As distressed Detroit drops its jets, bizav ponders the fallout

 - December 29, 2008, 6:54 AM

The news that General Motors and Ford are shutting their flight departments has rattled the business aviation community. Some attributed the actions to the sensational media coverage the “Big 3” (General Motors, Ford and Chrysler) executives faced after flying to Capitol Hill in private jets, while others blamed the subsequent $14 billion House bill that called for the distressed companies to sell their aircraft as a condition of the bailout. But regardless of the reasons, the industry is now pondering how the closures–and the economic conditions that were to blame–will affect business aviation at large.

Both GM and Ford released statements on December 2, noting their intent to close the flight departments. GM said the company’s travel volume no longer justified the existence of a company flight department, while Ford simply said it had “made the decision to immediately sell all five of our company planes and to close our flight operations.”

Both companies blamed the economy, rather than the increased media attention they received for flying to Washington, D.C. in private jets to request government financial assistance. In its statement, GM said it had suffered “significant cutbacks” and would be ceasing operations at Detroit Metro Airport as of January 1 and “pursuing sale of four of the [company’s seven] aircraft.” A Metro Airport spokesman told AIN that as of mid-December, GM had yet to notify the airport of its plan to vacate the space. “As far as we’re concerned, they have that space through 2009,” the spokesman said. “We’ve certainly seen everything that has been in the press, but we haven’t received any official notice, so nothing has changed.”

Rodney Hamilton, the director and chief pilot of Ford’s flight department, also blamed the economy and said he didn’t think Ford’s actions were threatening to the industry as a whole. “I think what is threatening are the economic conditions,” he told AIN. “I believe that in better times this would not have happened.” Ford said the decision was the “right one” and said the closure would “assist us with our cash improvement plan and aid in our overall turnaround efforts.”

Both companies told AIN they laid off 49 employees each, although earlier reports had stated that the GM closure would leave as many as 72 people unemployed. Neither company would provide a breakdown of the specific number of pilots, flight attendants, maintenance or dispatch personnel employed by the respective flight departments.

NBAA was among the first to speak out following the announcements. Association president Ed Bolen attributed the actions by GM and Ford to their “acute liquidity crisis….The fact that they are selling strategic assets, including airplanes, appears directly related to their particular liquidity challenge.” And in a letter to NBAA members, Bolen said the media had taken “a sensationalist view of not only the use of business aircraft by the Big 3, but the utilization of business aviation for any company, anywhere” and said he was “frustrated by the mischaracterizations of business aviation.”

NBAA also responded to H.R. 7321, the auto bailout bill, which would have prohibited the financially strapped automobile manufacturers from owning outright, leasing or owning any interest in private passenger aircraft, as long as the government debt was outstanding; and required the manufacturers to sell or divest any aircraft or interest that was owned before the bailout.

In a letter to Speaker of the House Nancy Pelosi (D-Calif.), Bolen expressed “concern” about the wording of the proposal and said it “appears to prohibit the use of business aviation in all situations, including when it is the sole mode of transportation available to a business, or it is the most prudent and cost-effective solution to a given transportation challenge.”

NATA president Jim Coyne opposed the bill outright and urged members of Congress to oppose it, saying it established “a damaging precedent that will detrimentally affect the thousands of small businesses in this country that provide air transportation using general aviation aircraft as well as the small businesses that support these types of operations.” Coyne also emphasized the importance of business aviation to local communities and “implored” the House to “consider the more than 1.265 million jobs created by the general aviation industry.”

The industry breathed a tentative sigh of relief, however, when House Democrats failed on December 11 to secure the 60 votes they needed to pass the bill. “If that provision had made it through and [had been] signed into law, between 50,000 and 100,000 jobs could have been lost,” said Eric Byer, NATA’s vice president of government and industry affairs. “Just that provision alone would have affected jobs across the board.” He added that the figures are “just estimates” by industry insiders, but there are no doubts that the provision would have been extremely damaging.

Industry and Employment Outlook

Although the House bill failed to pass, the outlook for business aviation is about as murky as it is for most industries in the current economic climate. NATA members are seeing drops in business of 50 to 75 percent and an increasing number of pilots are beginning to post their résumés, Byer said. “I think we’re going to see significant layoffs, no doubt about it,” he said. “It’s not pretty.”

Jeff Beck, a Gulfstream contract pilot, had one word to describe the state of the economy and the fallout following the GM and Ford announcements: bad. “As soon as [people] started talking about the auto executives and their private jets, it just killed the contract pilot business and the aviation business,” Beck said. A number of other flight departments followed suit, Beck said, and now there simply aren’t enough jobs to go around.

Likewise, corporate flight attendants have also taken a hit. Cyndee Irvine, a corporate flight attendant based in Hawaii, said her department closed recently and she knows of other departments that also announced cutbacks. Flight attendant Susan Friedenberg, owner of the Corporate Flight Attendant Training Program, said enrollment in training courses across the country has decreased and jobs are less secure. “We’ve seen seven or eight departments shut down in the Northeast,” she said.

John Casker, president of the Professional Aviation Maintenance Association, said maintenance technicians are also going to face cutbacks and layoffs. “Whenever a company is faced with economic issues, one of the first things to go is the flight department,” he said.

In spite of the bad news, the situation isn’t without precedent. “This is nothing more than a repeat of history,” Beck said. “It seems that every 10 years aviation crashes, but then it comes back even stronger than before.”

Judith Reif, chairman of the NBAA Flight Attendants Committee, said that opportunities for experienced flight attendants are still available. “Some flight departments are still hiring full-time flight attendants,” she said. “It’s not looking that good for new flight attendants seeking to come into the industry, but in six months

to a year, when the economy does turn around, people will start hiring again and things will ramp back up.”

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And although maintenance technicians might have to relocate, positions will always be available, Casker said. “A&P mechanics are highly employable,” he said. “So are there going to be jobs? Yes. But are they going to be in the area where someone was laid off? That’s a question I can’t answer.” He added that A&P mechanics are often employable in other fields, as well.