With the notable exception of business aviation, general aviation is likely to continue declining in the short term and make a slower recovery than commercial aviation over the long term, the FAA said in its annual aerospace forecast released last month.
“The one bright spot for general aviation is in the business/corporate segment of the industry, where increased growth in fractional-ownership companies and corporate flying has continued to expand the market for jet aircraft,” the agency said.
“Although shipments of [GA] jet aircraft declined during the third quarter (from 145 to 133 aircraft), the fallout from September 11 appears to have spurred the interest in fractional or corporate aircraft ownership,” the FAA continued. “It also appears to have provided new growth opportunities for the on-demand charter industry.”
Overall, airline passenger traffic is expected to continue to decline this year, followed by a strong recovery next year. But regional airlines seem to be largely Teflon-coated when it comes to the aftermath of September 11 and effects of the recession, with FAA Administrator Jane Garvey telling the 27th annual forecast conference in Washington that “at many airports we are seeing extraordinary performance by the regional air carriers.”
Even before September 11, the airline industry was already in a weakened state and headed toward one of its worst years in more than a decade. Domestic passenger demand began to decline in February last year, while international traffic turned negative in July, largely in response to the slowing U.S. economy.
Air carrier finances entered the red in the January to March quarter last year, according to the FAA, due in large part to a combination of the collapse of high-yield business traffic and rapidly escalating labor costs.
“Regional carriers are the one exception,” said John Rodgers, director of the FAA office of policy and plans. “They just continue to grow and grow.” He predicted that during the 10 years covered by the latest forecast (fiscal years 2002 to 2013), the nation’s fleet of regional jets will grow from about 700 to about 2,900, and the regional airlines’ revenue passengers miles (RPMs) will grow by 7.1 percent a year.
Despite September 11 and a lengthy 98-day strike that shut down operations at Comair, regional/commuter traffic continued to grow last year. Capacity in the form of available seat miles (ASMs) grew by 9 percent while RPMs grew by 9.5 percent.
Regionals enplaned a total of 79.7 million passengers last year, although the figure was only 0.8 percent higher than in 2000. The FAA said the large disparity in growth relative to passenger miles is due to an increase of 23.9 nm in the passenger trip length, which it attributed to increased numbers of RJs in the fleet and the fact that larger airlines continued to transfer many medium- to short-haul routes to their regional partners.
Although the GA industry continued to report increased billings through the third quarter of last year, the industry also reported its first decline in aircraft shipments in nearly seven years.
The FAA said airline passenger traffic fell 1.8 percent in FY 2001, which ended Sept. 30, 2001. The major effects from September 11 occurred in the fourth quarter of the calendar year, which is the first quarter of this fiscal year.
Therefore, there will be relatively large differences between fiscal year and calendar year growth rates for 2001 to 2003, and the FAA is reporting data on both a fiscal- and calendar-year basis for those years. Normally, the difference between calendar- and fiscal-year results and growth rates vary only slightly.
For example, the forecast says passenger demand in FY 2002–the current year–will fall 12 percent to 600.3 million enplanements, whereas the decline on a calendar-year basis is spread over two years–down 6.9 percent in calendar year 2001 and 4.7 percent in calendar year 2002. In FY 2003, passenger traffic is expected to increase 14 percent; the comparable figure in calendar year 2003 is 12.5 percent.
“While the slowdown of U.S. economic activity can be partially blamed for the slowing of demand for general aviation products and services, September 11 and its aftermath are expected to have the greatest and longest effect on the general aviation industry,” the FAA warned. “Many of the ‘no-fly zone’ and other restrictions placed on the operation of general aviation aircraft immediately after the terrorist attacks remain in effect today, closing many airports to VFR flying and idling thousands of general aviation aircraft.”
The FAA admitted that except for business/corporate flying, most of the statistics for GA are “discouraging.” It said that the number of student pilot starts, the key to the future of general aviation, declined 6.6 percent in 2001, the third consecutive year of decline.
“The disturbing news for general aviation is that the number of student pilots is projected to decline by 4.5 percent in 2002 and by an additional 1.2 percent in 2003,” the FAA predicted. “These declines reflect the uncertainties surrounding the restrictions imposed on flight schools and pilot training.”
According to the FAA, it has been estimated that as many as 20 percent of student pilots are foreign nationals now subject to increased scrutiny and lengthy background checks. “Losses of this magnitude could result in the closure of many flight schools,” it said.
At the same time, support for industry-wide programs designed to attract new pilots to GA “appears to be waning” among some segments of the industry, pressured by declining demand for products and services and reduced budgets. “The future direction of the general aviation industry will depend, in large part, on how successful the industry is in continuing to rebuild and stimulate new interest in these programs,” the forecast said.
Faced with these uncertainties regarding the future of pilot training, the question is how GA, especially pleasure/sport flying, will deal with the double effect caused by restrictions on flying and the current U.S. economic recession.
But the FAA’s forecasters acknowledged that the business/corporate side of general aviation appears well situated to benefit from the stringent security restrictions imposed on flying by commercial aircraft. Safety concerns for corporate staff combined with increased check-in and security clearance times at many U.S. airports seem to have increased the interest in fractional corporate aircraft ownership and on-demand charter flights, they said, adding that this segment of the industry could “greatly exceed” the forecast.
“The current forecast assumes that business use of general aviation aircraft will expand much more rapidly than personal/sport use,” the FAA said. “This is due largely to the expected continued rapid growth in fractional ownership and is reflected in the changing composition of the general aviation fleet mix.”
While hours flown by GA aircraft are projected to decline by 2.2 percent this year and increase by only 0.4 percent next year, hours flown during the last 10 years of the forecast period are expected to increase at an average annual rate of 1.5 percent. Much of that increase reflects increased flying by business/corporate aircraft and increases in the use of other GA aircraft.
The hours flown by turbine aircraft (including rotorcraft) increase at an average annual rate of 2.2 percent over the forecast period, versus just 0.7 percent for piston- powered aircraft. Jet activity accounts for the majority of the increase, expanding at an average annual rate of 4.1 percent.
The FAA said the large increases in jet hours are due to the expected increases in both the fractional-ownership fleet and its activity levels. Utilization of fractional-ownership aircraft averages approximately 900 hr annually, compared with only 380 hr for all business jets.
The latest forecast also sees airline passenger traffic returning to more normal levels of growth by FY 2004, although Rodgers cautioned there are several risks inherent in the FAA’s crystal-ball gazing. He listed these as security issues; return of the business traveler to the airlines; further financial woes or consolidation of the airlines; and labor issues.
He conceded that after the first or second years “we are producing a trend forecast.” As such, the FAA sees airline passenger traffic expanding at an average annual rate of 4 percent over the next 10 years, reaching one billion passengers in FY 2013. That is three years later than predicted in last year’s forecast, owing to both the recession last year and September 11.
“Soon enough the community will again be faced with the challenge of meeting–not stimulating–demand,” said Garvey. “We could be experiencing delays at some airports this summer.”