NBAA Convention News

GAMA: 2010 is not being kind to GA

 - October 19, 2010, 3:53 PM

To the General Aviation Manufacturers Association (GAMA), 2010 is proving to be a little worse than last year as far as shipments of aircraft are concerned, even as billings are up slightly. And many people are asking questions about that, said GAMA president and CEO Pete Bunce, and it is fairly easy to explain. “Most of the robustness is at the upper end of the spectrum of products that we have where profit margins are larger,” he said. “So long-range, large-cabin aircraft are the area hit the least in this recession, albeit we wish they were doing better, as well. That’s where the major profit margins are.” In the lower spectrum of products, down to turboprops and pistons, Bunce said, the profit margins are smaller. And that concerns GAMA. “If you look at the normal economic cycle and accept that a lot of economists said the recovery started in the fall of last year, we would have anticipated coming up to a point at this time where we are starting to see recovery in the sector,” Bunce acknowledged. “But because there has been instability or flatness in the recovery...we follow the general trends of the economy. And if the economy is flat and the recovery is not as strong as it was in the later half of last year, obviously that is going to have an impact on our sales.” Bonus Depreciation But he stressed that there is still some good news. The day that Bunce spoke to AIN, the Senate had passed a bonus depreciation provision in a bill boosting small businesses. Although it still had to go to the House and then to the White House for the President’s signature (it was signed into law on September 27), GAMA had been told by different member companies that there had been some people who were holding off on aircraft purchases to see if bonus depreciation was going to happen this year. “And so, we think that can help,” he predicted. “Will it help a lot? I don’t know. But I would anticipate that it will help some, so we are cautiously optimistic.” Overall, GAMA’s fortunes are tied to the economy and there remains a lot of uncertainty. Bunce acknowledged that public and private companies are holding cash, which impacts their ability to make decisions on purchases. “And, of course, we are continuing to watch the used market–slowly getting better but still not where we want it to be, especially in the range of aircraft that are 10 and less years old,” he added. “And so we watch that carefully, as well as how people are financing their aircraft.” GAMA also monitors flight activity, hoping that it becomes more robust in both Europe and the U.S. While it is climbing, it is not climbing at a rate that the industry would hope for at this stage of where the recession already bottomed out and where the recovery has commenced. “We wish we were in a better position, especially compared to 2009, than we are midway through the year,” he admitted. On another front, Bunce said that GAMA has been encouraged by actions by the FAA to establish a final rule on ADS-B Out, which he characterized as important to the manufacturers, because now the specification is frozen and they know what to build to. “Obviously there is a reluctance to start to order in quantity and try to prepare yourself to build up if you think that the specification may shift,” he said. “Now that we’ve locked that down with the final rule, that is important.” He noted that mandatory equipage for ADS-B is still out there–meaning a deadline of 2020–so GAMA is hoping that through a government-industry type of partnership, or working together in “thinking of different ways that the we can go ahead and move equipage forward on a voluntary basis, that is going to be very, very important for the industry, particularly business aviation and commercial aviation.” Obama’s Infrastructure Plan According to Bunce, the industry was encouraged by the fact that President Obama mentioned the importance of modernizing airports and the air traffic control system when he announced his $50 billion infrastructure investment plan early last month. “Important in that is this concept of the Infrastructure Development Bank,” Bunce asserted. “Now, it’s way too early to understand what would be envisioned and what Congress could put into play as far as the real nuts and bolts of making this work. But the concept would be–for us in aviation–if the infrastructure and data systems are moved up to the cockpit of airplanes, why not allow the government to help incentivize people to equip earlier to be able to go and start reaping the benefits.” Meanwhile the benefits to the government would be twofold. The first is being able to divest from ground infrastructure sooner, which will produce savings. But the other side is on the environmental front. “If we can go ahead and leverage these NextGen technologies sooner,” Bunce noted, “then we can show some true quantifiable gains on the environmental side for both reduced use of fuel and also reduced noise footprint from aviation. So there is definitely some interest from the administration to start looking at these concepts on what NextGen can do from a fiscal standpoint and from an environmental standpoint.”<o:p></o:p>