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Boeing Business Jet
The battle of the big guns


In this month’s Aircraft Comparative Analysis- we’ll provide information on a selection of new and pre-owned business jets in the $65m-$75m range for the purpose of valuing the Boeing Business Jet (BBJ) aircraft. The current New/Used percentage split for the BBJ is 25% new- and 75% pre-owned according to JETNET records.

Within the scope of this article- we will consider the usual productivity parameters - payload/range- speed and cabin size - and cover current and future market values. The field in this study includes the Airbus Corporate Jet.

BRIEF HISTORY
The market for large executive cabin class aircraft began long ago in 1959 with the introduction of the Boeing 707 - indeed- aftermarket conversions of Boeing- McDonnell Douglas- Airbus and BAC have been occurring for decades. Commercial aircraft that have been converted or built for corporate or business use (since the late 1990s)- and not airline transportation are referred to in the industry as ‘Bizliners’. Demand forced two leading commercial OEMs to address the market with the BBJ (Boeing Business Jet) and ACJ (Airbus Corporate Jet) in the late 1990s.

In 1998- Boeing reacted to the ‘Bizliner’ demand by delivering the first Boeing Business Jet - an ultra-long-range twin-turbofan jet using the fuselage of the 737-700 with the strengthened wings and landing gear of the larger 737-800.

Airbus followed with the Airbus Corporate Jet (ACJ) a year later. Fast-forward into 2010- and converted airliners number 365 in operation with 230 (or 63%) of the total fleet made up by Boeing-built aircraft- according to JETNET. These spacious jets are commonly used by sports teams- governments and various global corporations worldwide.

Table A shows there are 205 BBJ and ACJ Bizliners in-operation today- excluding the 365 converted airlines noted previously. There are three Boeing Business Jet models on the market (BBJ- BBJ2 and BBJ3). The latest- the BBJ3- was announced in 2006 and is based on the B737-900ER aircraft.

MARKET SHARE
As Chart A represents- the Market Delivery percentage share in October 2010 has the Boeing Business Jet (all models) at 65% and the Airbus ACJ (all models) at 35%.

The total sales for BBJs stand at 132 for all models. However- the lead-time to purchase a new aircraft is long (Boeing manufactured four BBJs in 2009 and six in the opening nine months of 2010 out of its jam-packed B737 commercial production line). Historically- 35 percent of the BBJs ordered are from government heads of state and are typically designed to seat between 25 to 50 passengers.

As mentioned- fuselages are taken from the Boeing 737-700 passenger jet production line and completed as BBJs with the addition of wings and landing gear from the 737-800- and winglets. Up to nine auxiliary fuel tanks can be installed in various arrangements- extending the range of the aircraft. When service letter 737-SL-02-017 is complied with- the BBJ can be RVSM certified.

The BBJ2 is greater in length- and the fuselage is from the commercial airliner 737-800- while the BBJ3 is even greater in length- utilizing the fuselage of the 737-900.

PAYLOAD AND RANGE
The data contained in Table B is published in the Business & Commercial Aviation (B&CA) May 2010 issue- and is also sourced from Conklin & de Decker. As we mentioned in past articles- a potential operator should focus on payload capability as a key factor. The BBJ aircraft ‘Available payload with Maximum Fuel’ at 4-723 lbs is considerably greater than that of the ACJ at 1-710 lbs.

CABIN VOLUME
According to Conklin & de Decker- the cabin volume of the BBJ at 5-390 cubic feet is smaller than the ACJ at 5-900 cubic feet (see Chart B).

POWERPLANT DETAILS
Powered by two CFM International CFM56-7 engines- the BBJ powerplants each offer 27-300 lbs of thrust. The ACJ is also powered by a pair of CFM International engines- but with slightly less thrust at 27-000 lbst.

COST PER MILE COMPARISONS
Using data published in the May 2010 B&CA Planning and Purchasing Handbook and the August 2010 B&CA Operations Planning Guide we will compare our aircraft. The nationwide average Jet A fuel cost used from the August 2010 edition was $4.90 per gallon at press time- so for the sake of comparison we’ll chart the numbers as published.

Note: Fuel price used from this source does not represent an average price for the year.

Chart C details ‘Cost per Mile’- and compares the BBJ to the field factoring direct costs- and with each aircraft flying a 6-000nm mission with an 800 pound (four passenger) payload. The BBJ at $9.19 cost per mile is considerably lower than the ACJ at $11.18 cost per mile.

TOTAL VARIABLE COST COMPARISONS
The ‘Total Variable Cost’- illustrated in Chart D- is defined as the cost of Fuel Expense- Maintenance Labor Expense- Scheduled Parts Expense- and Miscellaneous Trip Expense. The total variable cost for the BBJ at $4-066 is less than the ACJ at $4-939.

PRODUCTIVITY COMPARISONS
The points in Chart E center on the same aircraft. Pricing used in the vertical axis is as published in the B&CA August 2010 Operations Planning Guide. The productivity index requires further discussion in that the factors used can be somewhat arbitrary.

Productivity can be (and it is here) defined as the multiple of three factors:

1. Range with full payload and available fuel;
2. The long range cruise speed flown to achieve that range;
3. The cabin volume available for passengers and amenities.

The result is a very large number so for the purpose of charting- each result is divided by one billion. The examples plotted are confined to the aircraft in this study. A computed curve fit on this plot would not be very tight- but when all business jet aircraft are considered- the “r” squared factor would equal a number above 0.9.

Others may choose different parameters- but serious business aircraft buyers are usually impressed with Price- Range- Speed and Cabin Size.

After consideration of the Price- Range- Speed and Cabin Size- we can conclude that the BBJ- as shown in productivity index Chart E- is productive. The overall equipped price of the BBJ is considerably less ($9.5m less) than the ACJ. the BBJ offers less cabin volume- it is less expensive to operate on a cost per mile basis- and a variable cost basis than its competitor in this field of study.

Table C contains the average equipped prices from B&CA magazine for each aircraft. The average speed- cabin volume and maximum payload values are from Conklin and de Decker. The number of aircraft in-operation and percentage ‘For Sale’ are reported by JETNET.

Illustrated in Table D are the ‘Top 10’ Countries where BBJ aircraft are based. The United States tops the list with 47- or 36% of all BBJ aircraft followed by the Middle East countries of Saudi Arabia and United Arab Emirates (with a combined total of 21%).

AIRPORT PERFORMANCE
The airport performance is illustrated in Table E- and includes airport Take-Off Field Length (TOFL)- Landing- and Balanced Field Length. The BBJ is again reasonably competitive based on these airport performance criteria.

SUMMARY
Within the preceding paragraphs we have touched upon several of the attributes that business aircraft operators value. There are other qualities such as terminal area performance- time to climb performance- and maximum transition altitude levels that might factor in a buying decision- too- however.

We see every indication that the market demand for New Bizliners will continue to grow with the entire business jet industry. The Bizliner manufacturers are likely to continue to control the growth as they will have to focus on their primary airline customer deliveries and schedule limited allocations of Bizliners to their secondary corporate market. Even with long lead times- the Bizliner buyers seem to be willing to wait to get these unique and specialized aircraft to fit their needs.

Essentially- the Boeing BBJ fares well against its competition- so those operators in the market should find the preceding comparison of value. Our expectations are that the Boeing BBJ aircraft will continue to do very well in the pre-owned market.

For more information: Michael Chase is president of Chase & Associates- and can be contacted at 1628 Snowmass Place- Lewisville- TX75077; Tel: 214-226-9882; Web:
www.mdchase.com


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