Market Analysis: Falcon orders, deliveries and backlog

Falcon 8X msn 406 takes shape at Dassault's Bordeaux production facility

Despite all of the technology available now, the first flight of any aircraft is still a significant event. On July 5, Dassault’s Falcon 5X successfully flew for two hours. There were celebrations afterwards but there was also a lot of frustration: Dassault had hoped to be delivering the aircraft to customers by the end of 2017, but is now targeting 2020.

The last few years have been tough for the French-US manufacturer. One of its strengths has been its international sales – as a company with two bases, its employees have naturally looked outside both its home markets. Its sales team have been particularly strong in Latin America, southeast Asia, Africa, Russia and the CIS, and the Middle East.

But these markets have been particularly tough. At the start of 2016, Dassault hoped to deliver 60 jets. By June it had realised this was ambitious and cut its forecast to 50 aircraft. It finally delivered 49 Falcon jets during 2016, the lowest number of deliveries since the 47 aircraft it delivered in 1998.

Dassault was not alone in facing this situation – total business jet deliveries fell by 7.9%. Falcon deliveries were down 16.3%.

The Falcon 5X delays clearly did not help. In recent years, the industry has been reliant on new aircraft for sales and deliveries but the only new aircraft to begin deliveries in 2016 was the Falcon 8X. The first was delivered on October 5 2016 to Greek operator Amjet. So far there have been fewer than ten Falcon 8X deliveries.

Over the last 20 years, Falcon deliveries have broadly tracked overall business jet deliveries, although there have been some gaps. There was a significant spike in 2010, which saw a high number of Falcon 2000LX and Falcon 7X deliveries, and 2013, when a higher number of 7Xs were delivered.

It is likely that Dassault lost Falcon 7X customers to its own Falcon 8X.

The manufacturer stopped providing delivery numbers per model in 2015 but, according to various unofficial sources, is delivering fewer Falcon 900s.

Dassault has recently refreshed the interior of the 900, announcing the refurbishment programme during the 2015 NBAA trade show.

Drop in sales

The Falcon backlog has also been falling steadily since 2014, almost halving from 121 to 63 aircraft at the end of 2016.

Net sales in the last five years show the volatility in the market but have, for the most part, flattened out. Whilst this would normally be a good sign, flattening out around the 25 aircraft mark from a high of 90 aircraft a few years earlier cannot be seen as such a good sign.

In the two years before the data became available, 2009 and 2010, the net sales figures were negative. Two thousand and nine was a very bad year, with Dassault posting a year-end net sales deficit of 98 aircraft.

This was largely due to NetJets cancelling an order for 64 aircraft. Some of those aircraft are likely to be Falcon 7Xs that were due to be delivered to NetJets Europe. The company placed an order for 24 aircraft in 2006 and added a further nine aircraft the following year. However, only a small number of these aircraft were delivered.

This was repeated in 2015, when NetJets cancelled another order for 20 aircraft. Although there was no confirmation, it is largely believed that this was part of a Falcon 2000 order from 2006.

The jump to 90 aircraft orders in 2014 was explained by Dassault in its 2014 annual report as being largely due to orders for the Falcon 5X and Falcon 8X.

It was not until the year following the Falcon 5X delay that Dassault would publicly talk about its cancellations. Within the company’s 2015 annual report was a note against the net orders for 2015. Whilst it won 33 orders, 12 Falcon 5Xs were cancelled, taking the net order intake to 33 aircraft.

However, the difference between 2013 and 2014 orders was a minor spike of just 26 aircraft. The Falcon 5X was introduced in October 2013, and the Falcon 8X was introduced early the following year. Between 2012 and 2013 the difference in the number of Falcons ordered was just six aircraft.

There is no doubt that customers who would have ordered other Falcon types decided to order the Falcon 5X or Falcon 8X. This is especially true with the Falcon 7X, which could have lost out to the extra range that the Falcon 8X offers.

However, with both new aircraft only having a small impact on overall order numbers, Dassault would be hoping for more, especially as it spent just shy of $2 billion bringing both aircraft to market.

The Falcon 8X, being a development of the Falcon 7X, cost an estimated £685 million to develop, whilst the clean-sheet design Falcon 5X cost an estimated $1.3 billion.

What next for Dassault?

The comparison between the G500 and the Falcon 5X is easy to make as both aircraft will compete in a similar space. The G600 versus the Falcon 8X is a little more awkward. The 8X can fly further than the G600, but the Gulfstream is quicker and can carry more passengers.

Although, in reality, the Falcon 8X will not be pitted against the G600 often, what Dassault has done is to create an aircraft that can match or beat the Gulfstream in several different statistical categories.

Dassault has also stated its interest in competing at the top of the market. If the Falcon 5X competes with the G500 and the Falcon 8X competes against the G600, there is one hole that Dassault needs to address. And that’s the aircraft right at the top.

With Dassault working on a new aircraft tentatively called the Falcon 9X, it has a real opportunity to introduce an aircraft that could dominate the large cabin, long range market.

Little is currently known about the Falcon 9X (if it is even called this). Dassault, just like Gulfstream, has in the past been able to keep aircraft under wraps until it is ready to launch, so there will be a lot of speculation until the aircraft is revealed.

The biggest question about the aircraft is whether it will have two engines or be a tri-jet. Dassault’s heritage is in tri-jets but, with the Falcon 5X incoming, Dassault could use its cross section to form the basis of the 9X.

If so, Dassault and Gulfstream would appear to have taken the same path for future aircraft developments, with Dassault’s SMS project that first spawned the 5X drawing a parallel with Gulfstream’s P42 project. Both have designed a platform that can be stretched as the market decides what size of aircraft it wants.

What Dassault does with the Falcon 9X is all speculation at this point, but the number sequencing does suggest that the aircraft will have higher specs and a larger cabin than the current top-of-the-range Dassault aircraft, the Falcon 8X (itself a 1m stretch of the Falcon 7X).

The Falcon 8X, launched at the 2014 EBACE show, has a maximum range of 6,450 nm, while the new Gulfstream G600 tops out at 6,200nm. The development costs for the 8X are believed to be around the $685 million mark and it would seem unlikely that Dassault would pour money into an aircraft development that it would replace in a few years.

If the Falcon 9X is to go up against the G650, its max range is going to have to be above 7,000nm. If it is, as well as going against the G650 the Falcon 9X will also compete against the upcoming Global 7000.

Although Dassault has never needed to sell hundreds of aircraft a year to survive, it will still be looking for a way to stimulate slowly eroding backlogs and deliveries.

The Falcon 9X, if it does come as expected later in the year, could do just that, although it will be facing tough competition from manufacturers already established in the ultra-long range segment.

Once Dassault conquers ultra-long range, it will need to turn its attention towards the Falcon 2000, which flew for the first time in 1993. Although the aircraft has been through several minor iterations, the basic design is just under 25 years old, so it might not be too long before we start hearing rumours of a Falcon 4X as well.