GAMA: Large-aircraft Market Woes Cause Dive in Billings

 - February 22, 2017, 1:05 PM
According to the General Aviation Manufacturers Association, business and general aviation billings for 2016 were down by double digits as shipments of large business jets softened. (Photo: David McIntosh/AIN)

Business and general aviation billings for last year were down by double digits as shipments of large business jets softened and the largest aircraft, BBJs and ACJs, endured one of their weakest years yet, according to the General Aviation Manufacturers Association. Overall, fixed-wing business and general aviation shipments declined by nearly 70 airplanes to 2,262 and rotorcraft shipments were down by 175 units to 861, according to GAMA.

GAMA, which released its annual industry shipment and billings data on February 22, reported that business jet deliveries last year dropped by nearly 8 percent, to 661, and piston aircraft deliveries inched down by 3.5 percent to 1,019. Turboprop deliveries, however, were up by 4.5 percent to 582.

“We’re glad turboprops were up. That’s a good thing,” said GAMA president and CEO Pete Bunce. “But 2016 was not the year we hoped for.” He noted that the mix of deliveries, with fewer heavy jets, and used-aircraft pricing drove down overall billings by 14 percent, to $20.719 billion.

New turboprops such as the Daher TBM 930 and Piper M600 helped provide a boost to that sector, and Pilatus had a strong year, delivering 21 more PC-12s last year than in 2015. That helped offset a dip in Beech King Air deliveries.

Airbus Corporate Jets and Boeing Business Jets delivered five aircraft between them, a third of what the two companies handed over in 2015. Nearly all the business jet makers had a down year. Gulfstream’s large-aircraft deliveries slid to 88 last year from 120 in 2015. Dassault’s total dropped by six aircraft, and despite a jump in deliveries of the new Legacy models (the 450 and 500), Embraer shipments also fell as Phenom deliveries dropped. Textron’s results benefited from a jump in Latitude shipments (Latitude deliveries did not begin until late August 2015), but its legacy models were down.

‘Transitional Period’

“When they are down that much, companies reset with rightsizing and layoffs. From that perspective, 2016 was just not a great year,” Bunce said.

Many of the business jet makers announced layoffs at some point last year, and Bunce said he would not be surprised if that continues this year. “There’s a lead-lag factor,” he said, noting that companies are still implementing layoffs announced late last year. “I think there will still be some adjustments.”

He added that the business jet market has hit a “transition period,” with several new models slated to reach market later this year and next. Among these are the Gulfstream G500, Textron Longitude and Bombardier Global 7000. “We’ve got a number of products that will be delivered, and that definitely will help.”

But he was less clear on whether market factors will provide any momentum. “There’s some optimism,” he said. “Some people saw a bump at the end of the year. That may be a reflection of what we saw in the stock market. I believe companies are encouraged by the discussion of overall corporate tax reform. Flying is up in the U.S.” But “there are so many different factors out there,” from financing questions to the strength of the U.S. dollar, that it is hard to predict how this will ultimately drive the market, he said.

The rotorcraft sector also showed signs of further struggles as the oil-and-gas market remained weak. Turbine helicopter deliveries—without factoring in Leonardo shipments in either year (the 2016 results were not available at press time)—were down by 120 aircraft to 637, while piston helicopter shipments are down 20 percent to 224. As a result, billings by the reporting manufacturers were down by $200 million, to $3.6 billion.

Regulatory Challenges

As GAMA members watch market conditions, they are also keeping an eye on political and regulatory factors could affect their business, among them smoothing out international validation processes. U.S. officials are working with Canada, Europe, Brazil and the International Civil Aviation Organization on the issue, but Bunce expressed dismay at progress. “There’s a lot of work to be done,” he said, adding, “In our current position the problem is not on the other side of the Atlantic. Some commitments were made and they are not being lived up to on this side of the Atlantic.” He did not indicate whether the lack of progress stems from a slowdown during the transition in U.S. Presidential administrations. “In the end, [the sought-after] validation is a risk-based approach proven to save resources and duplicative efforts,” he said. “There’s absolutely no reason why we would not be able to move out according to the timeline that was agreed to.”

While work continues on validation, so too do efforts to put new Part 23 regulations in place. “We are early in the stages,” he said, noting that the actual implementation will come this summer. The industry is working with the FAA on training for the new regulations. “Then we are going to have to have companies go through the process and start using the new structure, and we’re going to learn from them,” he said. Some of the approaches used in Part 23 are being looked at for Part 27 and 29, but that, too, is still in the early stages.

FAA reauthorization and possible ATC reform remain at the forefront. Lawmakers and their staffs are asking for input, Bunce said. “Both Republicans and Democrats are listening.” Transportation Secretary Elaine Chao also has pledged to listen to input from everyone, he added. “We take her at her word that she is going to do that.” He believes an ATC reorganization proposal will resurface, but he was less clear about what shape it will take. “It’s still early. I’m hoping that President Trump allows Secretary Chao to work the process…and something emerges from there that really moves the ball forward.”

But Bunce expressed exasperation at statements that NextGen isn’t working. “In Washington, when you say things enough times—even if they’re not true—people start to believe them. This constant drumbeat that NextGen isn’t working and isn’t happening just isn’t true. The FAA is executing on every single thing the airlines have asked them to execute on.”