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					Impacts of Escalating Fuel                                 Federal Aviation
                                                           Administration
Costs on Aviation System
Planning: VLJ Perspective




Transportation Research Board, Session #304
Dipasis Bhadra, Office of Aviation Policy and Plans, FAA
Date: 12 January, 2009
Agenda

•    Rationale
•    Definition
•    Types and coverage
•    Market situation
•    Forecast: FAA and others
•    Concluding thoughts




                                Federal Aviation   2
7 January, 2009                 Administration
Why VLJ?
                  Premium Passengers Coach / Economy




  2008 Total
Enplanements       ?

   ?                                                       ?
                                        Source: Moreno-Hines (2006), MITRE


                                    Federal Aviation                3
7 January, 2009                     Administration
Segments of the Business

•    Private business jets
•    Fractional ownership
•    Air taxi
•    Charters




                             Federal Aviation   4
7 January, 2009              Administration
Typical VLJ Vehicle
   •      Pressurized aircraft
   •      All weather vehicle
   •      Four revenue seats
   •      365 mph cruise speed
   •      Certified to fly into known icing conditions
   •      1,100 nm range (maximum). 700 nm practical with 2
          passengers
   •      Cost per passenger-mile (> $2.00 nominal based on life-
          cycle cost analysis)
   •      $1.65 million dollars (cost)
   •      3,415 public airports (> 3,000 ft. paved runways)
   •      Low Landing Minima capability provided to all airports
          using SATS LLM hardware (WAAS-aided)
   •      Airport Design Group = A-I
   •      Wake Vortex Classification = Small
       Source: Based on Trani, Baik and Hinze (2006)


                                                       Federal Aviation   5
7 January, 2009                                        Administration
   Price and MTOW




                  Source: Bonnefoy and Hansman (2006)


                                                        Federal Aviation   6
7 January, 2009                                         Administration
      VLJ Operators
      Primarily Operating Eclipse 500 Jets (Certified to FL 410)

    • DayJet (Florida) non-operational with 29 Jets
           – Commenced operations October 2007
           – Aggressive growth plan calls for a 100 Jet fleet by end of 08.
           – Suspended operations in September, 2008
    • Linear (Massachusetts) Operational, 3 Jets
           – Commenced operations in November 2007
           – Linear plans for 10 Jet fleet by the end of 08.
           – Planning for ~300 Eclipse Jets within 5 years.
    • North American Jet (Illinois) Operational, 5 Jets
           – Commenced operations in August 2007
           – Not purchasing additional jets.
           – Manage future VLJ’s for private individuals.
    • POGO (Massachusetts) Expected to be
      Operational by early 2009
           – Government approval pending.
           – Robert Crandall former CEO of American Airlines is Chairman
             and CEO.
Source: Based on Everson (2008)


                                                                              Federal Aviation   7
      7 January, 2009                                                         Administration
                                                                                                      Number of Flights




                                                                                      -
                                                                                              100
                                                                                                    200
                                                                                                           300
                                                                                                                 400
                                                                                                                       500
                                                                                                                             600
                                                                                                                                   700
                                                                                    BCT   Boca Raton, FL




7 January, 2009
                                                                                    GNV   Gainesville Regional, FL
                                                                                    TLH   Tallahassee Regional, FL
                                                                                    LAL   Lakeland Linder Regional, FL




                   Source: Everson (2008); based on ETMS data
                                                                                    APF   Naples Municipal Regional, FL
                                                                                    PNS   Pensacola Regional, FL
                                                                                    SRQ


                                                                                    SAV


                                                                                    PIE


                                                                                    OPF
                                                                                                                                         (Source: ETMS)




                                                                                    OCF


                                                                                    VLD



                                                                Departure Airport
                                                                                                                                                                                    Origin Airports: DayJet




                                                                                    SFB


                                                                                    DTS
                                                                                                                                                          DJS Top 20 Departure Locations




                                                                                    ISM


                                                                                    LEE


                                                                                    F45


                                                                                    PFN
Administration
Federal Aviation




                                                                                    CRG


                                                                                    SGJ


                                                                                    DAB
        8
      Origin Airports: Linear Air                                                                                                   Linear Air Departure Locations
                                                                                                                                                                                            Source: (ETMS)


                                     30




                                     25




                                     20
                 Number of Flights




                                                                                                                                     Bradley International, CT

                                                                                                                                                                 Bangor International, ME
                                                                                                           Nantucket Memorial, MA
                                                              Albany International, NY




                                     15
                                          Hanscom Field, MA



                                                                                         Barnes Muni, MA




                                     10




                                      5




                                      0
                                          BED                 ALB                        BAF               ACK                      BDL                          BGR                        OXC      BHB     BTV   H30   HTO   HYA   OWD PVC   PVD
                                                                                                                                                                                               Departure Airport
Source: Everson (2008); based on ETMS data


                                                                                                                                                                                                                                 Federal Aviation    9
      7 January, 2009                                                                                                                                                                                                            Administration
     Altitude Characteristics: Day Jet
                     08
     Oct 07 thru Mar Maximum Flight Altitudes
                          1000

                          900

                          800

                          700
      Flight Operations




                          600

                          500
                                                                                                     Economic viability
                          400                                                                        requires making use of
                                                                                                     this FL
                          300

                          200

                          100

                            0
                                 0 to 5   >5 to 10   >10 to 15   >15 to 20   >20 to 25   >25 to 30     >30 to 35   >35 to 40   >40
Source: Everson (2008); based on ETMS data                           Flight Level (Thousand)

                                                                                                        Federal Aviation             10
       7 January, 2009                                                                                  Administration
DayJet, Linear, and North American VLJ
Operations Aug 07 thru Mar 08
                    DayJet   Linear Air   North American Jet

     700

     600

     500

     400

     300

     200

     100

        0
            Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08
                                                               Source: Everson (2008); based on ETMS data


                                                                         Federal Aviation                   11
7 January, 2009                                                          Administration
      VLJ Operations Aug 07 thru Mar 08




Source: Everson (2008); based on ETMS data


                                             Federal Aviation   12
      7 January, 2009                        Administration
 Top 100 Potential Airports with VLJ
 Operations




                                                                                               TEB
                                                                MDW


VLJ
Operations

                 VGT




                                                                                         GAI
                                                    DAL
                         CPM




                                                    AUS
                                                          HOU

                                                                               OPF
             Source: Trani, Baik and Hinze (2006)
                                                                                  LNA
                                                                      Federal Aviation          13
    7 January, 2009                                                   Administration
      Possible VLJ Airports




Source: Bonnefoy and Hansman (2006); Based on Form 5010 data.


                                                                Federal Aviation   14
      7 January, 2009                                           Administration
                  Forecast
                  Scenarios




                              Federal Aviation   15
7 January, 2009               Administration
  Economy Trend and Types
  Long-termand Adjustments of V
Quarterly
growth
rate(%)
                       Long term trend




                                                 ?
                               Short-term
                               rebounds or “V”
                               adjustments


                                                     year


                              Federal Aviation         16
   7 January, 2009            Administration
       Crude Oil and Jet Fuel: Price and
       Consumption
                                                  Gallons of Jet Crude Oil (Spot) and Jet
                                        Average Prices ($/Barrel):Fuel Consumed (Millions)Fuel (Paid)
               $170
              1,800
                                                                    Crude Oil                       Jet Fuel                                                                                            2007                  2008
               $150
              1,750

               $130
              1,700

               $110
              1,650

                $90
              1,600

                $70
              1,550

                $50
              1,500
                $30
              1,450
                $10
                      Jan-86

                               Jan-87

                                        Jan-88

                                                  Jan-89

                                                           Jan-90

                                                                      Jan-91

                                                                               Jan-92

                                                                                          Jan-93

                                                                                                   Jan-94

                                                                                                            Jan-95

                                                                                                                     Jan-96

                                                                                                                              Jan-97

                                                                                                                                       Jan-98

                                                                                                                                                 Jan-99

                                                                                                                                                          Jan-00

                                                                                                                                                                   Jan-01

                                                                                                                                                                            Jan-02

                                                                                                                                                                                      Jan-03

                                                                                                                                                                                               Jan-04

                                                                                                                                                                                                        Jan-05

                                                                                                                                                                                                                 Jan-06

                                                                                                                                                                                                                          Jan-07

                                                                                                                                                                                                                                    Jan-08
              1,400
                               Jan               Feb                Mar                 Apr             May               Jun              Jul             Aug              Sep                Oct               Nov               Dec
Source: Air Transport Association


                                                                                                                                                                                     Federal Aviation                                        17
       7 January, 2009                                                                                                                                                               Administration
       Wealth Destruction and Market for
       VLJ


According to Spectrem Group, a Chicago-based wealth-
research firm, surveyed households with a net worth of $1
million or more say their assets have declined 30% or more.
Nearly one-fifth of millionaires surveyed have experienced
declines of more than 40%.




Source: IHS Global Insight (2009)   Source: WSJ, January 6, 2009


                                                   Federal Aviation   18
       7 January, 2009                             Administration
   Credit Market Volatility and Major VLJ
   Players
DayJet Corp. filed for bankruptcy on Nov. 14, records show.
It had $23 million in liabilities and $17 million in assets,
according to its bankruptcy filing in a Delaware federal court.
Company officials said a failure to obtain capital was the
main reason it stopped flying.
Eclipse Aviaiton filed for bankruptcy protection on Nov. 25
reporting that it owes more than $1 billion in debts and plans
to sell almost all of its assets to the company’s largest
shareholder. The company had been seeking between $200
million and $300 million in new funding to keep operations
going, but the company has been unable to raise the money
             the global financial crisis.
given Jan 10, 2009
Source: WSJ,


                                             Federal Aviation   19
   7 January, 2009                           Administration
      Prospect of VLJs
                                      ?       X




                                      ?   ?   ?
Source: Bonnefoy and Hansman (2006)


                                                  Federal Aviation   20
      7 January, 2009                             Administration
Inventory Position




                  Source: The Economist; Jan. 10, 2009 issue


                                                               Federal Aviation   21
7 January, 2009                                                Administration
     General Aviation Shipments and GDP
        SAAR                                                                                                                        Units
           6%                                                                                                                   1200


           4%                                                                                                                   1000


           2%                                                                                                                   800


           0%                                                                                                                   600


           -2%                                                                                                                  400


           -4%                                                                                                                  200


           -6%                                                                                                                  0
                 2006q1   2006q2   2006q3   2006q4   2007q1    2007q2    2007q3   2007q4   2008q1   2008q2   2008q3    2008q4
                                                                                                                         est

                                                              GDP       US Shipments



Sources: Schaufele (2009) based on GAMA, BEA

                                                                                                    Federal Aviation                    22
     7 January, 2009                                                                                Administration
     SE Piston Deliveries: Low and High
     Scenarios
               5,000                 Actual        Forecast

               4,500

               4,000

               3,500
       Units




               3,000

               2,500

               2,000

               1,500

               1,000
                       2000   2005              2010           2015               2020          2025

                                              GI Nov 08 Fcst   Mar 08 Fcst
Source: Schaufele (2009)

                                                                             Federal Aviation          23
     7 January, 2009                                                         Administration
     US VLJ Deliveries Under Different
     Assumptions
              600

              500

              400
      Units




              300

              200

              100

                0
                    2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

                                                     GI Nov 08 Fcst       Mar 08 Fcst

Source: Schaufele (2009)

                                                                                        Federal Aviation             24
     7 January, 2009                                                                    Administration
VLJ Delivery Scenarios: Optimistic
and Probable




                          Federal Aviation   25
7 January, 2009           Administration
Forecast Scenario and Risks

•    Economy, economy, economy!
•    When will demand begin to grow?
•    Composition of demand afterwards?
•    Will demand ever return to prior trend line?
•    Which operators will survive the downturn?
•    Which manufacturers will survive?
•    Will environmental concerns curtail demand?
•    Will safety issues constrain demand?


                                    Federal Aviation   26
7 January, 2009                     Administration
Concluding Thoughts

• Present economic environment created
  considerable headwinds for VLJ operators and
  manufacturers alike
• Uncertainty involving demand, credit facilities
  and distribution channels remain strong
• Some form of VLJs are expected to serve future
  markets initiating more through air taxi
  operations
• Viable business models appear to be lacking


                                    Federal Aviation   27
7 January, 2009                     Administration

				
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