Waypoints: Looking for the tailwind

Especially after our experiences from the recession of 2008 and 2009, one could assume that the economic drop will flood the market with used aircraft, driving down prices.

However, past isn’t always prologue. At least as of this writing in mid-May, the used market has mostly held steady in both volume and values. There is minimal panicked selling from owners who find themselves without a job or otherwise financially affected by the global shutdown. In fact, in the light jet market, used prices even ticked upward a bit in April, according to Rob Scholl, senior vice president of sales at Textron Aviation.

“The preowned market is very encouraging. They have been at historical lows as far as aircraft for sale, on both the Citation and King Air side—especially when you consider aircraft that are 10 years or younger,” Scholl told me in early May. “We haven’t seen a drastic uptick in aircraft for sale in the last several weeks.” As a result, the door is open for prospective buyers to shop for new aircraft, given the dearth of quality used ones on the market.

His boss’s boss expressed similar optimism in an investor call in late April: “I think there’s a lot of reasons to be optimistic around…business aviation, what role it plays as you come out of this pandemic, and people do need to travel and they want to do it safely,” Scott Donnelly, Textron chairman, president, and CEO, told investors. “From a health standpoint…they don’t know what’s going to be going on the commercial airline side.”

Asked about the prospects for aircraft sales, as opposed to other Textron divisions, Donnelly said, “At aviation, while clearly a difficult situation, we do believe this cycle has fundamental differences from the challenges we experienced in the 2008-2009 downturn. The secondary market for preowned Citation aircraft is much stronger today as compared to 2008, with significantly fewer aircraft for sale and a dramatically lower number of aircraft under 10 years old. As such, we do not view the preowned market as an impediment to the sale of new aircraft.”

While no one predicts 2020 will be a strong sales year, the longer-term prospects are more promising. “We’re optimistic going into 2020 and 2021 and beyond,” Scholl said. “Obviously we’ve got to get this near-term uncertainty past us. But I do think we’re in a better position as a company and as a market going forward.”

Aviation consultant and observer Brian Foley expressed similar thoughts in a recent statement. “Few in business aviation will escape the impending downdraft. New and preowned sales will all be impacted as buyers wait for some semblance of normality,” he stated.

“The industry will undeniably be impacted after 10 years of relatively clear sailing,” Foley continued. “It’s a cyclical business but the speed and intensity of the change caught many off guard. Although there will be casualties, the majority of players have been here before and are survivors, having adapted their businesses to swings in the past. It’s said that the second half of 2020 may be more forgiving, but the wait will admittedly be excruciating.”

The guarded optimism is not unique to Textron or even the turbine market. Piper Aircraft President and CEO Simon Caldecott told me in late April that the company continued manufacturing through the pandemic. Some flight schools have delayed deliveries of training aircraft, but there had been no cancellations. “The global shortage of pilots is not going to go away…the demand for new pilots is still going to be there,” Caldecott said.

“The trainer market demand for us is going to come back fairly quickly. I think by the end of 2021 we’ll see this thing start to grow back up again.”

Textron’s Scholl said flight school sales for the 172 remained solid and he, too, felt the flight training market segment would recover quickly.

Meanwhile, the avionics business continues to chug along as well. In a statement, Garmin Executive Vice President and Managing Director of Aviation Phil Straub said, “Garmin’s aviation manufacturing, shipping, and repair departments are operating at normal capacities and we continue to see no immediate disruptions to our current products and services.”

Dan Schwinn, Avidyne president and CEO, said participation in the company’s online training courses was strong, as were its online sales inquiries. He was optimistic that the inquiries would turn into sales once people had a better sense of the state of the economy.

As Foley stated, these players have been through many economic cycles over the decades, and know to trim their manufacturing sails to take advantage of every zephyr that comes along. With any luck, the zephyrs will quickly turn into strong economic tailwinds.

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