The optimism generated by the European Business Aviation Convention & Exhibition (Ebace), coming as it did on the heels of six months of steady improvement in the business aviation industry, dimmed somewhat at the beginning of last month, as the unemployment rate in the U.S. rose, job creation slowed, auto sales declined, home prices and stock prices dipped and consumer confidence fell.
Ebace participants arrived in Geneva heartened by six months of a steady recovery in the business aviation industry, and they left further buoyed by a return to “those thrilling days of yesteryear” that included announcements of multiple aircraft purchases valued in the nine-digit range and news of growing flight hours, a slowly falling inventory of used aircraft, and plans by numerous companies for expansion.
Also at Ebace, Honeywell revealed a survey showing European aircraft-purchase expectations “equal to nearly 34 percent of the current fleet, well above the 25-percent level” that prevailed during 2001-2006.
At the same time, virtually the entire business aviation industry was anticipating that China would be the next growth market as globalization of trade continues. In fact, Gulfstream recently delivered its 300th G550 to a customer in Taiwan, where it will be operated by aircraft charter and management company Win Air.
Positive Industry Indicators
The good news for business aviation continues, despite talk of a double-dip recession and whispers of more economic doom and gloom.
Argus TraqPak numbers for May showed business aviation activity up 3.6 percent over the previous month. Looking at the results for operational categories, said Argus, “all segments posted a positive month, with Part 91 leading the way, up 5.5 percent, and Part 135 charter activity posted a 2-percent increase. The fractional market increase came in at a rather anemic but still positive 0.1-percent increase.
Although the fractional segment lagged as a whole, turboprop operator Avantair saw a jump in the rate of growth that it had not experienced since the beginning of the recession, according to founder, president and CEO Steven Santo. In response, he added, the Clearwater, Fla.-based company is increasing the number of orders for Avanti II twin turboprops and is hiring pilots. Santo expects to take delivery of eight aircraft this year, bringing the total number of Avanti IIs in the fleet to more than 60.
Elsewhere among the fractionals, Flight Options announced at the NBAA regional forum at New York’s Westchester County Airport in June it expects to add six or more jets to its 101-aircraft fractional fleet.
JetNet’s June report on the pre-owned business jet market in the first four months of 2011 contained good news. The Utica, N.Y.-based firm had previously reported that the first-quarter pre-owned market “showed early stage recovery signs with expectations that 2011 would be a year of recovery.”
According to JetNet, the trend continued into April, with 15.-percent growth in pre-owned business jet retail sales transactions for the first four months of 2011, along with a decline in average asking price. “The health of the pre-owned market sets the stage for new aircraft orders,” said the report.
Activity at Ebace seems to support the JetNet forecast. European charter and aircraft management operator VistaJet announced an order for a mix of Bombardier business jets, including 12 Globals, valued at $383 million. In a deal worth $207 million, its European competitor Comlux placed a firm order for three Embraer Legacy 650s, with options for four more.
Gulfstream, on its way to certification this year of the new G650 and G250, revealed a backlog valued at $17.8 billion as of the end of 2010. And Dassault Falcon unveiled plans for a Falcon 2000S priced in alignment with the current economic times–$25 million, approximately $7.1 million less than the Falcon 2000LX.
The June 2011 Business Jet Monthly report from JP Morgan was more cautious than most analysts’, offering mixed signals that make a decisive recovery “elusive.”
The report took note of “solid” first-quarter deliveries, and a percentage of used jets for sale that has declined to the September 2008 level. But it also pointed out that used aircraft prices, “historically a better indicator of improving demand for new aircraft, softened again.”
Brian Foley of Brian Foley Associates also sounded a cautionary note, pointing out that while conditions in other areas of the world slowly become more favorable for a general aviation rebound, “the European environment keeps getting more complex.” He explained that the limitations come from “high fuel prices, user fees, carbon taxes, airspace issues, new regulations and airport slot restrictions.
“When you factor in sustained economic weakness, a near-term robust market outlook just isn’t a reasonable expectation,” he concluded.
As for an industry response to the unfavorable market indicators in early May, Foley said it would not be surprising as business aviation’s ups and downs seem to follow lock-step with the stock market. “I expect when the next reports come out, we’ll see a little decline, but that’s just part of the market. I’m still pretty bullish for the third and four quarters of this year.”