Dassault: the best of times and the worst of times
Posted Date: 11/03/2010
Issue: Executive & VIP Aviation International March 2010
Publication: Executive & VIP Aviation International
Dassault Falcon is responsible for selling and supporting Falcon business jets throughout the world. It is part of Dassault Aviation, the aerospace company with a presence in over 70 countries across five continents. John Rosanvallon is its President and Chief Executive Officer. He explains to Executive & VIP Aviation International how Dassault Falcon has fared during the downturn and where he perceives Dassault Falcon’s next opportunities lie
Rosanvallon has seen the best of times and the worst of times since his appointment as President and Chief Executive Officer of Dassault Falcon Jet in 2003. Of course the rise and rise in business aviation – especially in Europe – had hardly started in 2003 and after four years began the freefall that has tormented the whole business aviation community over the last couple of years.
But Ronsanvallon has not just been at the helm at Dassault Falcon Jet for the last six or seven years. In fact he has been with Dassault for the last 34 years and became President (but not Chief Executive Officer) of Dassault Falcon Jet in 1996. He has seen it all.
Dassault Falcon is part of the worldwide Dassault Group of companies. The group produces the Rafale fighter jet as well as the complete line of Falcon business jets. The company has assembly and production plants in both France and the US, and service facilities throughout the world. The family of Falcon jets currently in production includes the tri-jets – the Falcon 900DX, 900LX, and the 7X – as well as the twin-engine Falcon 2000DX and 2000LX.
“I have had the opportunity to see the ups and downs of this market for a long time,” comments Rosanvallon. “The years 2005, 2006 and 2007 have been by far the most active from the new aircraft sales standpoint. But the last 15 months have been the most difficult of my 34 years in this industry.”
He adds: “It has been a very steep rollercoaster up and down for the last five years. But there have been a lot of signals that things have been much more stable for the last four or five months. Almost every major indicator – whether it is flying hours or the level of pre-owned aircraft inventory started a slow recovery from the lowest point of early 2009.”
Rosanvallon is clear that the industry’s technical indicators clearly show that the market is heading in the right direction. “The level of pre-owned aircraft inventory is an early sign of recovery. At the end of 2007 and early 2008, as the US industry was entering a tough time, that parameter was already starting to decline as inventory was growing rapidly. Of course all the macro-economic indicators like GDP and profits, and so forth, are also very important.” He continues: “I think China and Brazil will help us in terms of recovery. I don’t know how strong it will be in 2010 but I certainly expect an improvement in 2010 over 2009.”
So have there been changes in the market during the recession that mean the way in which Dassault Falcon does business has been changed forever? Has the fractional model been seriously damaged by recession? Rosanvallon is optimistic as he responds: “Clearly the downturn for the fractional business has been as severe as it has for us on the new aircraft side. The sale of shares came to a stop and they started to reduce their fleet. We are particularly close to NetJets and we have delivered to them a total of 60 airplanes over the last 10 years so they have been very important partners. But things are changing there, particularly with the new management under Mr Sokol. I was very impressed to see – and he has a reputation of being – a very strong business leader.”
Sokol said he is confident NetJets will break even in 2010. “As is the case with us, it will take some time for the fractional business to fully recover,” Rosanvallon adds.
When asked whether Dassault learned anything from the recession in terms of pre-owned aircraft values and the impact on new aircraft pricing, Rosanvallon responds: “I have never seen such a strong increase in pre-owned inventory as we saw throughout 2008 and the first half of 2009. For certain models, inventories tripled and for some models aircraft values went from a speculative high to a depressed low. Some aircraft went from $10 million to $5 million. We have seen good signs of inventory starting to decline slightly over the last five months; but for pricing and inventory levels to come back to more normal levels I think it will take 18-24 months.”
Aircraft financiers are obviously an important part of the chain that enables aircraft manufacturers to supply the market with new aircraft. With bankers re-entering the market since Summer 2009 for the right aircraft from the right manufacturers, what does Rosanvallon make of the attitude of the banks towards the new market for aircraft values?
“People have learned from this crisis that the way they commit to certain buy-back values has to be done with more discipline, making sure that you can assess the values much closer to the time when you will actually make the airplane trade,” he comments. “The financing guys look both at who is buying the plane and, from a product standpoint, they look at the history of values of this airplane. We are fortunate that if you look at the Falcon resale values in good times and in bad times, we are always ahead compared with similar airplanes.”
When it comes to aircraft for private charter, there are certain elements – particularly in relation to cabin design and connectivity – that add that little extra attractiveness. However, Rosanvallon points out that what really makes an aircraft successful – be it used for personal use or for private charter – is the aircraft’s reliability.
“We sell very few planes directly for private charter without the involvement of the primary owner,” comments Rosanvallon. “We like to think we have some strong points in terms of the cabin but charter companies are particularly sensitive to the cost of operations and the Falcon is by far, in each segment, the most fuel efficient and the most environmentally friendly. This was not a big deal maybe 10 years ago but it has become very important now.”
He continues: “For many years it was particularly frustrating for us because we had such a significant advantage in terms of fuel efficiency and it was not a big factor for people making the decisions. But it is a much greater factor today.”
So which markets is Rosanvallon particularly excited about now that we are all looking forwards? “Generally speaking, in the early 2000s the US represented maybe 70% of the market. Now the US represents, let’s say 30%. That is the biggest move we have seen in the last six or seven years. A big part of that change was made by western Europe becoming much more important. Clearly for the next two years we expect maybe a slower recovery from the US and the western European market but in the rest of the international market –in particular in Brazil, India and China – we have a lot of untapped potential and I think that will be a big factor leading market recovery.”
So how does Dassault Falcon follow the shifting market with aftermarket support services? “We have about 1,000 planes in the US today so the US remains a very important market. What is changing for customer service is that a lot more of these planes are travelling on a global basis,” responds Rosanvallon.
In 2008, Dassault Falcon opened a 20,000ft2 spares distribution centre in San Jose, California, in a joint business venture with UPS. Dassault Falcon has also added this kind of support in Brazil and China as well as other places in the world. “Our industry has followed the globalisation of the economy,” he adds. “Now we have 12-13 regional spares centres all over the world and we had just two or three just three years ago. What is true in terms of spares is also true in terms of service centres.”
Dassault Falcon’s product innovation going forward revolves partly around the expertise of its sister companies. “Dassault remains unique in that we are the only business jet manufacturer which has the same design office designing mach 2 fighters and business jets. That is the main reason we have this efficient design. We will continue to introduce new technologies. Our sister company – Dassault Systems – also gives us an edge in terms of digital design and processes. The Falcon 7X is for example the first airplane created digitally - end to end in every detail including the assembly process, optimizing in advance the maintenance tasks…”
So what are Rosanvallon’s closing comments? “The first flight of the Falcon was in 1963. We intend to remain a big player in the market and we think we have a lot of assets in order to continue to consolidate our leadership in the long term.”
