Increased bizjet activity suggests better days

 - November 2, 2009, 5:32 AM

It has been a long, painful year since the bottom fell out of the economy, but there are signs, however slight, that the business aviation industry is starting to recover.
In its September Part 135 flight activity report released on October 12, Aviation Research Group/U.S. (ARG/US) showed business aircraft activity for September 2009 at its highest level since October 2008.

The data is from serial-number-specific aircraft arrival and departure for all IFR flights in the U.S. September activity showed an uptick of 2.7 percent compared with August this year. And compared with September 2008, activity was up 0.4 percent.

There was also good news from Gama Aviation, the U.S. arm of Gama Group based in Farnborough, England. The global aviation services firm’s U.S. affiliate announced that this year is thus far a record year for growth of its managed fleet of business aircraft, with the addition of nine business jets since the first of the year, most within the last several months–two Challenger 604s, one Falcon 2000 and a Falcon 2000LX, one Gulfstream IV, a Gulfstream G350 and a Gulfstream G450, a Hawker 800XP, and Learjet 45.

There are also signs of recovery in the used aircraft segment. According to an October update by market research information and services provider Amstat, the inventory of used business jets for sale decreased from 18 percent to 17.2 percent in September. “When we examine the past several months’ worth of market data, the trend does seem to indicate that it’s likely we have seen the peak in terms of used business aircraft for sale,” said executive v-p Tom Benson.

The Amstat report also noted that business jet resale retail transactions have increased from 0.6 percent of the worldwide fleet per month to 0.8 percent for each of the most recent three months. While Benson was reluctant to describe the improvements as representing the end of the downturn, he did go so far as to describe them as “the first signs of market stabilization.”

Other market observers and analysts seemed in agreement with ARG/US and Amstat.

The JPMorgan business jet monthly report released in early October noted that, “Used [business jet] inventories fell by a further 50 [basis points] in September, the second consecutive meaningful decline and further evidence that we are past the cyclical trough in the used market.”

The UBS Business Jet Survey described the more recent numbers as, perhaps not better, but at least not worse.

The UBS September business jet market index, released October 16, came in at 43, some 16 percent higher than its July survey, and the sixth consecutive move upward, “indicative of continued slowing in the rate of market deterioration.”

The UBS report also noted that available business jet inventories declined 3 percent in September, “and are now four percent below the May peak on the third sequential decline in the past four months.” However, it also pointed out that despite recent declines, available inventories are still 26 percent higher than in the previous year.

Forecast International released its turbofan engine market outlook for the next decade early last month, forecasting sales valued at $292 billion through 2018 through the production of 66,273 engines for all aviation industry segments, including military and airline.

The Newtown, Conn.-based market intelligence and analysis specialist noted that for three years running before the economic meltdown in late 2008, “annual aircraft sales [were] growing at an unsustainable pace.”

Now, with signs of economic recovery only recently on the horizon, it expects the turbine engine market “to remain essentially stagnant through 2012, and then rebound in 2013.”

Forecast International described the business aircraft segment as having been “hit with a double whammy between the credit freeze and the negative publicity of executive use of company business jets.”

The credit issue, it said, will work itself out over time, but the public’s negative perception of private jets has caused the deferral or outright cancellation of many orders.

Nonetheless, the industry is developing new aircraft designs in anticipation of the market’s reversal, [with] Pratt & Whitney Canada, Rolls-Royce, Honeywell and Williams all involved in engine development programs to power these new jets.
But even as the industry arrived in Orlando for this year’s NBAA Convention, the attitude was one of limited expectations, and Honeywell’s forecast did little to lift spirits.

The company’s 10-year forecast sees a near-term dip in business jet deliveries in 2010 before a gradual rise begins in 2011.

In an interview at NBAA, Brian Foley of Brian Foley Associates shared a similar perspective. He said, “New sales aren’t going to gain steam until the middle of next year because of the extraordinary inventory of late-model, new-production airplanes.” The going will be so tough, Foley believes, that survival may depend on consolidation. “We suspect there will be some news with regard to [company] sales and mergers. There are six OEMs for business jets now, and once the dust settles, there will be fewer than that.”