A new world in top-end completion

posted on 11th June 2018

A bumpy road lies ahead with more fit-out capacity coming on stream, just as bizjet buyers are cancelling orders and deferring completions

The bizliner sector has been fertile ground for completion centres ever since its emergence in the mid-1990s, when Boeing and Airbus first realised the potential demand from heads of state and ultra-high net worth individuals for the luxury fitting out of larger aircraft.

The two manufacturers enjoyed tremendous success for 15 years, selling 380 of these aircraft. For widebodies in particular, with a price tag of $125 to $250 million, completion is a lucrative business. Around 20 established businesses worldwide, including the likes of Lufthansa Technik, Amac Aerospace, Gore Design Completions and L-3, have traditionally shared the majority of the contracts.

Jean Sémiramoth, Paris-based chief operating officer of turnkey aviation project management specialist Altaïr, says the result of this – at least up to 2011 – was a shortage of capacity for narrowbody bizliner completion.

Demand stayed high from governments, heads of state and the wealthiest private buyers, who did not suffer from the financing issues experienced by charter companies and corporate buyers as the economic crisis took hold in 2007-08. A new line of business in refurbishing 10 to 15-year-old Boeing business jets and Airbus corporate jets has also emerged.

“Not many completion centres can do the fitting out. It’s a craftsman’s job. The quality and kind of work required is more familiar to operators who work on a smaller scale,” Sémiramoth points out.

This past lack of capacity and the long turnaround cycle of bizliner completions – typically 18 to 36 months for a widebody and nine to 15 months for a narrowbody – means legacy outfitters have full order books for the next two to four years and appear relatively immune to the downturn.

Delays in new aircraft programmes ironically have added to the pressure. Boeing’s 787 and 747-8 and the Airbus A350 (and to a lesser extent for this market the A380) have all run behind schedule, meaning that as and when they do become available, VIPs at the front of the queue demand rapid delivery. The first business 747-8, for a VIP customer with one of the early production slots, was delivered only a few weeks ago.

A number of recent developments are changing the landscape. The Eurozone crisis and social unrest in North Africa and the Middle East have led to cancellations of bizliner orders, including A350s and B787s, and the deferment or cancellation of completions. Although China, and the Asian market generally, remains buoyant, Sémiramoth predicts a bumpier road ahead.

Completion centres that have traditionally specialised in widebody business have seen capacity free up, while new entrants to the game are trawling for business.

Aggressive expansion, especially in the Middle East and Asia, over the last three or four years has allowed manufacturers to expand their networks of authorised completion centres and the newcomers have a cost advantage. TAECO, based at Xiamen in China, was last year appointed as an Airbus cabin outfitter. Meanwhile ST Aerospace, through its affiliate company in the US, has unveiled the Aeria Luxury Interiors brand in the VIP completions and refurbishment business.

The likes of Altitude in New Zealand, Sabena Technics in France and Comlux in the US are increasing their profile in the completions and refurbishment market.

Sémiramoth suspects that rates may come down as a result of all this new activity. “The most successful operators are not yet feeling price pressure, but the new entrants eager to get business could affect this,” he says. Ultimately, he believes completion centres could merge or withdraw from the market.

While some buyers have long recognised the need to outsource aircraft acquisition and completion, aware of the complexities and difficulties involved, Sémiramoth says turnkey project management services are relatively new. “For totally independent companies like us, there is no conflict of interest – we’re not into operations, management, charter, manufacture or completion.”

Understanding the objectives and lifestyle of the client is important, even though Altaïr doesn’t get directly involved in design. “The key priority is to deliver what they wanted. Projects can overrun by months or years if you’re not careful, and the cost can be enormous,” he says.

“Each job is unique and these are high-stakes projects presenting major challenges and pitfalls,” Sémiramoth comments, recalling the leading completion centre that lost more than $180 million following delays and losses on three complex contracts.

A capable project management team must take full control of technical, regulatory, legal and financial issues, he adds. “If you haven’t made the correct assumptions right at the beginning as to the resources required, projects can quickly become a nightmare.”

Altaïr tends to specify completion centres with as much core expertise as possible. “The more they have in-house, generally the better. Otherwise you’re relying on external suppliers of furniture, for example, and then you still have to make everything fit. Certification can also be an issue, because in every case it’s like building a certified prototype.”