While 2003 general aviation shipping and billing numbers are hardly cause for celebration, the CEOs of GA manufacturers are generally upbeat and optimistic that a turnaround has been reached. And even though 2003 was a “challenging year,” it still ranks as the fifth best year for billings in GA’s history.
The General Aviation Manufacturers Association (GAMA) reported at its annual review and 2004 outlook briefing last month that total shipments of GA airplanes worldwide essentially held steady at 2,686 units in 2003–down just one airplane from the previous year–despite a 15.5-percent drop in billings.
Sustaining that status quo was strong growth in the piston-engine market, which largely offset a decline in shipments of business jets and turboprops. “The impressive strength of the piston segment in 2003 is an early indicator of a broader turnaround in all segments of general aviation,” claimed GAMA chairman Clay Jones, chairman, president and CEO of Rockwell Collins.
He added that Honeywell has found empirical evidence showing airplane sales strengthen when the economy grows in excess of 3 percent over an extended period– roughly three consecutive quarters. Fourth-quarter growth last year was particularly strong, with most economists projecting this year’s growth rate to be arou nd 4 percent.
Another indicator of the strength of the GA market is the number of used airplanes for sale, and the most concrete numbers available for used GA airplanes are those related to the turbine market.
“According to statistics provided by Amstat,” said GAMA president Ed Bolen, “in December 2002 nearly 16 percent of the business jet fleet was on the market. In the spring, we saw the market balloon to about 18 percent before shrinking to about 15 percent by the end of the year.” He opined that the used market is now clearly moving in the right direction, although it is still larger than its historical average of around 12 percent.
Jones termed this a positive indicator, but he added that when OEMs look at the used market, they primarily focus on just the number of relatively new aircraft for sale–those airplanes less than 10 years old.
“Either because of their high operating costs or the amount of money that would be required to update the older aircraft to meet current regulations like the reduced vertical separation minimums,” he said, “many of the older used aircraft are not really viewed as competition for new models. In fact, some of the older used aircraft are unlikely ever to return to the active fleet.”
Jones told those attending the press briefing in Washington that as of December, only about 20 percent of the used jet market was aircraft less than 10 years old, which is not too far out of line with historical figures. Moreover, the prices of these newer used jets have stabilized so that the gap between used and new has narrowed, and that is a positive development, he said.
Another reason for industry optimism, said Jones, is that new orders are already picking up, fueled in part by the accelerated-depreciation bonus, first passed by Congress in 2002 and then increased last year. “We really began to see an upturn in orders last June when bonus depreciation was increased to 50 percent [from 30 percent],” he continued, “and we believe the incentive is continuing to stimulate sales.” Bolen asserted that some GAMA directors are calling the bonus depreciation the most helpful legislation for GA since the General Aviation Revitalization Act of 1994.
“The OEMs all have numerous examples of bonus depreciation causing customers to accelerate the timing of their purchase, to buy new rather than used, or in some cases buy a larger model than they originally considered,” said Jones. “Because bonus depreciation has had such a positive effect on sales, extending the incentive beyond the current year is GAMA’s top legislative priority for the year.”
Meanwhile, the total number of corporate operators worldwide increased approximately 4.3 percent last year. At the end of 2003 there were 14,555 corporate operators in the world using a fleet of 23,121 aircraft. In the U.S. alone, there were 10,661 operators with a fleet of 15,870 aircraft at the end of last year.
At the same time, the number of individuals and companies in the U.S. that own a fractional share of an airplane increased by about 6.7 percent last year, from 4,232 to 4,515. The number of airplanes in fractional programs grew just over 6.1 percent last year, from 776 to 823. GAMA member companies are reporting that approximately 10 percent of their total turbine deliveries last year went to fractional programs.
Industry officials are convinced that the increased amount of time it takes to fly on airlines is a macro trend that will drive general aviation sales in the future. And many people also appreciate the inherent security of GA, including the established relationship with fellow passengers.
“Traffic to and from congested airports, long check-in and security lines, reductions in flight frequencies and elimination of service to many smaller communities are all combining to make it more difficult for people to rely on airlines to meet their need for time-sensitive travel,” said Jones. “We think general aviation offers these travelers a practical solution.”
But the future growth of general aviation cannot be taken for granted, he cautioned, lest the ban on GA at Ronald Reagan Washington National Airport or the Washington air defense identification zone (ADIZ) begin to multiply. This could really decimate the industry, he said.