Embraer does not want to be a buggy whip-maker and this week announced an electrical Vertical Take-Off and Landing (eVTOL) aircraft concept (pictured).

It was launched by EmbraerX, a new division of the Brazilian company: “dedicated to developing disruptive businesses that transform transportation.”

“Urban mobility is ripe for transformation and we are committed to having a major role in this key market,” said Paulo Cesar de Souza e Silva, president and CEO, of Embraer. He was speaking at a conference on eVTOL aircraft organised by Uber in Los Angeles.

Uber may seem like an unlikely aviation company. But last year it published a whitepaper called Uber Elevate arguing the economics of eVTOL taxis. The conference this week was its second in support of eVTOLS.

The company is not investing in eVTOLs or eVTOL companies (just as it does not own cars). But it is encouraging companies – including Embraer, Bell (which recently dropped the word Helicopter from its name), Aurora Flight Sciences (now part of Boeing), Slovenian manufacturer Pipistrel Aircraft, Chinese-owned Mooney Aircraft and drone-maker Karem Aircraft – to work with it on making eVTOL taxis happen.

Uber believes that flying in an eVTOL aircraft will eventually cost less than travelling by car. But for this to happen cost-effectively eVTOLs cannot be operated by pilots, so they need to be fully autonomous. Perhaps surprisingly, according to a survey of 1,500 people we conducted last month, some 13.2% of Americans say they are already prepared to fly in a pilotless aircraft.

Uber says it wants to start testing the system in 2020 with an eye to starting to carry paying passengers in 2023. Dallas Fort Worth and Los Angeles are vying to be launch cities in the US. This could change. Last year, Uber announced that it hoped to start testing in Dubai in 2020, but the UAE city has since dropped out.

The Uber Elevate project was launched before Dara Khosrowshahi became CEO of Uber and he admits he was initially sceptical about it. Levitt would approve of his change of mind. “For me the ‘aha’ moment came when I started understanding that Uber is not just about cars,” said Khosrowshahi speaking at the conference. “Ultimately, where we want to go is about urban mobility and urban transport, and being a solution for the cities in which we operate.”

Flying in 2023

Launching in 2023 may be a tad ambitious. Few industries are as highly regulated as aviation. The FAA and other authorities will – rightly – not be rushed. “I don’t think 2023 is too ambitious,” said Dan Elwell, acting administrator of the FAA, at the conference. “But I am certainly not going to make any commitments.”

Uber has famously had run-ins with many transport regulators, and won some. But these are very different when compared to dealing with federal agencies. As anyone involved in aviation knows, you do not cross an airworthiness regulator, and new air-traffic control systems and other infrastructure do not happen overnight.

While Uber deserves credit for pushing the concept, it does mean that many people now associate eVTOLs with air taxis. This is perhaps the same sort of mistake that was made when Very Light Jets were announced. The new aircraft type may eventually be operated as shared jets but the first eVTOL customers will almost certainly be individuals and corporates, who will lead the way before significant fleet buyers move in. This has been the same with the introduction of cars, aircraft and helicopters, and there is no reason why eVTOLs should be different.

At least another 20 eVTOL projects are being worked on. Some of these have raised significant amounts of investment (Larry Page, the founder of Google, owns one new entrant called Kittyhawk) but for now they are not much of a threat to existing aircraft manufacturers.

Tesla founder Elon Musk argued this week against what Warren Buffet terms moats – the competitive advantages that some companies have because of intangible and tangible assets, such as their brands or distribution networks. Musk said: “If your only defence against invading armies is a moat, you will not last long. What matters is the pace of innovation — that is the fundamental determinant of competitiveness.”

Musk and Buffet are both right.

Aircraft OEMs have strong moats – including capital, brands, production capabilities, after-service networks, supplier relationships, knowledge of the certification process and so on. So, they seem much better placed than whip manufacturers (pedants will also note that a handful of whip makers did survive). This is a huge advantage and was demonstrated 10 years ago when many new entrants tried to launch Very Light Jets. Embraer, in particular, knows this as it is one of very few new entrants to have truly succeeded in business aviation.

Moats can, however, be crossed, and not only when the defenders lower the drawbridge. As Musk says, manufacturers need to keep innovating and they are all trying. Airbus (A3 by Airbus) and Boeing (Boeing HorizonX) have similar divisions to EmbraerX.

There is even a really brilliant conference coming up in October in San Francisco called REVOLUTION.AERO focused on the companies and investors looking to disrupt business and personal aviation.

It is easy to dismiss the hype surrounding eVTOLs – especially if you are a hardened business-aviation professional with jet fuel in your blood. But they are inevitable. You may not be able to hail one on your phone come 2023, but they are coming. However, unlike a jet or helicopter you may not be able to hear them.

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It is astonishing how quickly the Middle East business aviation market has changed in just 12 months. At last year’s CJI Dubai Conference no one expected a diplomatic crisis over Qatar to start within a few months or predicted the anti-corruption crackdown in Saudi Arabia.

It was with these changes in mind that the operators’ panel — comprised of representatives from DC Aviation Al-Futtaim, ExecuJet and Gama Aviation — was perhaps understandably cautious about the next few months, the immediate future. All three executives agreed that 2017 had been tough and that 2018 was unlikely to see massive growth. This, too, was the view from the conference’s more-than 200 delegates. Just 43% of them were optimistic about Middle Eastern business aviation in 2018.

Nonetheless, the overall mood was far from depressed.

Companies that have set up in the region are in it for the long-term. And they are convinced there is a lot of growth to come. Sessions looking at the region’s longer-term prospects were more upbeat. The Middle East is already a key market for Airbus Corporate Jets and Boeing Business Jets, and the future looks even brighter with 92% of attendees believing that there are opportunities for more VVIP aircraft.

Holger Ostheimer, from DC Aviation Al-Futtaim, used data to argue why the region is set to grow. Those in the final session, covering the future for the region – featuring Steffen Fries, from fast-growing European operator MHS Aviation; Tariq Bin Ghalaita from Dubai South Airport; Adel Mardini from trip-planning and FBO company Jetex; and Captain Raman Oberoi, from local operator Falcon Aviation – were far more bullish than their counterparts on the first panel. Some 70% of attendees are optimistic or very optimistic about the next 10 years.

There is a consensus that Saudi Arabia – which is introducing new regulations — could emerge as a much-stronger market in 2019. UAE operators are also positive about the Dubai World Expo in 2020. “You should have asked us about the next 10 years, not the next 12 months,” said one of the first panelists. “In the long-term, we are all bullish.”

Volatility can also work both ways. The region had to cope with a number of negative shocks in 2017. Maybe there will be more than just a couple of positive surprises in 2018.

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But on his 37th call this week, it is clear that things are changing. Donnelly is far too prudent to say it, but things are definitely looking up. And he may soon need to get his thesaurus out and look up more bullish words.

The manufacturer’s first-quarter aircraft sales were up 4% to $1 billion thanks to more deliveries and higher prices. It delivered 36 jets in the first quarter (one more than in the first three months of 2017) and 29 turboprops (up from 20 in the same period last year). The division made a profit of $72 million for the quarter, up from $36 million.

But Textron Aviation’s $1.6 billion backlog is the most significant change. It has changed how it accounts for backlog, but this is its highest first-quarter backlog since 2012 (when it was still delivering aircraft ordered in 2008) and the first time it has risen organically since 2008 (it rose to $1.5 billion in the first quarter of 2014 when Beechcraft was acquired). It is still a long way from a $14.5 billion backlog in the first quarter of 2008 – but it is up significantly on $1 billion in 2016 and 2017. The first quarter is typically a slow sales period for all manufacturers, so the backlog can be expected to rise further as this year progresses.

Donnelly says Textron is seeing stronger demand for jets in the US, helped by tax reforms and growing business confidence. And it is also seeing more international buyers for turboprops.

“People are looking to invest. It has been, frankly, a long time. A lot of people are out there who have aircraft that are certainly getting older. They are upgrading a lot more infrequently than they used to because we went through some of those down years,” said Donnelly. “I would like to say that it is not crazy, but there is natural demand in the market. People are out there and looking to upgrade aircraft, and that is why we have seen a solid order flow.”

He also says Textron is discounting less than before. “The amount of capital, the amount of investment that you make in this business, warrants getting a better return and we need to see better pricing in the end market and so that is the trade we are making. We have been walking away from deals at price levels that are just not acceptable to the business.”

Donnelly says that Textron expects to get the Citation Longitude certificated in the next few months and expects to sell more this year. He also said that the Citation Hemisphere project remains suspended while the company waits for Silvercrest engines. A lot of coverage this week has focused on the Hemisphere delays, but Textron does not need the aircraft now.

As good GE alumni, Donnelly and Scott Ernest, the president of Textron Aviation, are not given to hyperbole. Both like talking about “incremental demand” and are naturally cautious when forecasting. But 2018 looks set to see more than an incremental improvement for Textron aircraft. After nine years, things are looking up.

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Normally the first business aircraft imported into a country are brand-new.

This is usually driven by wealth. Ultra High Net Worth Individuals (UHNWI), often newly rich, value their time, and want the best that money can buy. They do not buy second hand cars and feel the same about aircraft.

It has happened in many countries around the world, including China.

But China did not come from the same mould as other countries. The first business jets in China were mid-size jets operating charter flights. The first privately owned business jet was a Cessna Citation Excel.

These aircraft, new when they entered the country, came into a China that was unrecognisable by today’s standards.

Having moved from a socialist centrally planned economy into a market-driven economy, China’s growth began, and with it came a generation of newly wealthy individuals.

Brand-new, large-cabin, long-range jets began to enter the country in numbers. Often UHNWIs would choose an aircraft one up from their friends. So, for example, if they saw that a friend had bought a G450, they would buy a G550. If they saw somebody had bought a G550, they would buy a G650. Pretty much all of the aircraft coming in were new.

Although pre-owned aircraft have begun to be accepted in China, these were normally purchased by charter companies, rather than individuals or companies.

In 2017, the ratio between new and pre-owned aircraft coming into China shifted towards pre-owned for the first time.

According to Asian Sky Group’s figures, of the 68 business jets that were added to the Chinese fleet in 2017, 39, some 57%, were pre-owned. In 2016, only 36% were previously owned.

The shift has taken place for a few reasons. One aircraft manager at ABACE this week said that one of these is that buyers are looking for value, adding that six months ago there were a lot of good deals in the market, but these were quickly taken.

All the best from Shanghai.

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That so many people are in attendance should be taken as a highly-positive sign. The Asian Sky Group’s annual fleet report, published today, and the ABACE market updates session were both very positive about the Chinese market.

Yes, China’s headline-making days of double-digit annual economic growth might be a distant memory, Beijing’s anti-graft measures may well be weighing on conspicuous consumption, and the expected increase in infrastructure needed to support business aviation operations may well have slowed down. But the Chinese government’s economic planners plainly see the benefits that general aviation could bring to the country, and the subject of general aviation was specifically mentioned in the 13th Five-Year Plan, introduced in 2016.

Although the definition of general aviation (GA) is broad and more commonly refers to smaller aircraft, the plans to further open the country for general aviation also affect business aviation.

The Five-Year Plan explicitly speaks of the need to further develop the infrastructure needed to support GA, as well as the need to open up more low-level airspace.

These measures brought with them a renewed sense of optimism in the Chinese market. Charter companies began to see an increase in requests, aircraft began to be used more often and an increasing number of pre-owned aircraft began to enter the region.

All of this helped the Chinese mainland fleet grow by 8.7% in 2017, more than double its 4.3% growth rate in 2016.

Alongside the Chinese mainland, Greater China combined — including Hong Kong, Macau and Taiwan — also saw an increase in fleet numbers during 2017, with a continued decline in Macau offset by gains in Hong Kong and Taiwan.

Hong Kong also has issues that constrain its fleet’s growth, although these are largely attributed to a lack of available parking slots. Last year’s 7.8% growth is higher than the 4.8% in 2016 and is presumably good news for Shenzhen, Guangzhou and Zhuhai, which are all close enough to Hong Kong to be used as overspill airports to park aircraft.

Elsewhere in Asia the picture was less bright.

Overall, the Asia-Pacific fleet grew by just 2.6% in 2017, a touch lower than the 3.0% growth recorded in 2016. Almost all of the rest of Asia-Pacific – beyond China — saw either a decline in fleet numbers or remained flat, with only Australia, India and Malaysia seeing more aircraft enter their fleets.

The sharpest declines were in Singapore, which lost 20% of its fleet, and Indonesia which lost 10%.

Asian Sky Group’s managing director Jeff Lowe says that he is seeing renewed optimism in the region. This contrasts with the market survey results that the company published in its most recent Asian Sky Group Quarterly magazine, where most respondents expressed caution.

Lowe believes this is a blip, believing the results of the survey are “perceived (hoped) as just a momentary pause – a collective catching of our breaths if you will – at the start of a new year before we all go roaring off into the remainder of 2018.”

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ABACE, which takes place this week in Shanghai, is overshadowed by the possibility of an escalating trade war between the US and China.

As part of President Donald Trump’s unilaterally proposed tariffs targeting in part what he sees an unfair trade imbalance, the US has proposed import levies on Chinese-built aircraft (it is unclear why it has done this at it is a tiny industry). China, in turn, has responded with a proposed introduction of an additional 25% tariff on imports of US-built aircraft weighing between 15,000kg and 45,000kg. This would clearly affect Boeing airliners but, if implemented, would also apply to all large business jets built in the US.

Perhaps we should ask the question: Are the threats flying back and forth between the White House and Tiananmen Square real or merely bluff? As one aircraft broker has said here in Shanghai, the Chinese are patient, they will not panic and their responses will be measured. Instead of making threatening noises, the powers in Beijing will remain calm and wait to see how the trade dispute evolves before showing their hands. The last thing the broker sees happening is for Chinese buyers to change their purchase plans and buy aircraft that will not be affected by the threatened higher tariffs.

There is a good chance that these threatened tariffs will not be imposed – both are just proposed – and there would be ways around the tariffs (including off-shore registration) but any talk of trade wars is a concern to be managed by an industry that is often driven by the strengths or weaknesses of global trade.

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Jet Aviation this week agreed to buy Hawker Pacific for $250 million. And it is a deal with a lot of winners.

It is clearly a good deal for the sellers. Private-equity company Britton Hill (which owned 65.82%) and shipping firm SEACOR (34.18%) have both obtained good returns on their investments. The size of Britton Hill’s investment in 2014 was not disclosed, but SEACOR paid $25 million for its stake in 2010. Neither of them was a forced seller. In fact, one of their biggest drivers was the influx of capital into business aviation at the moment. Both owners wanted to sell while the sector is still hot, and so asked Jefferies, the leading business aviation investment bank, to start the sales process in 2017.

But it is also a deal that makes sense for Jet Aviation. The General Dynamics subsidiary – and sister company to Gulfstream – already has a very strong Asian business. But adding Hawker Pacific – which has the largest network of FBOs and MROs in Asia – will make it even stronger.

The acquisition also makes life harder for competitors. During the sale, Jefferies kept highlighting the fact that buying the 40-year old Hawker Pacific was the last chance for someone to get significant market share in Asia through a single acquisition.

It is worth sparing a thought for the unsuccessful bidders. Not only have they spent many hours fruitlessly conducting due diligence and discussing synergies in meetings, but now many of them have to spend next week in a Hawker Pacific facility watching the deal being toasted on the Jet Aviation stand.

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It was not confined to just one area. Civilisation was beginning to form in different regions around the world at much the same time. But it is widely agreed that Mesopotamia and ancient Egypt were the most advanced.

Mesopotamia covered an area that included modern-day Iraq, Kuwait, parts of Syria and Turkey. Ancient Egypt generally refers to the lowest extent of the river Nile in modern-day Egypt.

Both Mesopotamia and Ancient Egypt form part of the Middle East.

In a new report by Corporate Jet Investor we look into how the Middle East has developed for business aviation.

Using data from AMSTAT we look at how the region’s fleet has changed over the course of the past five years, plotting the data not only by the numbers of aircraft in each of the countries, but also their average ages and types of aircraft.

The top line is that the business jet fleet shrank by 2% in 2017. This was largely due to fewer new aircraft deliveries into the region.

The Middle East is known as a large-cabin market, and the slow-down in deliveries could be attributed to a lull in the replacement cycle as manufacturers gear up to begin deliveries of newer aircraft models.

In 2017 the top three aircraft types in service included the Gulfstream G450 and the Boeing BBJ1. Both of these have replacement models due to come online in the next few years.

You can click on this link to view and download the report.

Alternatively, if you are unable to do so, do feel free to reply to email for a copy.

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Especially when one of the companies involved is the country’s second-largest airline. ANA Holdings, the owner of All Nippon Airlines (ANA) has formed a partnership with Sojitz, the Tokyo-based general trading company.

Named ANA Business Jet, the new operator is looking to launch during the summer using HondaJets. ANA says it will provide the worldwide sales network, with Sojitz using its knowledge of business jet operations.

Sojitz is itself no stranger to aviation. In 2017 it bought a minority stake in ACJ Jet Charters, a Florida-based charter operator and promptly used its AOC to set up its own business-jet operator called Phenix Jet.

Although ANA Business Jet will offer direct charters from Japan, the HondaJets will be used from major ANA hubs in Europe and the US.
ANA currently serves nine cities in the US as well as eight in Europe, although a map on ANA’s website shows charter flights from only two cities in the US and one in Europe.

Airlines in Japan forming business jet divisions are not a new phenomenon.

Last year Japan’s biggest airline, Japan Airlines (JAL), formed a partnership with Dassault Falcon Service to create JAL Falcon Business Jet.

Whilst ANA Business Jet will have a joint focus on flights from Japan as well as European and US charters, JAL Falcon Business Jet focuses solely on providing onward connections for passengers on JAL’s Tokyo to Paris scheduled flights.

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It is all about water content. Kernels pop because they have a membrane or pericarp that holds in water. When heated the kernel’s water turns to steam that explodes through the pericarp. Corn that has dried out – cracking the membrane – does not pop*.

But like many things in life, working out which off-shore aircraft registry will pop (or not) is much harder.

Until 2007, when the Isle of Man aircraft registry launched, it was really all about the ABCs – Aruba, Bermuda and the Cayman Islands – and these all continue to do well.

The Isle of Man is another that has clearly been a success. On March 3 it hit its 1,000th aircraft registration. Analysis by The Sovereign Group, shows that the register has 432 aircraft on it at the moment including 313 corporate jets.

San Marino, which launched in 2012, is also really booming, particularly with operators. It now has more than 200 aircraft on its registry and 13 companies have San Marino Aircraft Operator Certificates. The latest to get one was Luxaviation.

In contrast, the Jersey register has not been a great success.

Originally, the registry was to have been a joint effort between Guernsey and Jersey, but a fallout during the planning stages pushed the two apart.

Guernsey then launched its own 2-register in December 2013. Jersey eventually followed in November 2015 with its ZJ- register. And while Guernsey’s register began to grow, Jersey’s struggled.

There are currently around 20 2-reg private jets, and a higher number of commercial aircraft registered in Guernsey.

Jersey has only ever had one helicopter and one Cessna Citation CJ4 on its register.

According to a Freedom of Information request that Corporate Jet Investor submitted to the States of Jersey in December 2017, the register cost £860,000 ($1.2 million) to set up and costs £66,000 to run every year.

From the date of launch until September 2017, the total fees generated by the registry were just £15,617.

Following the poor performance, the government decided to stop actively marketing the registry whilst a new business model was devised.

But more problems arose in October 2017 when Avisa, the technical support company used by the registry, was acquired by The CAVOK Group, which decided against continuing with the contract.

Without technical services, the register was forced to ground its only aircraft until a new technical support contract could be put in place. Fortunately, only the Citation CJ4 was on the register at the time and, even then, it was undergoing maintenance in the UK.

After being offline for just over a week, the States of Jersey appointed Regio Lease as the new technical support company for a six-month interim period whilst the new business model was being worked on.

Six months later, the States of Jersey have passed the management of the register over to Ports of Jersey, no doubt impressed with how it has grown the island’s ship register since it took it over in 2016. Since Ports of Jersey has taken over the shipping register, it has added 287 new vessels and completed over 1,900 transactions.

Other aircraft registries may launch soon. Air Safety First Group, which runs the Aruba and San Marino registries, is looking at other jurisdictions. Apparently, once you pop you can’t stop.

*What other business aviation newsletter gives you useful facts like this?

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