FBO Survey 2007

 - March 28, 2007, 7:26 AM

When business aviation is booming, as it is now, nowhere is it more evident than at FBOs, the place at airports where everybody ends up hanging out, working, planning, preparing, departing and arriving. FBOs are also the place where most people are introduced to non-airline aviation.

FBOs hire more entry-level workers than any other aviation service business, launching thousands of fresh young aviators–pilots, technicians, operations experts, marketers and managers–into satisfying (and occasionally lucrative) careers. And FBOs reflect the state of the industry. In good times, the fuel flows, business jets crowd the ramps and FBOs build new hangars and opulent terminals to welcome pilots, passengers and owners.

When the economy dims, FBOs are still there, keeping the doors open for weary travelers, perhaps putting a big project on hold and managing costs carefully, but always preparing for the turnaround so that when business picks up, the facility is once again ready to welcome the growing flow of business aviation traffic.

From record high sales of business jets to the slow but sure advent of very light jets and growing fractional and jet card programs, business aviation is riding a wave of strong interest and investment. Certainly there are some areas of concern, such as user fees, airport infrastructure problems, environmental issues and even shortages of experienced personnel, but no one is forecasting a business aviation decline anytime soon.

Shipments of turboprops and business jets are up 11.5 and 18 percent, respectively, from 2005 to 2006, according to the General Aviation Manufacturers Association. In its annual forecast issued in October, Honeywell Aerospace predicts that more than 1,000 business jets will be delivered this year. Rob Wilson, president of Honeywell Business and General Aviation, noted that industry growth is moving into uncharted territory.

He added, “The march to adopt advances in technology continues at every manufacturer. Innovation to improve cabin comfort, extend range, broaden mission capability and produce business jets that are highly productive, cost-efficient assets is ongoing across the industry, from both traditional and emerging business aircraft OEMs.

Steady gains in new aircraft capability and flexibility, coupled with incremental demand from fractional ownership and jet cards, airline use of business jets, branded charter operations and special-mission applications, all fuel unprecedented business jet demand over the next 10 years.”

“That businesses are beginning the year with a positive outlook is not surprising,” said Donald Kohn, vice chairman of the Federal Reserve Board, during a speech on January 8. “Profits have been high, encouraging business expansion, and external funding for capital projects remains readily available on favorable terms.”

In its annual business jet forecast, also released last October, Rolls-Royce noted that the business jet market is driven by factors such as the business cycle, corporate profits, personal wealth, new technology, aircraft retirements and growth outside the U.S. “Corporate revenues are likely to increase from $9 trillion to $18 trillion over the next 10 years,” the company’s presentation stated.

The number of millionaires should grow by 50 percent and billionaires by more than 100 percent by 2015. About 4,700 business jets will be retired in the next 20 years, according to Rolls-Royce. And most significant, business jet deliveries outside the U.S. are climbing sharply, with a greater percentage than ever going to markets that traditionally were not big buyers of business jets.

There are clouds on the horizon, but it’s too soon to judge whether they will have a negative effect on business aviation. The 416-point drop in the Dow-Jones Industrial average on February 27 is one such cloud, and while pundits claimed that it was a result of a drop in the Chinese stock market, something former Federal Reserve Bank chairman Alan Greenspan said might have had an influence, too. On February 26 Greenspan gave a speech to a Hong Kong business conference over a satellite link, according to a brief Associated Press report on February 27.

AP quoted Greenspan saying that signs indicate the current economic expansion might be ending. “When you get this far away from a recession,” he said, “invariably forces build up for the next recession, and indeed we are beginning to see that sign.” The following day, the market seemed to shrug off Greenspan’s remarks, and financial pundits downplayed his influence.

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