Aboulafia: Business Aviation Market Is Recovering

March 19, 2012 » AINalerts » March 20, 2011
March 20, 2012, 4:04 PM

“The business aviation market is just starting to recover,” Teal Group vice president for aerospace analysis Richard Aboulafia said this morning during an aerospace and defense outlook teleconference hosted by Desjardins Capital Markets. “Companies are making record profits and are literally stuffing about 7 percent of this cash under their mattresses,” meaning many have available capital that could be readily deployed to purchase business jets. He is also encouraged by the declining inventories of pre-owned business aircraft.

While Aboulafia is confident that recovery is under way, the problem is that the business aviation market is “torn in half.” Companies building business jets that cost more than $25 million each have seen deliveries rise slightly since 2008, he said, while those making aircraft below this threshold have seen shipments drop by 56.4 percent in the same period. This shift has benefitted Gulfstream and Bombardier, but penalized Cessna and Hawker Beechcraft.

Aboulafia is forecasting a 12-percent compound annual growth rate for business aircraft through 2017. Though he expects that the top and bottom market segments will expand at this same rate, Aboulafia said the bottom half will still be depressed in historic terms and thus “there will be too many players in this segment.”

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Richard Pierce
on March 21, 2012 - 4:42pm

Let's see, oil at $107 per barrel (and likely to go up dramatically if the middle east deteriorates further), an Obama administration that links jets with fat cat corporations (that have nothing better to due with their money), a large inventory of used jet aircraft that still exists, an FAA that is eager to put more user fees on turbine aircraft (they will get to us poor ol piston folks later), little to no demand for new aircraft in the mid to lower portion of the market and Mr.Aboulafia is predicting 12% compound growth???????
If they can build enough airports for general aviation maybe our pals the Chinese will buy. Maybe a bit more research required for his "analysis"???????

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ian becker
on March 24, 2012 - 9:05am

There are 5 million travelers in the US who are fed up with the time wasting crap the airlines are dishing up.

Even though these folks fly 1st class they arrive at the same time as the back of the cabin folks. They spend more time at airports than they do actually flying in the air.

With private jet one can attend three meetings in one day. Conversely, it takes three days to attend one meeting via commercial. Ask, Ed Bolen.

This is a huge scourge upon US productivity. It wastes literally tens-of-billions of dollars annually. DOT once did a study: their figure was $15 billion for the Eastern seaboard alone.

However, open "private jet" to these 5 million...then, watch private jet utilization surge to over to over 85%...presently it is less than 20%. See Avinode stats.

This is quite easy to accomplish. Use iTunes as the model.

Use social media as a collaborative technology. Aggregate travel demand in real time. Facilitate the sharing of the market price of a charter. The result is: private jet at airline price. The value proposition is: save time.

Yes...I know it is novel...never been tried. So was Edison's light-bulb.

Skeptical: Get the market price of a charter. Divide this by the passenger capacity of the proffered aircraft. The quotient is the per-person cost to fly the mission. Now phone the airlines and get their unrestricted price. It will be about the same as the per-person cost, above. What will not even be close is: the time the above charter travelers will save.

Institute this paradigm, then watch the demand for small (less than 15 seats) jets soar as millions of travelers arrange booking via the internet and make use of the 5,000 airports across the US.

This method assures owners and operators (Part 135) their optimum price. Their profits are never at risk, as there are no empty seats. With this model the complement of travelers (irrespective of how many or how few) together pay the entire, total trip cost. Technically: there are no schedules, and this does not foul or Part 380. It is no different than an autonomous group booking a charter for their own purpose...be it a camera club, or sports fan club.

These travelers get to travel, on-demand, point-to-point, expediently...at a price approximating the airlines' fare. The huge price barrier of private jet is solved. Private jet is now open to regular 1st class travelers.

I'd love to read your comments...

Ian Becker@z-Jet.com
PO Box 370831
San Diego, CA 92137

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