Newsmakers 2009: The recession takes its toll

 - December 28, 2009, 6:22 AM

By November 2008, it was obvious that despite the best efforts of the drivers and most ardent wishes of the passengers, the economic bus was headed over the cliff.
And as weeks passed, it became apparent that with the bus still falling and no bottom in sight, the business aviation industry was facing a recession–one that quickly spread across the Atlantic to Europe, then to Russia, India and China and most recently into the Middle East.

On-demand charter hours had begun to drop, even as early as the summer of 2008, and that drop continued into 2009, as did interest in fractional ownership.
A decision by the big three automobile manufacturer CEOs to fly to Washington, D.C., on their company jets in November to ask for bailout money from the federal government resulted in a public black eye as Congress and the media piled on. The fallout was predictable and flight departments began closing, companies canceled orders for new aircraft, and flight hours fell further.

Among the manufacturers, who were the last industry segment to feel the blow, healthy order backlogs began to wither in December as credit became scarce and customers canceled orders.

As the recession deepened, business activity fell 10 percent, then 20 percent, and in some cases as much as 30 percent. Aircraft manufacturers began cutting production, followed by implementing layoffs and furloughs in unprecedented numbers.

Now, some 15 months into the recession, signs of a recovery remain elusive. But they are there, however slight.

Since September, the number of total flight hours has increased. The improvement has not lasted long enough to be called a trend, but it is encouraging nonetheless. And used aircraft brokers have watched as anxious buyers who are able to obtain credit, or who have sufficient liquidity, have begun slowly cherry-picking among the massive inventory of pre-owned business jets.

From Bombardier came news that more than 100 employees will avoid layoffs next year following a job-sharing agreement with the union. And Greenwich, Conn.-based private jet travel specialist CitationAir has announced it will recall 16 of 85 pilots placed on furlough.

But the bottom is still there, and it’s still bumpy.

In a late November release, Forecast International predicted production of approximately 825 aircraft in 2009, 738 in 2010 and 716 in 2011. The General Aviation Manufacturers Association third-quarter numbers show business jet deliveries down 37.8 percent compared with the same period in 2008, and numbers from Berkshire Hathaway showed its NetJets subsidiary suffered a loss in revenues of 42 percent (about $1.5 billion) in the first nine months of 2009.

One thing with regard to the economic state of the industry is certain: it will remain a major story through this year and probably well into next.

AIN_2009_Newsmakers.pdf