It might be thought that the U.S. market, which consists of two-thirds of the world’s business jets, would be important to Lufthansa Technik’s (LHT, booth 2881) VIP and special missions unit, but this is not the case. While it does offer VIP customers C-check capabilities at its factory in U.S. territory Puerto Rico, it does not have any VIP or maintenance shops in the continental U.S.
“It ought to be an important market for us, but the aircraft we normally outfit for service are more often serviced [by] U.S. [firms],” Wieland Timm v-p of sales told AIN. “Most of them have their own facilities; uniquely in the U.S., smaller outfits—’mom and pop shops’—offer services and repair capabilities.”
Since Covid began, LHT’s VIP and head-of-state business have remained stable. It sometimes sees demand for bigger, as well as head-of-state, aircraft in North and South America, and has built government aircraft in these regions. “This is an ideal market for us, but it does not include the U.S. market,” he said.
A number of aircraft are located in Central America and the Caribbean because their tail numbers and registrations are domiciled there, but they are often destined for customers elsewhere in the world. “The Cayman Islands and other jurisdictions [nearby] are very often used for aircraft registration when the customer actually comes from another part of the world,” he said. “Many aircraft are registered in Central America or the Caribbean, but outfitted or maintained by LHT in Europe.”
From its Hamburg headquarters, LHT VIP services aircraft only from Airbus and Boeing, usually starting with the A320 or the 737 families. “We also intend to initiate services for the Airbus A220, because that aircraft is in our fleet,” he said. “We want to step into the VIP and government markets for the A220. We do not offer maintenance or outfit services on the smaller Gulfstreams, Bombardiers, and other business-jet types, except interior solutions like cabin management or entertainment systems.”
Demand is limited to three individual customers a year for such aircraft. Airbus sells aircraft with a factory cabin (but outfitted by partner Comlux) for the A220, called the ACJ TwoTwenty. “If a customer is interested, we can offer aircraft production programs and products,” he said.
Timm is positive about the outlook for the Americas market for VIP and government aircraft in the coming 12 months.
“Some customers will purchase new aircraft, as the Boeing 737 Max has now obtained certification clearance for all customer types,” he said. “There will be increasing demand and in the next five years many customers will order specific Boeings. The Airbus A220 will also attract attention—it is an attractive aircraft. It has a bigger cabin than a similarly-priced Bombardier or Gulfstream and offers more comfort. Its appealing pricing dynamics could interest North American clientele.”
However, Timm does not believe that the A220 will challenge the A320 family, as it cannot provide the range certain customers require. “The A220 is perfect for intercontinental travel in North America. But customers who are doing business often need to fly internationally: China to the U.S., or the U.S. to the Middle East. On a typical route, you need an aircraft with additional range. This can only be done by the A320 family or Boeing 737s—or a Gulfstream, Bombardier, or similar. The Global 7500 or new 8000 and similar aircraft also have the range, but limited space. That’s the difference [with a bizliner].”
In terms of BBJ Max sales, he estimates that there are not that many BBJ Maxs in the global private jet market. Even as the aircraft’s credibility is restored after the aircraft’s grounding due to issues with the flight control system, he thinks it will be a while before the program takes off.
“They normally produce four to six aircraft per year for the VIP market,” he said. “The longer-term target could be to manufacture around 10 a year. This is totally different from airline orders like Southwest’s for 500 Maxs, putting more than 1,000 into service. This is, for airlines, easy to do. VIP will pick up because in total around 150 BBJs entered service since 1999. The amount in service is limited, though.”
Timm is pleased to note that Covid-19 and the war in Ukraine have not led to any decrease in demand for LHT’s services. “We are always fully booked,” he said.
“Last year was the best we ever had, year two of Covid, it was a success,” Timm noted. “Normally, a lot of cargo is transported in passenger airliners. Many aircraft were grounded, logistics costs exploded, and parts availability collapsed. Some companies also saw production lines for specific parts decrease, due to factory closures or employee layoffs in the wake of increased sickness rates.”
There was also a tremendous increase in prices. “Due to the Ukrainian situation, energy costs have exploded,” he said. “Annual price increases range between 10 to 100 percent. This is a tremendous challenge and will continue to impact pricing. You can’t avoid it. We will find a solution. I don’t worry about the forthcoming winter in Germany. It’s clear that it will cost more money for everybody. Whatever role the government plays, everyone will face a rising cost of living.”