Private jet for VIPs on a budget

United Arab Emirates' Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum (back...

United Arab Emirates' Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum (back C) is taken on a tour inside an Airbus 319 aircraft during the Dubai Airshow November 17, 2013. Gulf airlines splashed out on well over $100 billion of orders on day one of the Dubai Airshow, underscoring a shift in power in the aviation industry and giving a boost to the formal launch of Boeing's newest 777 jet, as well as to Airbus's A380 superjumbo. REUTERS/Ahmed Jadallah

Reuters

, Last Updated: 11:22 AM ET

The Dubai Airshow produced a harvest of deals for the world's biggest and flashiest jets this week, but for those unable to afford a $400-million A380 superjumbo there is always an alternative - the poor man's private jet.

Making its debut on the tarmac at the Middle East's largest aerospace event was what its supplier calls the world's first "re-manufactured" business jet, designed for VIPs on a budget.

Ohio-based Nextant Aerospace takes small business jets that may be 10-20 years old and near retirement, rips them apart and re-sells them with new avionics, engines and interiors.

"We're solving the problem of the industry," Nextant's president Sean McGeough said in front of a rebuilt Beechjet 400, gutted and offered for sale "as new" at some $5 million.

That's a fraction of the $25 million that super-rich customers can spend simply on the interior of some of the luxury converted jetliners displayed this week.

"There's about a year-and-a-half inventory backlog (of older jets) on the market. Until that inventory starts selling off, new aircraft sale will not rebound," McGeough told Reuters in an interview.

Five years on from a credit crunch that badly hurt the industry, manufacturers of small business jets are only now speaking of shoots of recovery, lagging well behind a rebound in the global equity and U.S. housing markets.

Plentiful second-hand jets are crimping demand for new light- and medium-sized aircraft, in stark contrast to top-end products on display in Dubai, according to experts.

"It's a customer's market and buyers are smart," Marco Tulio Pellegrini, chief operating officer for business aviation at Brazilian business jet manufacturer Embraer, said.

"Many are looking at the used market for replacement, forcing manufacturers to increase discounts," he added.

Re-manufacturing is the process of bringing end-of-life goods back to their original condition and is responsible for a growing share of the manufacturing sector.

Starting out from the familiar tyre retread, the process can cover anything from refrigerators to ink cartridges, medical pumps, gearboxes, office furniture - even locomotives.

According to a 2012 U.S. trade report, aerospace is the largest re-manufacturing sector worth $13 billion annually. But until now, this has mainly been confined to aircraft parts.

However, while large business jets are benefiting from new technology, some analysts say re-manufacturing merely underscores industry woes at the lower end of the market.

"It's a sign of a stagnant market ... (with) not a lot of technology coming in," said aerospace analyst Richard Aboulafia, vice president of Virginia-based Teal Group.

"The idea is sound in that most of the progress in business jets, especially lower end business jets, has been in propulsion and avionics."

JET REHAB

Nextant has sold 36 of its re-manufactured business jets. After a spell in jet rehab, they sell for $4.95 million.

Canadian Bombardier's smallest aircraft start off at $8.1 million and Gulfstream's at $15.7 million.

Suppliers see demand for low-cost business jets even in the oil-rich Middle East, in the wake of corporate budget cuts and the shrunken wealth of high net-worth individuals.

"The light and mid-sized segment was impacted the most, while the larger cabins weathered the downturn well," said Scott Neal, senior vice president of sales at Gulfstream.

Nine months after seeking bankruptcy court protection from high debts, the manufacturer of Nextant's revamped planes, Beechcraft Corp, emerged from Chapter 11 this year minus the "Hawker" name.

It stopped producing the Japanese-designed airframes being retrofitted by Nextant several years ago. But earlier this year, the manufacturer launched its own upgrade program for the Hawker 400 jet, called the 400XPR.

"We've had three solid quarters this year - we're bullish about the future and the Middle East," said Richard Emery, president for Europe, Middle East and Africa and Asia-Pacific at Beechcraft.

Business jet makers could make a total of 9,800 deliveries worth $269 billion in the next decade, according to Bombardier.

But the Canadian firm says the slowest recovery in the private jet sector has been from its corporate clients.

"Companies still want to fly privately, but rather than buying their own, more and more are looking at renting from operators," Bob Horner, senior vice president of sales at Bombardier Business Aircraft said.


Videos

Photos