AVwebBiz Complete Issue: Volume 5, Number 7

February 28, 2007

By The AVweb Editorial Staff
 
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Cessna's Pelton Labels User Fee Proposal As Airline "Bailout"

Pulling no punches, Cessna Aircraft Company Chairman, CEO and President Jack J. Pelton last week labeled the FAA's proposed scheme of user fees and increased general aviation fuel taxes a "bailout" for U.S. airlines. Pelton's remarks came in a Feb. 23 speech to the University of Northern Colorado, touching on the general aviation industry's recent successes, the advances in technology potentially making future aircraft and air transportation more exciting, and the major obstacle to continued success: user fees. Putting his cards on the table, Pelton's prepared remarks stated, "After an intense lobbying campaign by the nation’s airlines, the FAA this year has proposed to radically change the way it is funded. Instead of the stable, non-bureaucratic gas tax, the FAA is proposing to switch to user fees -- the same method retarding the natural free-market growth in Europe we might otherwise expect to see given the dynamics of that economy. In Europe, the airlines rule the skies, shutting out other air travel alternatives." Pelton went on to gaze into his figurative crystal ball, painting a picture of declining general aviation growth, stifled overall domestic economic activity and reduced U.S. economic competition internationally, all because of airlines getting "the bailout they seek" from the FAA's reauthorization proposal. "What the FAA is proposing is to create a new bureaucracy to collect user fees, which they admit will bring in less than they get now, and would result in an unstable funding stream dependant on continued growth of the system," Pelton said in his remarks.

Listing problems with the FAA's user-fee proposal, Pelton also labeled as "fact" the following industry talking points:

  • The nation’s air traffic control system was developed primarily to control airline movements into and out of the large hub airports in the U.S.
  • Only 3 percent of the activity at the country’s 20 largest airports is considered general aviation.
  • General aviation aircraft primarily use secondary or small regional airports. They do not fly to hub airports.
  • The FAA wants to modernize air traffic control but they have not yet defined a plan for doing that.
  • Airlines are losing money. And many are in bankruptcy.

In Pelton's view, it all adds up to a "bailout" of the airlines by the federal government. Pelton added that the general aviation industry's $203 billion economic impact in 2006 and the 1.2 million jobs created in whole or in part by this industry will decline if the FAA/airline user-fee scheme is enacted. "How much -- it is impossible to say. But instead of growing to meet the global demand and retaining our national leadership in general aviation, we will retreat and ultimately lose out to Japan, to Brazil, to Canada," he added, ultimately ending his speech by calling on attendees to "weigh in with your legislators." Good advice, that.

 
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ADS-B Update: Three Firms Qualify To Bid

Last week's FAA announcement that three firms had qualified to bid on the ADS-B portion of the agency's planned Next Generation Air Transportation System (NGATS) brings closer -- or pushes further, depending on your cynicism level -- the date by which the U.S. ATC and air navigation system is modernized. The firms' identities should come as no real surprise: Lockheed-Martin, Raytheon and ITT were selected by the agency’s Joint Resources Council (JRC), a team of top FAA executives that reviews major acquisitions, and were approved to proceed toward the next phase of NGATS implementation. That phase is segment two of ADS-B implementation, which runs from 2009 to 2014. Segment one involves installing ADS-B at Philadelphia, Louisville, and Juneau, along with new stations on oil and gas platforms in the Gulf of Mexico. Segment one also includes the expansion of ADS-B broadcast services along the East Coast, throughout North Dakota, and along the lower part of the U.S. to Arizona and through Southern California. In addition, it involves the development of ADS-B separation standards and software to interface between ADS-B and other air traffic control systems. Presumably, ADS-B segment two involves nationwide expansion of the technology, but the FAA's fact sheet and Web site were silent on its exact nature.

In July, after the contract is negotiated, the FAA's JRC will review the business model in the proposed contract and, presuming a "go-ahead" decision, the agency will award the contract for establishing the ADS-B ground infrastructure and providing broadcast services. To achieve last week's three-company selection, the FAA's ADS-B program office released a Screening Information Request on Nov. 30, 2006, to solicit potential vendors. The JRC's review of the submitted proposals resulted in the three companies being selected to participate in further activities leading to the contract award. Additionally, the JRC approved moving the Alaska Capstone project into the national ADS-B program, as well as expanding Capstone services within the state. According to the FAA, combining Capstone with the national ADS-B program ensures that development of the Alaska aviation infrastructure will be on par with the national infrastructure as developed in the lower 48 states.

 
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FAA Proposes "Special Conditions" For Dassault's Falcon 7X

As a precursor to final U.S. type certification, the FAA this week published the proposed "special conditions" under which it intends to certify Dassault's forthcoming Falcon 7X trijet. In its statement, the FAA noted the 7X will have "novel or unusual design features" not envisioned in its existing airworthiness standards for transport category airplanes, thus requiring the special conditions. The agency said those features include "side stick controllers, electronic flight control systems, and flight envelope protections," and added that it does not have a regulatory framework in place to ensure appropriate safety standards for these design features. However, rather than an indication of new obstacles to Dassault's type certification of the 7X, the FAA's statement is both a normal action for the agency to take when presented with an advanced aircraft or engine to certify. Basically, the set of special conditions is a good sign that Dassault is that much closer to certifying the 7X.

Earlier, the airframer told analysts it had received a total of 158 firm orders worldwide for its business jets in 2006, including a $1.1 billion contract from NetJets Europe for 24 copies of the Falcon 7X, the largest order ever for business jets in Europe. Falcon business jets accounted for 62% of total Dassault sales in 2006, according to the company, and had a total backlog of more than 300 aircraft. Over 80 aircraft will be delivered in 2007 compared to 61 in 2006. According to Dassault, the Falcon 7X flight test and certification program accumulated 1520 flight test hours and 543 flights and is now complete. Certification from both the EASA and FAA are expected soon with first deliveries in the second quarter of 2007. The FAA's statement of special conditions set March 28, 2007, as the deadline by which comments on the 7X's certification standards should be submitted to the agency.

 
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On Tour: Embraer's Phenoms

Embraer this month embarked on an ambitious multi-continent tour, featuring full-scale mock-ups of its under-development Phenom 100 and Phenom 300 light jets, to include some 30 cities in the U.S. The tour began in Daytona Beach, Fla., where the Embraer road show expected to draw attendees at NASCAR's Daytona 500 race. An additional tour began in Brisbane, Australia, is in Sydney this week and plans to be in Melbourne and Perth in early March. Europe, Latin America and South Africa also are on the company's road show schedule. Meanwhile, one European customer, JetBird, is reporting the Phenom 100's first flight is expected by mid-2007, with the low-cost executive charter operator expecting to take first delivery of a Europe-certified airplane in April 2009.

Paul Geaney, managing director of JetBird, commented, "We are delighted that the Phenom design and manufacturing program remains on schedule and, as European launch customer, look forward to receiving the first European certified Phenom 100 in April 2009." The operator has placed firm orders for 50 Phenoms, with options for another 50. As the manufacturer edges closer to having flying airplanes, engine manufacturer Pratt & Whitney Canada says it has logged more than 600 hours of tests on the Phenom 100 engine, with the first two flight-worthy engines set for delivery to Embraer in early March. There, they'll be installed on the Phenom 100 prototype. Other components of the 100 have begun to arrive at Embraer's production facility and ground-based testing is well underway.

 
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Raytheon's Beech/Hawker Sale Gets EU Clearance

The Raytheon Company's proposed spinoff of its aircraft-manufacturing business got a green light last week from Europe's regulatory authorities. The European Commission automatically cleared the proposed sale to a new company formed by Goldman Sachs and Onex Partners after no antitrust problems were identified and no complaints from rivals were received. The EC allowed 25 working days for interested parties to oppose the sale. Raytheon announced the $3.3-billion deal Dec. 21, 2006, saying it will sell its Hawker and Beechcraft lines. As AVweb reported, the sale does not include Raytheon's fractional operation, Flight Options, or Raytheon Airline Aviation Services (RAAS), but does include the Raytheon Aircraft Services FBO network. More than 8,500 employees and about 100 facilities worldwide are involved.

Onex, a diversified company with annual revenues of some $20 billion, is also a partner in the recent takeover of Australia's Qantas Airways. The company bought Boeing's Wichita/Tulsa division in 2005; locally, Wichita residents mostly praise the firm for turning around the division, now known as Spirit Aerosystems Holdings Inc. The firm, headed by Gerry Schwartz, also manages a real estate and a public market investment fund.

 
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Marketing Synergies: Marquis Jet Joins Microsoft

Most of the business links between aviation and Microsoft Corp. have involved the software giant's "Flight Simulator" program, which used to allow would-be pilots to fly their PC into Chicago's Sears Tower. Now, with the recently launched small-business product Microsoft Office Live, the publisher is offering 10 hours of private jet travel on a Citation V Ultra operated by Marquis Jet -- NetJets' flight card operation -- as the grand prize in a sweepstakes promotion targeting small business owners and entrepreneurs as potential users of its new software. The sweepstakes, called "I'm Going Places," targets expansion-minded small-business owners looking for ways to create, maintain and promote their company's Web sites as well as managing their businesses online.

Michael Schultz, U.S. business and marketing lead for Office Live at Microsoft, said, "We can add wings to any business by helping even the smallest one establish a professional Web presence in just minutes. It's just like private jet travel with the Marquis Jet Card program: a better way for small-business owners to promote and manage their business -- wherever their business takes them." Marquis Jet is an acknowledged leader in private jet cards, offering a compromise between fractional ownership and retail charter 25 hours at a time. The Marquis Jet Card program is operated by NetJets Aviation Inc. or NetJets International Inc. under their respective Part 135 certificates.

ElleJet Charter Brokerage Focuses On Empty Legs

San Diego, Calif.-based charter, maintenance and refurbishment facility ElleJet this month said it is entering the charter brokerage business in a big way -- by focusing on filling seats on deadhead, or empty, legs flown by certificated operators. According to Joseph Gold, ElleJet's vice president of sales and marketing, the company maintains the "largest network of empty leg flights in the industry," and offers its customers access to the most exclusive air charter fleets in the world at reduced prices. That makes the company one of the latest to jump into the excess-capacity market: leveraging the near-commodity of empty air charter flights through a network of operators seeking to reduce their costs by filling empty seats on those legs. And there's a ready cadre of well-heeled customers looking to abandon the airlines who are willing to pay the extra price.

"As ElleJet continues to expand, so do our services and our dedication to our clients. Commitment to quality customer service and affordable prices is the key component of our success," commented Ben Schusterman, ElleJet's vice president of operations. In fact, what ElleJet is doing is nothing new -- many charter brokers have been sprouting up on the Internet in recent years to help operators with their marketing and defray costs associated with one-way charters or the expense of having an airplane and crew sit idle for a few days, waiting on the customer. And, according to ElleJet, "many companies are recognizing the advantages of private jet travel over traditional business class fares." ElleJet also provides traditional charter services as well as concierge, maintenance, painting, flight synchronization and aircraft refurbishment.

 
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Earthjet Unearths More Details

If you think you've heard it all when it comes to air-taxi concepts, think again. West Palm Beach, Fla.-based Earthjet is adding its own twist by using a franchise business model for the Part 135 service, in addition to conceptually designing the roughly 14,000-pound light jet to be used by the franchisees. "We believe the franchise model is a very effective way to structure an air-taxi service. Essentially, Earthjet will provide pilot and business training to franchise owners to ensure consistency of service," company President and CEO Dean Rotchin told AVweb. As for the air-taxi aircraft, Earthjet presented a conceptual design package that includes performance data and supplier bids to several "leading" aircraft manufacturers, and two are interested in building the six-seat (in air-taxi configuration) jet.

A decision on which company will manufacture the airplane is expected later this year, according to Rotchin. All Earthjet flights will be nonstop, and fares will be fixed at $375, $675 or $975, depending on the distance. "This allows for simpler and more consistent pricing," Rotchin says. The business plan allows for passenger co-mingling on the market-pair flights, and the company believes that it can break even with an average load of 2.5 passengers per one-way trip. Rotchin says service could start with an "interim" aircraft in 2008, with the Earthjet-designed "ideal" airplane entering the fleet in the 2010 timeframe.

Phoenix Associates Acquires Noble Jet

Phoenix Associates Land Syndicate earlier this month announced it had acquired Noble Jet Inc., a jet aircraft maintenance facility based at the Fort Lauderdale (Fla.) Executive Airport (KFXE). The company said it acquired 80% of Noble Jet's common stock for $2.0 million, paid through a combination of cash payments and a 10-year note. Noble Kurth, Noble Jet's principal, will retain a 20% equity position in the company and will continue to manage its day-to-day operations as chief operating officer. Phoenix assumed overall executive control on Feb. 23, 2007. Noble Jet specializes in the Learjet family of aircraft, performing unscheduled repairs, routine maintenance, and major airframe inspections. Several air taxi operators rely on Noble Jet for direct support of their Learjet fleet.

Paul Alonzo, president and CEO of Phoenix Associates, stated, "We are very excited about the addition of Noble Jet to the Phoenix organization. Coupled with the Best Jets group of companies, Noble Jet will give us an existing book of business in the very active south Florida market." In conjunction with the Noble Jet acquisition, Phoenix announced hiring Jeff Hathorn to conduct marketing and sales efforts in the Southeast for the Best Jets family of companies. Hathorn holds an ATP certificate and has extensive experience in the military, air cargo, passenger airlines and corporate jet flight operations. Phoenix Associates Land Syndicate is a public holding company with assets and/or interests in construction and land development, oil and natural gas, commodity brokering and trucking.

 
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