After an exceptional year 2017 with 16 new orders, Boeing Business Jets consolidated its position against its main rival, Airbus, in a very specific business aviation market. Ultimate Jet took advantage of the Monaco Yacht Show to meet with Greg Laxton, CEO of Boeing Business Jets, to review the Seattle giant’s subsidiary.
Can you describe your market?
Boeing, with its BBJ branch, represents 70% of market share in the large private carrier segment and 60% of that of private single aisle aircraft thanks to the 737 family. To be more precise, this market has three types of customers: individuals and companies, charter operators, and governments. In fact, 50% of sales are made directly to individuals or companies that acquire an aircraft for a long term use, while having the objective of maintaining a high residual value during a possible resale. They use their aircraft for their personal and professional needs. Then, 30% of the demand come from charter operators who use a BBJ in the on-demand market, with specially designed aircraft for this type of activity, such as DeerJet. Finally, 20% of our BBJ sales concern the governments market around the world. In this regard, the year 2017 was particularly positive for us, since we sold 12 aircraft to different states worldwide.
Compared to your competitor, how do you explain this success?
Several factors can explain our success, starting with our very wide aircraft offer, ranging from single-aisle BBJ MAX 7 to 747-8, going through our latest model, the 787. The different versions of aircraft with different cabin volumes allow us to offer a diversified choice according to the specific needs of our customers. The other assets undoubtedly remain the reliability and the availability rate of 99.9% of our aircraft in operation, but also the capacity to respond as closely as possible to the maintenance needs of the aircraft all over the world. Five specialized engineers are specially assigned to our BBJ operators wherever they are in the world. Our customers benefit from the synergies with the Boeing commercial airplanes range as well as its resources, around the world, which is a great advantage compared to small business jets. All of these factors contribute, I believe, to our success. Regarding our direct competitor, Airbus, we do not know what the future holds for us. However, if I had to make a comparison with our competitor’s products, I would say that our aircraft have much more autonomy and a lower cabin altitude, especially on the Boeing 787 which is a reference in this field. This aircraft has been developed taking into account in-depth studies on the subject to improve the comfort of passengers.
You are particularly active in the second-hand market, especially to assist your customers with the resale of their aircraft. Can you tell us a little more?
We are indeed active in the second-hand market with a specialized team because we want to have an overview of the sales and life cycle of our aircraft. This allows us to maintain a certain stability, not only on the number of aircraft on the second-hand market, but also on the residual value of the aircraft that our customers are selling. It is important for us to support them in the resale process, especially when they acquire a new model. The residual value of our aircraft remains high, however, because they were originally designed for commercial aviation and log much fewer cycles and flight hours than expected. Not surprisingly, the BBJ range on the second-hand market has a very good potential. A fifteen years old BBJ still retains a strong residual value and generates relatively low operating costs, in comparison with the top of the range business jets like the G650 or the Global 7000. This is mainly due to the synergies between our aircraft and those of commercial aviation that have been developed to achieve a certain efficiency, especially in terms of their engine.
We estimate the cost per flight hour on a BBJ MAX at about $ 7,000, which is comparable to that of a Gulfstream, Global or Falcon, with the difference that our single-aisle can carry twice as many people in twice as much space as these aircraft.
What are your market forecasts for the next five years?
This is a relatively difficult question because many parameters come into play, including economic fluctuation. However, we are relatively confident as we note a market potential growth. Considering several factors, such as the increased need for people to travel or the natural replacement of current aircraft in the medium term, we feel the market is well oriented for the next ten years.
My personal opinion is that we could sell seven to ten aircraft a year over the next five years.
Can you give us an update on your order book?
Definitely 2017 has been our best year since 2008 with a total of 16 orders. In 2018, we have presently sold five aircraft and we will deliver five aircraft, including the first BBJ MAX in early October. Our backlog for the BBJ MAX is 20 units, divided as follows: four BBJ MAX 7, thirteen BBJ MAX 8 and three BBJ MAX 9.
Do you intend to develop a BBJ specific outfitting centre like the Airbus Corporate Jet Centre?
We do not intend to create a centre of this type in the medium term, because we think it is a sector separate from a manufacturer. We sell, in most cases, the aircraft in “green” configuration, that is to say without any cabin accomodation. Most of our customers have their own designer who is already in charge of their homes or their yacht. However, we have a dedicated BBJ team who assists our customers throughout the cabin layout process to be sure that the overall design does not affect the performance and integrity of the aircraft. Otherwise, if a customer has no designer, we can suggest him to approach different design studios such as Jacques Pierrejean or Alberto Pinto. At the same time, we can help him to find the right outfitting center working in partnership with us through our worldwide network.
What is the best-selling model in the Boeing Business Jet family?
With more than 160 aircraft delivered, the 737 BBJ is undoubtedly the bestselling aircraft since the creation of Boeing Business Jets in 1996. Currently, our best seller is the BBJ MAX 8, mainly because of its performance. On this model, the new winglets and new CFM LEAP-1B engines give a range of 12,300 km while the consumption is 14% lower than the previous versions.
Thanks to its wide and spacious cabin, the BBJ MAX 9 also encounters a significant success.
By Frédéric Vergnères © Mathieu Douhaire © Boeing Business Jet