycles. Generally amajor boost to aircraft value and, as such, what lenders arewilling to do to gain your business.

In-Flight Systems: Different from the comfort/cosmeticaspects of interior work, office/entertainment upgrades toolder jets or installations in jets previously lacking them offer traveling staff higher productivity, more time in-contact and the intangible advantages of being able totalk to home or relax with some diversions during thelongest days.

With better finance deals available, demand on theincrease, and a shrinking pool of available options, 2015 maybe an optimal time for an aircraft change. Are you looking for more articles on aircraft finance? Visit www.avbuyer.com/articles-guides/business-aviation-finance




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O'Gara February 20/01/2015 16:26 Page 1

O'Gara February 20/01/2015 16:26 Page 2

here can be no doubt that changes inthe landscape of available aircraft financ-ing since 2008 have had an adverse im-pact on the Business Aviation new and

pre-owned markets. As 2014 ended the large inven-tory of business aircraft available on the pre-ownedmarket remained at very affordable prices.

One of the metrics we often view as a key indica-tor for market health is the percentage of the aircraftfleet For Sale. This percentage has steadily de-clined, largely because the total fleet has grown (i.e.more new business jets have entered the market,while fewer aircraft have retired from the fleet).

Financed vs Cash Trends: Pre-OwnedAccording to JETNET, the percentage of financedversus cash-bought pre-owned retail transactions forbusiness jets was roughly split 50/50 from 2000through September 2008. Then in late 2008 the eco-nomic meltdown arrived, at which point securingdebt financing for pre-owned business aircraft pur-chases became a more challenging task for buyers.Thus the pendulum swung in favor of cash as themethod of the majority of pre-owned jet transactions.

Today, as illustrated in Chart A (opposite , top),the ratio of financed versus cash transactions for pre-owned business jets stands at 26% financed versus74% cash, based on JETNETs findings from US-based FAA-filed financial documents. There hasbeen little change in the percentage of financedbusiness jets over the past six years since the start ofthe economic meltdown.

Financed vs Cash Trends: NewToday, curiously, the new aircraft segment is at ex-actly same 26% financed and 74% cash-bought splitas the pre-owned market (see Chart B, opposite,center).

JETNET data reveals new business jet transactionsfollowed a downward movement from an 80% cash-purchase level in 2000 to slightly below 60% in 4Q2004. After that low point, new business jet cash fi-nancing rapidly climbed back to the 70% mark andheld steady throughout the economic downturn thatstarted in 2008.

Then in 2010 it increased to a post-2000 high-point of 80% cash-funded purchases, before turningdownward again to 70% cash and 30% financed.Now, the new market is at 74% cash transactions.

3Q 2007 vs 3Q 2014Table A (opposite, bottom) provides a snap shot viewof the third quarter of 2007 (pre-recession) comparedto the third quarter of 2014.

It is clear that more cash transactions have takenplace in the financing of business jet aircraft since theeconomic meltdown.

During 3Q 2007, there were 1,560 total pre-owned business jet transactions completed, with50% (774) financed and 50% purchased withcash.

During 3Q 2014 the number of pre-ownedbusiness jets financed declined to 469 (orjust 26% of a total 1,779 transactions forthe quarter).

With the new (+9.3%) and pre-owned (+12.1%) business jet markets showing great improvements in their January-September

2014 transaction percentages, what will Mike Chase and Marj Rose discover about the use of financing of these transactions?

Finance vs Cash:Latest Trends for New and

Pre-Owned Aircraft Transactions



Mike Chase (president,Chase & Associates) andMarj Rose (president,MarketLift), offer highlysought-after aviationmarket research expertise.Contact them [email protected] [email protected]. JETNET, mean-while, the ultimate sourcefor information & intelli-gence on business and com-mercial aircraft worldwide,can be contacted viawww.jetnet.com.

T

Jetnet KnowMore_Layout 1 20/01/2015 14:57 Page 1

Note the increase of 14% more pre-ownedtransactions (1,779/1,560) in 3Q 2014 versus 3Q2007.

New business jet transactions showed the samepercentage split for financed (26%) and Cash(74%) in both 3Q 2007 and 3Q 2014.

Overall, there was a decline of -43% transactions(401 versus 702) from 2007 to 2014.

Our comparative data clearly shows that therewere fewer new financed and cash transactionsoverall, but a higher number and percentage ofcash transactions.

Since the economic meltdown in 2008, regulatorshave increased their scrutiny of banks, which have inturn increased their due diligence processes for cus-tomers seeking business aircraft loans. This is a differ-ent environment today compared to thefree-wheeling days before the recession althoughthere are signs that some buyers are beginning tofind more favorable terms for financing.

Nevertheless, a buyer should expect the banksdue diligence to be more penetrating today. Perhapsthis could be one of the underlying reasons for theshift toward cash transactions over the past fouryears. Other reasons could be down to the higherdeposit amounts required, as well as personal loanguaranty from company executives.

Debt FinancingDebt financing for pre-owned business jets is avail-able today, however. There were over 50 banks andfinancial institutions that processed and filed pre-owned business jet debt instruments (not includingleases) in 3Q 2014. Security agreements were usedin the majority of the financial transactions recordedin 3Q 2014, followed by Amended SecurityAgreements and Mortgages.

SummaryWe have heard from many aircraft finance profes-sionals that financing is certainly available today forbusiness aircraft. The above paragraphs and tableshave allowed us to drill into some of the historicaldetail on aircraft financing, courtesy of JETNET,offering some insight into the current trends.

As we continue moving through these unprece-dented economic waters, there is no doubt that buy-ing patterns, and the means of purchasing assets likebusiness aircraft, will continue to be affected. We willkeep you updated as the recovery continues.

Meanwhile, at the end of this month JETNET willrelease the 2014 Pre-Owned Business, Helicopter,and Commercial Airliner report, and on February 11GAMA will present the Year-End 2014 New Ship-ment and Billings report. Youll find both coveredwithin the March edition of AvBuyer.

Are you looking for more articles on aircraft finance? Visit www.avbuyer.com/articles-guides/business-aviation-finance

AIRCRAFT FINANCE BIZAV INTELLIGENCE


TABLE A: Finance vs Cash Transactions

NNEW BUSINESS JETS

PPeriod FFinanced CCash TTotal

33Q 2007 182 520 702

PPercentage 26% 74% 100%

33Q 2014 104 297 401


PPRE-OWNED BUSINESS JETS

PPeriod FFinanced CCash TTotal

33Q 2007 774 786 1,560


33Q 2014 469 1,310 1,779


Source: JETNET; Analysis by Chase & Associates

TABLE A: Finance vs Cash Transactions

CHART A - Pre-owned Business Jet Full Retail Sale Transactions U.S. FAA Financial DocumentsFinanced vs Cash* as of 3Q 2014

CHART B - New Business Jet Full Retail Sale Transactions U.S. FAA Financial DocumentsFinanced vs Cash* as of 3Q 2014

Jetnet KnowMore_Layout 1 20/01/2015 15:28 Page 2

BIZAV INTELLIGENCE AVIATION LEADERSHIP ROUNDTABLE

oull have noticed in this months BizAvIntelligence section there are a cluster ofarticles about financing. The good news isthat there are more resources and flexibility

around age of aircraft that can be considered. Even amoderate swing toward more liberal terms would bea huge improvement for buyers.

For the last several years, pinning down residualloss rates and a residual value have been plaguedwith outcomes that have been less meaningful sincepredictions never seemed to hold true. A combina-tion of factors played into the problematic nature ofthese assessments.

Thus, rather than developing another financingarticle, I felt it would be beneficial to expand on theimportance of residual value in the financing indus-trys willingness to provide funds for aircraft that havebeen overlooked during our recovery.

In the 40 years that Ive been buying and sellingaircraft across multiple downturns and recoveries, Ivenever seen a recovery that did not have a robustlending community to help stabilize, and push therecovery along. That fact is interesting because a lackof financing may have slowed the current recovery,but more cash buyers entering in the market meansa more solid group of new owners.

When you use all-cash to buy, often the result is abetter thought-out purchasing decision and a greatereye towards purchase price. Furthermore, as morelenders trickle back into the market and financing isnot limited to a few big name banks that are mostlydriven to lend based on strong, long-standing rela-tionships, a healthy competition in favor of the bor-rower will return.

Rather than summarily declining requests forfinancing, lenders today are becoming more tolerantregarding the age of the aircraft and models out ofproduction. Discretion still will be - and should be -used to keep our industry recovery on a solid foot-ing. The metrics used to evaluate residual value willsurely center on a combination of age, pedigree,records and cosmetic condition, as well as modern-ization and upgrades.

Longer Shelf LivesWill older aircraft bear the cost of avionicsmodernization? My sense is yes for many aging

models, and this is a huge factor on our older fleetremaining relevant to the lending community. If wecan get an industry buy-in to this concept, we will beable to consider a longer life to our existing fleet. Ifthat happens, we may begin to see a bottom-upstrengthening to our market rather than just top-down improvement. This situation will be a changefrom the recent past when we struggled to assess atwhat point an aircraft reached its scrap value.

I wouldnt want to spread hope across the oldest,less compliant segment of our fleet (including veryold turboprops and non-turbofan jet aircraft). Eventhough the lenders may embrace slightly older air-craft, they will not have an interest in the very oldest,least compliant models.

Imagine if we could just add 10 years to the fleetlife. That change would be a huge benefit to thevalue component, as well as to the growth rate ofour recovery. New weighting components for resid-ual value will increase the attractiveness of aircraftthat recently were overlooked or not counted.

I am sure that it will be clear very soon why lendersare becoming more and more willing to take thispositive step to aiding and supporting the recovery.The lending community is remembering the greatvalue a well thought-out aircraft portfolio can bringto their bottom lines.

We are very excited about the recovery and all theancillary growth this will bring to our industry. Thereis no doubt the manufacturers will continue theirwork to bring new models to market as well as newiterations to current products - and this will affect thetop-end valuation of the market.

I am most excited about the low-end marketopportunities for first-time buyers and step-up buyersfrom turboprops to jets. I believe we are going tohave a great 2015 and beyond. Aircraft financing willbe a big part of our collective success!

Y

Residual Values:The Effect on Financing.

The idea of aircraft financing swinging back to a more open and broader-based service industry is so exciting and expansive in the discussion

of a recovery, notes Jay Mesinger. But how will the residual value component impact on lenders willingness to participate?

Jay Mesinger is the CEO and Founderof Mesinger Jet Sales. With 40 yearsexperience in the aircraft resale market,Jay also serves on the Jet AviationCustomer and Airbus Corporate JetsBusiness Aviation Advisory Boards(BAAB). Contact him at [email protected]


If we canget an

industrybuy-in to

this concept,we will be

able toconsider a

longer life toour existing

fleet

JMesinger Feb15_JMesingerNov06 20/01/2015 14:47 Page 1

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ustomers continually demand more speed, range,cabin space - and better operating costs, from thejets they buy. The avionics manufacturers arefrequently adding new features and capability, while

engine manufacturers are using increasingly sophisticatedmaterials and have found ways of reducing fuel burn andoffering more thrust for less weight. Consequently, the researchand development of the aircraft OEMs is essential to keep upwith rapidly advancing technology and demand.

All of this means there are some exciting new business jetsgetting ready for market. The impressive range offered byultra-long-range jets is set to stretch even further. The aircraftstructures and systems are becoming more complex withwidespread use of composite materials and new fly-by-wiresystems. Cabins are getting wider, and higher offering

improved comfort with flat cabin floors and more than six feetof head clearance.

Also, todays business jets need to provide the latest cabintechnology to cope with the demand for connectivity via iPads,iPhones, Blu-Ray and all the other in-flight communicationsexpectations.

For the future, Textrons Cessna unit is working hard onlarger cabins to its smaller jets. Pilatus seeks to bring utilityturboprop features to its new jet. Dassault promisesexceptional economy through advanced Silvercrest enginescombined with lightweight structures. And Honda is on thebrink of first deliveries. Finally, the days of the Personal Jet maybe about to arrive with serious development of the CirrusVision now moving forward. All of these developments, andmore are outlined below.

Today, every major Business Aviation OEM has an extensive program of aircraft

in development, notes Rod Simpson. Find out more about them here

Snap-Shot Guideto Turbine Trends

Business Jets of the Future


C

BIZAV INTELLIGENCE TURBINE TRENDS

Bombardier Global 7000The $65m Global 7000, one of two newversions of the Global series, has a stretchedfuselage allowing an extra cabin zone andlarger windows. It also has longer range. Theprototype will fly in 2015.

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Bombardier Global 8000The Global 8000 is designed for exceptionalrange requirements. At $65m, it does nothave the extra cabin length of the Global7000 but is longer than the Global 6000. Thisjet cruises at Mach 0.9.

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Category Ultra Long RangeCertification 2017First Delivery 2017Crew + Pax 4+13Cabin Height 6ft 3inCabin Length 45ft 7inCabin Width 8ft 2inCabin Volume 2,236 cu.ftMTOW 104,800 lbRange 7,900nmMax Cruise 516 ktsFlight Ceiling 51,000 ftAvionics Bombardier VisionEngines 2 x GE Passport 20

Bombardier Challenger 650The Challenger 650 is an improved versionof the Challenger 605 with new engines forimproved takeoff performance, BombardierVision flight deck, an upgraded cabin withwider seats, larger window surrrounds andnew in-flight entertainment system. Price,$33.35m. www.bombardier.com

Category Long RangeCertification 2Q 2015First Delivery 2Q 2015Crew + Pax 3+10Cabin Height 6ft 0inCabin Length 25ft 7inCabin Width 7ft 11inCabin Volume 1,150 cu.ftMTOW 48,200 lbRange 4,000nmMax Cruise 470 ktsFlight Ceiling 41,000 ftAvionics Bombardier Vision (ProLine 21)Engines 2 x GE CF34-3B MTO !

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Bombardier Learjet 85Bombardiers Learjet 85 development pro-gram has been halted. Given the weaknessof the market, we made the difficult decisionto pause the Learjet 85 program at this time,said Pierre Beaudoin, President & CEO, Bombardier inc.

www.bombardier.com

Category Mid-SizeCertification N/AFirst Delivery N/ACrew + Pax 2+10Cabin Height 5ft 11inCabin Length 22ft 7inCabin Width 6ft 1inCabin Volume 665 cu.ftMTOW 36,700 lbRange 3,000nmMax Cruise 470 ktsFlight Ceiling 49,000 ftAvionics ProLine FusionEngines 2 x PW307B

Cessna Citation LatitudeThe Citation Latitude, at $16.25m, is broadlybased on the Citation Sovereign but with amuch larger stand-up, flat floor cabin. Accom-modating up to nine passenger seats - includ-ing a 2-seat divan the cabin incorporates arear restroom.

www.cessna.com

Category Mid-SizeCertification 2H 2015First Delivery 2H 2015Crew + Pax 2+9Cabin Height 6ft 0inCabin Length 21ft 9inCabin Width 6ft 5inCabin Volume 816 cu.ftMTOW N/ARange 2,700nmMax Cruise 446 ktsFlight Ceiling 45,000 ftAvionics Garmin G5000Engines 2 x PW306D1

Cessna Citation LongitudeThis will be Cessnas flagship business jet,costing $26m. It is rumoured that the Longi-tude, which has a T-tail, a new swept wing andfly-by-wire systems, will be larger than origi-nally announced. It will be among the fastestin the Super Mid-Size category.

www.cessna.com

Category Super Mid-SizeCertification 3Q 2017First Delivery 3Q 2017Crew + Pax 2+12Cabin Height 6ft 0inCabin Length 28ft 11inCabin Width 6ft 5inCabin Volume N/AMTOW N/ARange 4,000nmMax Cruise 490 ktsFlight Ceiling 45,000 ftAvionics Garmin G5000Engines 2 x Snecma Silvercrest SC-2C

! !

Cirrus Vision SF50With the third of three flight test aircraft hav-ing flown in January, 2015, Cirrus is headingtowards certification of its single-engined,$1.96m personal jet at the end of 2015. Tar-geted at owner-pilots the Vision will also ap-peal to small business users.

www.cirrusaircraft.com

Category Entry LevelCertification 4Q 2015First Delivery 4Q 2015Crew + Pax 1+6Cabin Height 4ft 1inCabin Length 11ft 6inCabin Width 5ft 1inCabin Volume 182 cu.ftMTOW N/ARange 1,200nmMax Cruise 300 ktsFlight Ceiling 28,000 ftAvionics Garmin G3000Engines 1 x Williams FJ33-4A-19

Dassault Falcon 5XThe $45m Falcon 5X is Dassaults new genera-tion, fuel-efficient, twin-engined business jetoffering lower operating costs. It has a signifi-cantly larger cabin than the Falcon 2000, amuch longer range and 100kts more cruisespeed.

www.falconjet.com

Category Super LargeCertification 4Q 2016First Delivery 1Q 2017Crew + Pax 3+16Cabin Height 6ft 6inCabin Length 39ft 0inCabin Width 8ft 6inCabin Volume 1,770 cu.ftMTOW 69,600 lbRange 5,200nmMax Cruise 595 ktsFlight Ceiling 51,000 ftAvionics EASy III Flight DeckEngines 2 x Snecma Silvercrest

Dassault Falcon 8XThe Falcon 8X is a development of the Falcon7X with a longer cabin and 500nm morerange. The aircraft also has a completely newcockpit incorporating the new generationEASy system including a head-up display. See fuller profile on page 120 of this issue.

www.falconjet.com

Category Long RangeCertification 3Q 2016First Delivery 4Q 2016Crew + Pax 3+16Cabin Height 6ft 2inCabin Length 42ft 8inCabin Width 7ft 8inCabin Volume 1,695 cu.ftMTOW 73,000 lbRange 6,450nmMax Cruise 595 ktsFlight Ceiling 51,000 ftAvionics EASy III Flight DeckEngines 3 x PW307D


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Embraer Legacy 450The Legacy 450 is a shorter version of theLegacy 500, offering less range but a similarcruising speed and a shorter takeoff distance.Priced at $15.25m, it provides a very comfort-able stand-up cabin for up to nine passengers.

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Category Mid-SizeCertification 2H 2015First Delivery 2H 2015Crew + Pax 2+9Cabin Height 6ft 0inCabin Length 24ft 0inCabin Width 6ft 10inCabin Volume N/AMTOW N/ARange 2,500nmMax Cruise 542 ktsFlight Ceiling 45,000 ftAvionics ProLine FusionEngines 2 x HTF7500E

Gulfstream G500Gulfstream has increased its product rangewith the G500 and G600. The $43.5m G500 isthe smaller capacity model with a 5,000nmrange. The first G500 has already been builtand will fly early in 2015.

www.gulfstream.com

Category Long RangeCertification 2017First Delivery 2018Crew + Pax 2+18Cabin Height 6ft 4inCabin Length 41ft 6inCabin Width 7ft 11inCabin Volume 1,715 cu.ftMTOW 76,850 lbRange 5,000nmMax Cruise 516 ktsFlight Ceiling 51,000 ftAvionics Gulfstream Symmetry/

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Gulfstream G600Gulfstreams $54.5m G600 is a stretched ver-sion of the G500 with a longer range. TheG600s cabin is wider, longer and taller thanthat of the G550, offering a crew rest area infront. Development will follow on after theG500.

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Category Ultra Long RangeCertification 2018First Delivery 2019Crew + Pax 2+18Cabin Height 6ft 4inCabin Length 45ft 2inCabin Width 7ft 11inCabin Volume 1,884 cu.ftMTOW 91,600 lbRange 6,200nmMax Cruise 516 ktsFlight Ceiling 51,000 ftAvionics Gulfstream Symmetry/

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Honda HA420 HondaJetAfter 15 years of development the $4.5m Hon-daJet is in production with first deliveries duein 2015. The fastest of the Entry Level jets of-fers a 1,200 mile range and a spaciousfour/five seat cabin.

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Category Entry LevelCertification 2015First Delivery 2015Crew + Pax 2+5Cabin Height 4ft 10inCabin Length 17ft 10inCabin Width 5ft 0inCabin Volume N/AMTOW N/ARange 1,180nmMax Cruise 420 ktsFlight Ceiling 43,000 ftAvionics Garmin G3000Engines 2 x GE-Honda HF120

Pilatus PC-24The PC-24 will appeal to owners of the suc-cessful PC-12 single-engined turboprop whowant more speed but with the flexibility of thePC-12. The $9.3m PC-24 has a large rearcargo hatch and can operate from short unprepared airfields.

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SyberJet SJ30iThe latest version of the Swearingen SJ30 willbe sold in two forms - the $7.25m SJ30i andSJ30X (with higher-powered FJ44-3AP-25 en-gines). The SJ30i is the fastest of the light jetswith a cruising speed of 486 kts and thelongest range in the category.

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Eagle February 21/01/2015 16:11 Page 1

ata Comm encompasses two main areas:ATN-B1 (or CPDLC) and FANS 1/A+(including ATN-B2). It can be confusingwhen confronted by a string of unfamiliar

letters. The reader requires either an avionicsglossary to crack the code or a degree in aviationtechnology (possibly both) to understand thealphabet soup. Controller-Pilot Data LinkCommunications (CPDLC) is one of those codes, andit is best understood by an introduction of its history.

Like most technologies, CPDLC began with aneed to solve a problem and progressed through aseries of gradual piece-meal steps toward aseemingly eternal resolution in an environmentwhere goalposts are constantly shifting. Historically,

signs of frequency congestion emerged in the 1980s.Primarily the problem applied to frequenciesallocated to Air Traffic Control (ATC) sectors and tothe Aircraft Communications Address and ReportingSystem (ACARS).

Sector frequencies manage enroute flights, andACARS covers messaging data between aircraft andground, both for ATC and Airline Operations Control(AOC). There were concerns of voice communicationlanguage barriers and overlap where an ongoingATC and aircraft communique could be overriddenby another transmission. Communication (includingdata) was via Very High Frequency (VHF) and HighFrequency (HF).

The VHF congestion was partially resolved by

Aviation Mandates:All You Need to Know

About CPDLC - ATN-B1

FLIGHT DEPARTMENT AVIONICS


D

!

Helping you to familiarize with avionics advances and related mandates forequipage, Ken Elliott unpacks Controller-Pilot Data Link Communications

(CPDLC) within NextGen, this month focusing on ATN-B1.

Ken Elliott is a highly-regarded industry authorityon avionics as a member ofthe NextGen AdvisoryCouncil sub-committee andTechnical Director, Avionicsat Jetcraft. Contact him [email protected] www.jetcraft.com

Avionics Mandates_Finance 20/01/2015 16:35 Page 1

General Aviation February_Layout 1 19/01/2015 15:53 Page 1


FLIGHT DEPARTMENT AVIONICS

implementing the use of 8.33 KHz spacing,narrowing the gap between assigned frequenciesand providing many more channels. HF, meanwhile,is gradually being replaced by SatelliteCommunications (Satcom), operating at much higherfrequencies. HF, including HF DataLink (HFDL), hasits own limitations, mostly regarding poor quality ofthe signal, voice distortion and overall reliability ofservice.

The need for a solution grew greater withsignificant expansion of air traffic. Furthermore, therewas a need to standardize two way communicationsbetween ATC and aircraft as well as the data that areautomatically provided from an aircraft to theground. Because airlines were already establishedwith ACARS, there was a need to consider bothexisting and new equipment, as well as operationalrequirements.

The combination of these factors and thedivergent interests of different aviation governingbodies has created a background of confusingterminology, coupled with a potpourri of data commtimelines.

New ArchitectureIn 1983 ICAO began an effort toestablish a DataLink architecture underits Future Air Navigation System (FANS)structure. This became the architectureand protocol standard of an oceaniccommunications network, where HF andearly Satcom ruled. Boeing, a long timeuser of ACARS, developed FANS-1 tothe newer ARINC 622 binary dataformat, followed by Airbus with itsFANS-A. Later these were combinedand have since evolved into FANS-1/A+.

Boeing (FANS-1) incorporated theprinciples of Automatic DependentSurveillance (ADS) and early CPDLCusing the existing ACARS. Note thatADS is automatic surveillance such asposition reporting, and CPDLC iscommunication using text in the form ofdata, not voice, for clearance requestsand authorizations.

ADS for FANS is known as ADS-C(ADS Contract) and allows an automatichandshake by contract between theaircraft and enroute ATC for DataLink.This is different from ADS-B (ADSBroadcast), which uses GPS/FMS andTransponder technology to provideflight and position information that isbroadcast as OUT data to ATC andaircraft with receivers that have INcapability.

Meanwhile, specifically for CPDLC,ICAO continued its separate FANSeffort based primarily on newerAeronautical TelecommunicationNetwork (ATN) protocols and standards.

This development also became known as ATN-B1(Baseline 1). Having a CPDLC architecture that wasbased on universal International Standards (ISO)subsequently provided a continental-based DataLinkplatform, which was different from the oceanicsystem due to the high density of airspace and usersin continental airspace.

This newer DataLink structure known as CPDLCVHF DataLink (VDL) Mode 2 was eventually adoptedby EUROCONTROL for use across continentalEurope under the final program designation of LINK2000+ (otherwise known as FANS-2). VDL Mode 2has a much higher and faster data capacity than theexisting ACARS.

The term FANS is typically linked to oceanicairspace and today includes both a Data Comm andsurveillance component. On the other hand, theterm CPDLC or ATN-B1 covers continentaloperations where, because of transponder and radarcoverage, surveillance is not a requirement. Howeverthe US is beginning to implement FANS 1/A+ overVDL Mode 2 for its continental airspace while

HHISTORY IIDENTIFIER KKEY FEATURES IINSTIGATING AAGENCY TTIMEFRAME

Early Implemented Structure

FANS-1 (Oceanic)

Automatic Dependent Surveillance (ADS) Controller-Pilot DataLink Communications (CPDLC) developed from & using ACARS

Boeing 1990s

Early Implemented Structure

FANS-A (Oceanic)

Automatic Dependent Surveillance (ADS) Controller-Pilot DataLink Communications (CPDLC) developed from & using ACARS

Airbus 1990s

FAA FANS FANS-1/A (Oceanic) No latency timer per RTCA NAC RTCA-FAA 2000s

Current Global Oceanic Structure

FANS-1/A+

Automatic Dependent Surveillance (ADS) Controller-Pilot DataLink Communications (CPDLC) developed from ACARS but using VHF Data Link (VDL) Mode 2 or Satcom

ARINC 622 RTCA DO-258A

ED100A

1990s- 2000s

(evolved)

The Network Architecture ATN

Aeronautical Telecommunications Network ICAO using ISO 1990s

CNS/ATM Comm

CPDLC (Continental)

Controller-Pilot DataLink Communications (CPDLC) Based on & developed from ATN

ICAO 1990s

CNS/ATM Comm

LINK 2000+ (Continental) FANS-2 or ATN-B1 Airbus FANS-B+

Controller-Pilot DataLink Communications (PM-CPDLC) VHF DataLink (VDL) Mode 2

EUROCONTROL ICAO 9705-

9896 RTCA DO-280B

& ED110B RTCA-DO219

2000s

FAA CNS/ATM Comm

FANS-1/A+ Leading to FANS-3 or -C ATN-B2

US domestic FANS-1/A+ over VDL Mode 2

In work RTCA SC214 and

WG78 2017-2025

CNS/ATM Surveillance ADS-B & -C

Automatic Dependent SurveillanceBroadcast (ADS-B) using Transponders Automatic Dependent Surveillance-Contract (ADS-C) using Satcom

TABLE AABOVE IS A SUMMARY OF THE DATA COMM HISTORY WITH THE HIGHLIGHTED SECTIONS BEING THE FOCUS OF THIS ARTICLE.

Avionics Mandates_Finance 20/01/2015 16:36 Page 2

traditionally ATN-B1 is linked to continentalEuropean operations. Requirements are oftenreferenced as CPDLC for LINK 2000+ and FANS1/A+ elsewhere. Remember that requirements arebased on what you need to operate in certainairspaces. Typically, mandates are higher levelrequirements that apply to almost all users in muchlarger 3D airspaces.

It is important to highlight the link between DataComm and the wider modernization of airspace.Data Comm development, and especially itsimplementation, is becoming fully integrated withother NextGen programs aimed at Trajectory BasedOperations (TBOs). Aircraft and equipment programssupporting NextGen often combine FANS 1/A+ foroceanic use, with CPDLC for Link 2000+ as well asADS-C and ADS-B capability. They are even nowdesigning for ATN-B2, FANS 3/C.

Link 2000+Link 2000+ is a key element of the Single EuropeanSky (SES 2+) initiative adopted in March 2014 afterseveral iterations, and now accommodates usersalready equipped with FANS 1/A+.

Protected Mode (PM-CPDLC), used by Link2000+, allows the flight crew to select from a menuof standard ATC communications to send andreceive messages via text. A correspondingapplication exists for ATC Controllers. PM-CPDLC isan up-to-date version of CPDLC that minimizesmessaging errors, protecting communication databoth ways. PM-CPDLC has higher integrity thanFANS 1/A+ CPDLC, verifying entire messages thatare received by the intended recipient.

Link 2000+ ground services are provided out ofseveral control centers offering DataLink services ona 24/7 basis to all aircraft equipped with theappropriate avionics in the upper airspace (aboveFL 285) and include:

Geneva (LSAG) London (EGTT) Maastricht (EDYY) Rhein (EDUU) Scottish (EGPX) Zurich (LSAZ)

Typical messages to and from ground stations are: Frequency Changes Climb/Descent Clearances Direct Clearances Turns & Headings SSR Instructions Replies to Aircrew Requests Microphone Checks

The following underlying protocols are applicableto CPDLC: Voice and DataLink shall co-exist as a means of

ATS communication. CPDLC supplements voice. CPDLC shall only be used in the context of non-

time-critical communications. Time-criticality is

determined by the ATC traffic situation, systemsand flight crew/controller response time andrecovery time. A voice response is generallyexpected in a few seconds, while the latency ofCPDLC is usually much longer (up to severalminutes).

The decision to use either voice or CPDLC shallbe at the discretion of the controller and/or pilotinvolved.

A controlled flight shall be under the control ofonly one ATC unit at any given time.

User guidance for Link 2000+ is Flight CrewDataLink Operational Guidance Version 6, availablefrom the EUROCONTROL website under Link 2000.There are no Letter of Authorization (LOA)requirements for Link 2000+ and training is theresponsibility of the operator. Note that there havebeen a number of Link 2000+ disconnections(Provider Aborts) reported, and while this anomaly isbeing resolved there is a White List where certainaircraft (and equipage) can be added. This is acomplex issue beyond the scope of this article. Moreinformation can be found at:https://www.eurocontrol.int/link2000/wiki/index.php/White_Lists.

Mandate and TimelineDepicted in Table B (overleaf) is the currentEUROCONTROL requirement for ATN-B1 or CPDLCover VDL Mode 2 (see note 2 below and see alsoitalics under Aircraft Equipage, overleaf). In summary,the mandated requirement is: Aircraft operation above FL285 Aircraft operation in designated European

Airspace 1 January 2011: All new aircraft operating above
