It has been almost 30 years in the making, but the first of Honda's (NYSE:HMC) long-awaited private jets are about to start being delivered to customers.
For about $4.5 million, those happy customers will get an innovative, small jet aircraft, powered by unique wing-mounted engines produced by a joint venture between Honda and General Electric (NYSE:GE).
But all of this raises a question: Why the heck is a mass-market automaker spending big bucks to produce a luxurious private jet?
Why a small jet aircraft is a Honda kind of project
Honda's founder, Soichiro Honda, had long wanted to apply the company's penchant for mechanical innovation to aircraft. But it wasn't until 1986 that a young engineer named Michimasa Fujino was given the green light to start the long process of developing the first flying Honda.
Most automakers wouldn't even consider such a project. But Honda's culture has long supported tinkering by engineers. And that tinkering has led to interesting new lines of business in the past: In addition to making cars and motorcycles, Honda also manufacturers power equipment (like lawnmowers) and marine engines. In a way, it's not surprising that Honda would try its hand at building an aircraft -- and it's not surprising that the company would find a way to build a business case for such a venture.
The aircraft it has chosen to build is interesting. As business jets go, the HondaJet is pretty small. As typically configured, it will seat six people (including the flight crew), and offer a range of 1180 nautical miles at a maximum cruise speed of 420 knots. It's powered by two small jet engines set -- unusually -- on pylons rising from the wings, an arrangement that Honda says allows for a roomier cabin.
Applying automaking expertise to the small-volume world of aircraft
But while some have dubbed the jet "the Civic of the skies," at a price of $4.5 million the HondaJet is hardly a mass-market proposition. It's considerably more than the $3.35 million you'll pay for the similarly sized Citation Mustang, built by Textron (NYSE:TXT) subsidiary Cessna. The Mustang offers similar range to the HondaJet, but it's not quite as fast.
Honda thinks that its auto-making expertise will give it some advantages over companies like Cessna. It says that the HondaJet is the "fastest, highest-flying, and most fuel-efficient aircraft in its class." But Honda thinks that its advantages go beyond the technical specifications.
For instance, some competitors produce in such small numbers that their jets' interiors are essentially hand-made, and fit and finish can be iffy. Honda plans to do (much) better by bringing the same level of precision and standardization found in an Accord's interior to the HondaJet.
Its mass-production expertise could make a big difference in other ways. Honda says that it will be able to build 80 of the jets a year at its factory in North Carolina, about double what its rivals manage. It will need that capacity: Honda already has over 100 orders for its new plane.
That factory has already begun building HondaJets, including several aircraft for testing. If the last of that testing goes according to plan, it'll start delivering jets to customers very soon.
After many years of work, the first HondaJets should ship soon
Fujino is now CEO of the subsidiary formed to build the jet, Honda Aircraft Company. And after almost three decades of work, the aircraft is on the verge of production: It received "Provisional Type Certification" from the U.S. Federal Aviation Administration (FAA) in March, a strong sign that full approval to begin customer deliveries is near.
Getting FAA approval to sell a new type of aircraft is an expensive, complicated, years-long process. But Honda is nearing the end of that road. The FAA is currently doing final testing of the HondaJet, and the company expects full certification within a few months.
After that, the HondaJet's prospects will be up to the market.
John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.