A Business Perspective: Business aviation takes a battering

Farnborough Air Show » 2010
July 17, 2010, 8:25 AM

If journalism is the first draft of history, the front pages of Aviation International News over the last two years serve to chronicle the forces that have darkened business aviation’s sky for the past two years. It has been a rough flight, riding a spectacular updraft until encountering a brutal shear 18 months ago and fighting a severe downdraft since. Despite some breaks in the weather recently, the business jet is by no means in the clear yet.

It’s well known that business aviation’s fortunes are elastically hitched to the ebb and flow of the economy, lagging them by a year or so, and the last down cycle was triggered by the chaos and angst that followed the terrorist attacks of Sept. 11, 2001. Aviation, both commercial and business, felt this event hard because airliners had been commandeered as the weapon, and the process of beefing up security to prevent a repeat is still under way nearly 10 years later.

The TSA’s so-called Large Aircraft Security Program (LASP) proposal revealed how little it knew (or how little it would acknowledge) about the way business aviation operates, but lobbying and education efforts by the Washington alphabet groups and scathing coverage by the aviation press persuaded the agency to hold a series of public meetings around the U.S. to hear from the people in business aviation’s trenches. Their message was polite, loud and clear, and the TSA withdrew its original LASP. A revised proposal is due out for comment by late this year.

The specter of LASP was actually a more menacing threat to business aviation than the crumbling economy, which (although never on this scale since the 1930s) has wobbled before but always righted itself. A bad rule made law, however, could have inflicted a harsher and more enduring blow on bizav. Until the TSA releases its revised large aircraft security proposal it would be premature for business aviation to regard LASP as a bullet dodged, but so far this has been a victory of sorts.

The sour economy, however, is many tentacled and continues
to ensnare business aviation by bloating the inventory of used aircraft and stifling demand for new ones. Since the recession took hold in the latter half of 2008, business aviation has lost some 30,000 jobs at OEMs, flight departments and the service industry that supports them. Most disturbing, this damage has been inflicted on a $150 billion industry employing 1.2 million people with the active approval of the U.S. government.

The Big Three’s SUV-size Blunder
Business aviation could see storm clouds on the horizon as summer in the Northern Hemisphere drew to a close in 2008, but the hammer blow was dealt by the CEOs of the three struggling Detroit car manufacturers when, in December, they each made the staggeringly stupid decision to fly to Washington aboard their $40 million business jets to beg for taxpayer bailout money.

The ensuing “fatcats in their luxury jets” headlines launched a savage backlash on business aviation and did more damage than the economy alone could have wrought. President Obama, a staunch supporter of business aviation in that he has used Air Force One more than any other president in history, chose to portray business jets as yet one more symbol of wretched excess by the very same people who got us into this mess in the first place.

We have subsequently had to witness House Speaker Pelosi clamoring for use of a 757 because a Gulfstream is just too small for her needs, and now we learn that establishment of a TFR (an exclusionary protective bubble placed in the airspace over a presidential destination) has now become a status symbol for other government high-ups as they mingle with their subjects.

Wisely, business aviation’s public voices have chosen to portray this appetite for private lift by government officials as a ringing endorsement of bizav’s benefits and advantages. Privately, of course, all in bizav are seething at the rampant hypocrisy.

In some ways, business aviation had been setting itself up for this “exposure” for decades. Bizav has been aviation’s stealth operator since long before the
F-117 Nighthawk and B-2 were declassified. It has almost always preferred to operate in relative secrecy, and secrecy breeds just the sort of suspicion that erupted after the Big Three Auto bosses blew it. Bizav has been drifting down in the ash cloud ever since.

This is not to say that money has not been tight for the past couple of years, but business jets were suddenly cast in the same disapproving light as red Ferraris in hard times and seen as perks, not as the business transportation tools that the industry had thus far been increasingly successful in portraying.

Bloated Used Inventory
As public furor grew, flight operations declined and pre-owned inventory swelled to alarming new highs as owners felt compelled to hang a for-sale sign on their aircraft. And therein lies a key factor in the bloated inventory of used aircraft: for an unidentifiable number of owners, hanging that for-sale sign was primarily a gesture to symbolize “I feel your pain.” With values slashed by half in some cases, owners knew there had never been a worse time to sell a business aircraft, and those who could possibly avoid it had no intention of parting with their jet or turboprop at a fire-sale price. Market forces have butchered used prices over the past 18 months.

From the standpoint of the buyer, bloating and stagnation in the used jet market is a function of fear of future impoverishment/buying prematurely (missing the bottom) or greed driven by targeting and holding off for that same bottom. Either way, some airplanes have languished on the used market for a couple of years.     

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