The Temple of VTEC - Honda and Acura Enthusiasts Online Forums > Today's Reading Links > > Re: WARNING: Shill news! HondaJet production starts

owequitit wrote:
kidoairaku wrote:
what I've never understood about the HondaJet is the business case. How can a company who cant justify creating a 5door hatch in Canada despite the success of so many competitors, justify this multi billion dollar investment into executive jets?
whats the market for this segment? whats the markup on a jet?

This retails at about $4 million per unit. Times the roughly 100 on order that they have confirmed (it may actually be more, and will likely rise significantly once it is actually certified), that works out to about $4 billion in revenue. Based on development costs, start up costs, production costs etc, MOST airplanes end up with a break even point of around 200-250 units. Beyond that, they start to get profitable because the initial costs have been worked down to about zero.

As for the justification, there are several:

1) It was one of Soichiro's dreams, and it is something Honda has been investing in since the early 1990's.

2) Airplane programs can have a very long and lucrative lifespan, if the programs are run correctly (a series of continuous improvements). There are some designs like the Beech King Air that have been continuously in production for over 50 years in various forms, and there are updated versions of the original model still being built today. They have been built by the thousands and are still one of the most sought after turboprops in the sky (probably THE most sought after). So from a business standpoint, there is a lot of potential for longer term revenue streams beyond what you might find in the car industry. The downside is that it is very cyclical and if the companies don't have the means to weather a downturn, they typically don't.

Aviation is also not quite as brand snobbish as cars. If the jet is fast, reliable, efficient, and does its job well, Honda will be selling them for decades to come. I don't think Honda's credibility hurts here either, and initially, it seems that it is going to deliver on its promises. What I am afraid of is that Honda won't commit to the series of continuous improvements that will be required to keep this thing relevant. Hopefully, I will be proven wrong, because the paint will barely be dry on the Type Certificate before Cessna counters (their counter is already in development, and is based on an existing design which makes the process of certification far easier.

3) Honda's original desire was to produce aircraft engines. The HF118 turbofan actually predates the Hondajet, but after development, Honda couldn't find a partner willing to help them prove their engine with an existing airframe. In typical Honda fashion, they decided to go it alone and prove their own engine. In the process, they proved their own airframe as well, and when interest was high, they decided to build it. As development continued, they found ways to make more thrust from the HF118 and it evolved into the HF120 on the production airplane. The fact that their first engine design came out and beat state of the art competitors by 20-25% is simply staggering. Granted Honda has a lot of engine technology, but the competitors weren't exactly inexperienced or underfunded.

It should also be noted that Honda built its first jet back in the early 90's using someone else's engines.

3) Long term, just like Honda sees with robotics, there are a lot of positive applications to this technology. Most directly linkable is the aerodynamic technology to their cars. However, there are some arguments that the materials technology will apply, but I don't know how much I buy that since the production techniques are so different. Perhaps it will eventually.

Long term, it is also a good advertiser for Honda. Who doesn't want to be able to say they make jets too?