December 1, 2010
In this challenging downturn, economic forecasting makes weather forecasting look like a piece of cake. At least in meteorology you have physical properties that can’t be changed. True, there are many of them in a nearly unending variety of combinations, but physical laws apply. In economic forecasting, it seems there are no rules these days. Predicting an upturn in general aviation sales activity continues to confound even the most experienced forecasters. But you own a 1960s-era AirKnocker, so why do you care how many new airplanes sell—and what’s it to you that BigJet company is struggling to meet payroll?
Wouldn’t it be nice if those of us who own old, reliable airplanes could sit back smugly and watch the aviation doldrums affect only others? Sure would be nice to be immune from the impact of economic lethargy here in aviationland. But the truth is we’re all affected when the GA system—and it is a system—stagnates. A year into what the feds call a “recovery,” Cessna, Hawker Beechcraft, and Piper continue to lay off workers, Mooney just put itself through a self-imposed foreclosure process to shed debt, and now any hope of a rebound has been pushed back to 2012.
As the owner of a 1972 Beechcraft Bonanza I worry that the investment bankers owning Hawker Beechcraft will divide up that company, spinning off the more lucrative jet business to investors and selling the propeller-driven products to some other company. How would that impact my ability to get parts? What will that do to the resale value of my airplane? You can insert the name of your favorite airplane into similar scenarios playing out at many GA manufacturers. Without healthy manufacturers, every one of us who flies will continue to live on the edge of aviation sustainability. Maintenance, avionics, interior, paint and other shops, FBOs, airport owners, and even funding for publicly owned airports all hang in the balance as GA activity remains flat or declines. New aircraft sales drive used aircraft sales and the associated maintenance, avionics, paint, and interior upgrades that follow when someone buys a used airplane. New aircraft sales help normalize used aircraft values. While I don’t like to see the value of my old airplane decline, I would rather see it decline in a healthy way as it ages than see its value artificially increase temporarily because of a scarcity of quality airplanes when new sales stagnate. That’s what we saw in the 1990s when used values increased at 8 to 12 percent per year in some cases, simply because there were so few new airplanes being delivered.
However, when new models with new technology were finally infused into the system in the early 2000s, used values fell precipitously. That necessary adjustment was painful and not something I want to go through again.
So what’s the status of new aircraft sales? Not good. The General Aviation Manufacturers Association reports that in the first half of 2010, total airplane shipments were down about 10 percent compared to 2009, a dismal year compared to 2008. At 927 units, the 2010 deliveries are less than half of what they were in the same period of 2008.
For more than 20 years, Honeywell has prepared an annual 10-year forecast of the business jet market. Last year, it predicted that 2010 would be the low point for deliveries, with 2011 seeing a marked improvement. At the National Business Aviation Association convention in October, Honeywell’s latest forecast predicts 2011 will be another down year, with recovery beginning in 2012. If the forecast is correct, we will start back up in business jet deliveries in 2012.
The short-term forecast is tepid at best, but the NBAA show was upbeat. We saw one of the large fractional ownership companies placing a large order for new airplanes. NetJets announced that it was buying as many as 125 Embraer Phenom 300 light jets worth as much as $1 billion. Bombardier announced two new ultra-long-range airplanes. Cessna unveiled an upgrade to its speedy Citation X, now calling it a Citation Ten. Those Citation Ten pilots will sit behind a new Garmin 5000 panel—that young company’s first Part 25 avionics system and a real wake-up call to Honeywell and Rockwell Collins, who usually dominate such lofty spaces in high-end business jets. Hawker Beechcraft introduced a new variant of its light jet, the Hawker 200.
Cessna President and CEO Jack Pelton didn’t deny rumors that Cessna is already flying a new single-engine turboprop , likely based on the Mustang fuselage. An announcement about the program may occur before you read this. Here are the rumored descriptions of the turboprop: The 300-knot airplane would fit neatly between Cessna’s top-of-the-line Corvalis piston airplanes and its entry-level jet, the Mustang, and sell for less than the Mustang—which means less than the TBM 850 or Pilatus PC12 NG, but probably more than the Piper Meridian.
Piper announced a rather dramatic change to its PiperJet product—extending and widening the fuselage, a response to feedback from prospects about the size of the cabin.
A recovery may be a bit in the offing, but manufacturers are at least beginning to invest in their product lines, positioning themselves well to take advantage of better times—a move that will serve well all of us who use GA airplanes of any type.
E-mail the author at firstname.lastname@example.org; follow at twitter.com/tomhaines29. Editor in Chief Tom Haines this month celebrates 25 years of covering the general aviation industry.
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