AIN's 2014 Year-End Report

 - January 5, 2015, 9:38 AM
COO Randy Padfield and production director Mary Mahoney, who are retiring this month, with current editor-in-chief Charles Alcock.
COO Randy Padfield and production director Mary Mahoney, who are retiring this month, with current editor-in-chief Charles Alcock.

For the first time since the Great Recession began—six long, frustrating, challenging years ago—I think the worst is behind us. New-aircraft sales volume, at some $21 billion, is about what it was before the downturn. And I believe the increased business activity we’re seeing within our company and in the industry overall represents a sustainable trend.

Granted, the number of new aircraft being delivered has declined. That’s due to the Great Recession decimating the light (and even midsize) jet market. But the recent (and historically disproportionate) popularity of larger, long-range, more expensive jets has kept the total dollar volume up. And what  also makes me optimistic is what is happening in other sectors: the maintenance, completion and overall MRO industries are booming. This reflects more pre-purchase inspections of preowned aircraft, which translates to more preowned aircraft sales, which leads to higher maintenance volumes, which results in firming and then increasing preowned pricing, which ultimately produces an uptick in sales of new business jets.

While not rising across the board, meanwhile, fuel sales have increased substantially in key cities around the country, reflecting heightened activity in the business sectors. Executives at the larger FBO chains recently shared the double-digit gains they are seeing at all their major business-centric markets.

Indicators like this make me believe we are looking at a strengthening business aviation industry, first in the U.S. and then in other key countries. The improvement may be slow in 2015 but should increase significantly after that—perhaps 3 to 5 percent per year through the rest of this decade.

That is a bullish prediction, but in my 40-plus years of being immersed in this business, we have never missed a 10-year boom-bust cycle. All we’ve had these past half-dozen years is a bust. I think we’re overdue for a boom.

Of course, geopolitical and natural calamities—ISIS, Ebola, Ukraine, you name it—can derail anything. And these impossible-to-predict crises seem to happen more frequently every year. The Wall Street Journal’s Daniel Henninger recently observed this phenomenon in a column that suggested we’re now perpetually living on the brink of disaster. He summed up the situation by quoting Martha and Vandellas’ 1965 hit: “Nowhere to Run.” In fact, though, while an international crisis can temporarily affect profits, free-market believers ultimately do have somewhere to run—and that’s back to business. Capitalists invariably get back to work. And they are doing so now.

Our publishing office is in a small city in Connecticut, at a relatively modest-sized GA airport. At 6:30 a.m. one recent morning, I saw more activity on the ramp than I’d witnessed in a while: two Citations, a King Air, a Cheyenne, a Meridian and our own Baron were all being fueled and pre-flighted, getting ready to take off. This type of increased business activity by smaller companies will ultimately lead to the prosperity we have been missing, as Barons get replaced with turboprops and King Airs with pure jets. And this is what will ultimately drive the entire industry: when the little guys have the confidence that things are going to get—and stay—better. I believe that time has come.

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AIN 2014 Year-End Report (522K)

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