Review of the Mid-Size Jet Market

As we’ve seen in previous articles within this series, over the last decade the Entry Level and Light Jet markets have experienced some turbulence owing to swings in their economic cycles. Is there any evidence that the lower end of the Mid-Size Jet market is experiencing the same?

The fact that Bombardier recently opted to stop production of its Learjet series after several decades of production to focus on building Super Mid-Size Jets, Large Jets, and Ultra-Long-Range Jets could be interpreted that the Mid-Size Jet arena is not as lucrative as it used to be.

More than a decade ago, Bombardier invested approximately $1.5bn in the Learjet 85 program which it intended to become the fastest, largest and most capable Learjet it had ever built. Despite much fanfare, Bombardier ‘paused’ development, then wrote-off its investment and the Learjet 85 never came to market.

Instead, Bombardier developed the Learjet 70 and Learjet 75 platforms based on the older Learjet 40XR and Learjet 45XR models. The Learjet 70/75/75 Liberty saw several years of modest demand before Bombardier pulled the plug on 60 years of Learjet manufacture.

Although the Entry Level and Light Jet segments are considered the most vulnerable business jet markets with the lowest margins, the Mid-Size Jet market is more lucrative, though less so than the larger markets Bombardier and others now focus on.

Why Buy a Mid-Size Jet? 

Ideal for passengers with longer-range travel requirements, the need for additional luggage capacity, a fully enclosed aft lavatory, more sophisticated coffee/snack stations, and more headroom, today’s current production Mid-Size Jets offer a maximum payload of close to 3,000 pounds, and a range up to 3,350 nautical miles.

Table A: In Production Mid Size Jet Specifications Comparison

The aircraft in this study typically seat up to nine passengers (excluding two pilot seats) and offer a Maximum Take-Off Weight (MTOW) between 30,500 and 37,500lbs.

Specifically, the Embraer Praetor 500 is an evolution of the Legacy 450 and was introduced in 2018. It provides greater range than its predecessor and is the first Mid-Size Jet to feature a flat-floor, stand-up cabin, and fly-by-wire technology in the cockpit.

Meanwhile, Textron’s Cessna Citation Latitude evolved from the Citation Sovereign+ and offers many enhancements. Its shorter range (2,700nm) positions it between the 2,100nm Citation XLS+ and the 3,074nm Citation Sovereign+. Offering a generous amount of cabin space that allows for an expanded refreshment center and ample storage for catering, the Latitude also offers the benefit of a spacious lavatory and baggage compartment.

Following Bombardier’s withdrawal from the arena, the Embraer Praetor 500 and Cessna Citation Latitude are currently the only two in-production Mid-Size Jets on the market. Table A (above) provides a full performance and specification comparison for the two models.

Mid-Size Jet Market Overview

For comparative purposes, we have included the Learjet 75 which is no longer in production in Table B. We have also featured the Mid-Size Jets that remain in production today and their predecessors that were produced during the 2018 to 2022 timeframe.

Table B: Mid Size Jet Shipments between 2018 and 2022

A look at the General Aviation Manufacturers Association (GAMA) shipment reports shows an average of fewer than 75 Mid-Size Jet units being delivered annually between 2018 to 2022. The Compound Annual Growth Rate (CAGR) for these aircraft is -7.6%, negatively impacted by shipments during the first year of the pandemic.

The fortunes of Embraer and Textron are stark, with Embraer enjoying a positive CAGR while producing lower volumes of Mid-Size Jets, and Textron suffering a negative CAGR while producing higher volumes.

While shipments recovered somewhat after 2020, the average shipments per year from 2021 to 2022 is 61 units, which is well below the 96-unit peak recorded in 2019.

Variable Cost per Revenue Seat Mile vs. Range 

Comparing our field of in-production Mid-Size Jets and their predecessors, Chart A shows that the Embraer Praetor 500 offers the lowest variable cost hr/seat mile, even bettering its Legacy 450 predecessor. The core contributing factor is the 15% range improvement offered by the Praetor 500 with no significant increase in variable hourly cost.

Chart A: Mid-Size Jet Variable Cost per Seat Mile vs Range

The story is different when benchmarking the Citation Latitude against its predecessor. The Latitude has a slightly higher variable cost (16 cents versus 14 cents per seat mile) while offering 12% less range.

The Embraer Praetor 500 offers 600nm more range than the Citation Latitude (which has a higher purchase price when bought factory new). The Latitude holds an advantage in terms of long-range cruise speed and balanced field length requirements (among other items), though.

In terms of fuel consumption per hour the Latitude and Praetor 500 both average 250 gallons per hour, but the Praetor 500 offer 11% more trust per engine allowing it to have a maximum operating altitude of FL450, which is 2,000ft higher than the Latitude.

Productivity Index 

Chart B represents a productivity index for the Mid-Size Jets in our analysis. The productivity index multiplies aircraft range (with NBAA reserves, and in a high-density seating configuration), cabin volume, and long-range cruise speed, dividing the result by 1,000,000,000.

Chart B: Mid Size Jet Productivity Index vs Price

The Embraer Praetor 500 offers a higher productivity index score of 0.95 with an improvement of 0.05 point (6%) when compared to the Legacy 450. The Latitude follows with a productivity index score of 0.63 which is lower than its sibling the Citation Sovereign+.

Keep in mind that there are several factors to consider when buying jets, many of which are beyond the scope of this article, including residual value, service support network, and ability for owners/operators to upsize while staying with a favoured brand. In this regard, both Cessna (with the Citation Longitude) and Embraer (Praetor 600) have in-production Super Mid-Size Jets available.

Mid-Size Jet Market Summary

The Mid-Size Jet market shows a negative CAGR from 2018 to 2022, but a positive one between 2020 to 2022. As Chart A showed, due to the lack of current production aircraft in this segment, an opportunity may exist for a new market entrant – especially with the recent CAGR improvement.

With business jet flight activity softening a little recently, leading fleet operators like NetJets and Flexjet could potentially be tempted to shift some of their future aircraft orders for the Super Mid-Size Jets to Mid-Size Jets instead, thereby lowering acquisition costs somewhat and preserving their own profit margins.

Of course, while the aircraft OEMs have been blessed with ever-increasing backlogs of aircraft being sold at (or near) list price, the size of the backlogs accumulating mean they’re unable to offer delivery positions to new buyers before 2024/2025 at the earliest.

With the potential for lower GDP growth, higher inflation and higher interest rates impacting aircraft financing among others, new aircraft orders may begin to favor the lower price segments (having favored the Large Cabin and Long-Range segments more recently), and this could benefit Embraer and Textron (plus any potential new market entrant) in the Mid-Size Jet arena. 

So who could be tempted off the side-lines to capitalize on the gap in the market that Chart A identified? Would Pilatus, or somebody else make their next move the Mid-Size Jet market?

The product gap exists for a Mid-Size Jet with a range between 2,800 and 3,200nm that offers a variable cost per hour, per revenue seat mile close to US$0.14 (but no higher than $0.16). It would need to offer a fuel consumption rate of no more than 250 gallons per hour, and have a Maximum Take-Off Weight between 35,000lbs to 40,000lbs, while seating between nine and ten passengers. Its variable cost would need to be below $4,000, and the aircraft would need to offer a factory new price in the region of $20m-21.5m. 

With Bombardier exiting this segment, there is certainly space for Pilatus to make a solid move into the Mid-Size Jet market if it chose to do so. With 42 PC-24 Light Jets delivered annually between 2020 and 2022, a move-up option for its customers would certainly seem to make sense. Things could be due to get interesting in the Mid-Size Jet segment. Don’t look away now!

Read more articles in this series, including:

• Review of the Super Large Jet Market
• Review of the Large Jet Market
• Review of the Super Mid-Size Jet Market
• What's the Latest in the Light Jet Market?
• Entry Level Jet Market: What's the Latest
• Twin-Engine Turboprop Market Update
• Single Engine Turboprop Market: What's the Latest
• Light Single Engine Turbine Helicopter Market
• Light Twin-Engine Helicopter Market Review