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GAMA First Quarter 2010 Shipment Analysis
Bizarre picture painted by latest GAMA shipment numbers.


Well- this was a major disappointment... I had expected the first quarter aircraft delivery numbers from the General Aviation Manufacturers Association (GAMA) to show the market stabilizing - perhaps even starting to rebound. Instead- the quarterly shipment report GAMA issued on May 10- 2010 showed the market continuing to fall- with total shipments down 15 percent from the same period a year ago.

Every delivery category was down – business jets by 14.1 percent- turboprops by 32.6 percent and piston products by 7.3 percent. In an interesting anomaly- however- billings were up by 7.1 percent – a clue that while things in the market are grim- it’s not all bad everywhere.

Perhaps looking for something nice to say- GAMA noted that this year’s first quarter totals represent “an improvement over the dramatic decline experienced in first quarter 2009 deliveries as compared to first quarter 2008.” We’re not losing ground as fast as we were before. GAMA said the improvement in billings was a result of “international deliveries of large cabin- long-range airplanes- where customers rely less on third party financing than the remainder of the industry.”

It noted- however- that this year’s first quarter billings are still 12.6 percent below this same period in 2008. As a matter of fact- the 15 percent reduction in shipments from last year’s total is quite in line with what Honeywell predicted in its annual industry outlook last October. At that time Honeywell said we should expect to see aircraft sales in 2010 continue to fall to levels 10-12 percent below 2009 levels- or a total business jet market of about 700 units.

Honeywell was expecting business jet deliveries last year to reach only about 800 units. In fact- they did better than that. We closed last year at 870 jets- and with a strong fourth quarter surge- I thought perhaps we had seen the worst of things- and that this quarter would show improvement. Alas! No - at least- not based on a cursory look at this new GAMA report. As frequently happens- however- a more detailed look at the report paints a somewhat different picture.

ONE OF THE STRANGEST REPORTS
In many ways this is one of the strangest GAMA reports I have seen in a very long time. In every delivery category – jets- turboprops and pistons – the leading manufacturer this quarter is not the company that was the leader either in the last quarter- the last year or the last decade for that matter.

Some of the oldest- most established and most respected product lines in the industry sold very poorly in the first quarter of 2010 – so poorly- in fact- that their continued existence would likely be jeopardized if this quarter’s results proved to be a lasting trend. At the same time- other segments of the market are experiencing what would probably be called a recovery if the down segments weren’t otherwise doing so badly.

In short- this is a pretty confused market – but one that may not be doing quite as badly as the overall results initially suggest. Hidden in the GAMA numbers are some tantalizing signs that recovery might just be imminent. If you subscribe- as I do- to the theory that the first signs of recovery will appear in the piston market- there is cause for some optimism!

For the first time in more than two years- half the companies Reporting single-engine piston deliveries had equal or better results than last year. Throughout all of last year- no piston maker had shown improved results in any quarter. Not one. So- suddenly- here is half the market either stabilized or starting to get better. Admittedly they are starting from the rather low level to which we have sunk during the past three years that the piston market has been in decline- but at least there is some upward movement - but more on that later.

THE JET MARKET
Looking at the specifics of the jet segment- the new market leader for the past quarter was Bombardier- with 47 deliveries on billings of $1.499 billion. The company’s deliveries were down from 54 units a year ago- but billings were up from $1.37 billion- or by 9.4 percent.

Bombardier’s billings were up because the higher-end of their market – the super mid-size and larger models – generally performed as well or better than last year while their entries in the light to medium range did comparatively poorly. For example the Lear 40/45 series- which is the low-end model in the Bombardier line-up- recorded 14 deliveries in first quarter 2009 and just one this year.

Among the larger models- a total of 10 Challenger 300’s were sold in the first three months of last year compared with nine during the same period this year. Challenger 605 deliveries were ahead of last year at 16- compared with 15 in 2009. At the top of its line- Bombardier’s CL 850/870/890 series did better than last year- by four units versus two. And similar trends were reported at all the jet makers.

Cessna - the traditional leader in business jet deliveries by a wide margin - was a distant second in the first quarter this year with 31 units- down from 69 in first quarter 2009. Of Cessna’s nine models- eight were off last year’s pace including its best-selling Mustang- down from 29 to 21 for the quarter. The only Cessna model with a gain was the Encore- up from one to two. Light-end sales were weak- with the CJ1+- 2+ and 3+ series collectively recording just six units compared with 19 a year ago.

Third place in business jet deliveries stakes went to Gulfstream- which came to within three units of tying Cessna for second. Gulfstream delivered 28 units; just three below the 31 it recorded in the first quarter of last year. It did- however- capture its traditional second place in the business jet billings race- with $1.074 billion- down slightly from the $1.17 billion it recorded last year.

Not all the business jet makers were down- though. Both Embraer and Dassault recorded healthy gains – so healthy- in fact- that if you were looking only at their numbers you would conclude that the recovery was proceeding very nicely.

At Embraer- the Miracle in Brazil continued to unfold with almost military precision as the company jumped from sixth place in business jet deliveries a year ago to fourth place this year with delivery of 20 units – up from eight in 2009. That’s a gain of 150 percent- and reflects the introduction of two new models in as many years: the Phenom 100 and 300. Both the 100 and 300 arrived in the market on- or very close to the original schedule predicted by the company – an awesome achievement in this industry. Embraer also managed to evade the malaise besetting much of the rest of the light portion of the jet market. Phenom 100 deliveries were up from six units to 16 while the 300 made its market debut with a single delivery for the quarter.

Dassault parlayed its market position in larger business jets into a strong first quarter performance- with 17 deliveries. This was up nearly 55 percent from the 11 units Dassault delivered in the first quarter of 2009 – again- very good results for an industry still mired in recession.

Hawker Beechcraft didn’t show a net gain in business jets for the quarter but came very close- reporting 14 units delivered- compared with 15 in the same period the year before. Moreover- 12 of those 14 involved the company’s highest-end models- the Hawker 4000 and 900XP series. Last year those models accounted for just six units- while the balance of the company’s deliveries came from among its lighter models. Like Cessna- Hawker Beechcraft doesn’t segment its billings by product categories so it is only possible to guess what portion of the $305.4 million was generated from Jet sales. It is very reasonable to assume that a higher percentage came from the jet segment this year than last- though.

At the very top of the jet market- in the airliner-based business jet category- it looks like a full recovery has already occurred. With a total of seven units reported (five from Airbus and two from Boeing)- 2010 was the most successful first quarter in the history of this product segment since the two companies began reporting regular data to GAMA. It matches the seven units delivered during the first quarter of 2006 when Airbus had three and Boeing four- and exceeds every first quarter since.

In 2006 airliner-based business jets would account for 22 deliveries in total – the highest total reported for the segment in this decade. Since then first quarter totals added up to six for 2007- three for both 2008 and 2009- and now seven this year.

Looking at the numbers- it’s fairly evident the bizliner category doesn’t march to the same drummer as the rest of the business jet market anyway. In 2008- when the rest of the industry was having the best year in business jet history- the bizliner market totaled just 15 units – down 31.8 percent from its 2006 high.

In 2009- as the rest of the industry was in free-fall- bizliner sales matched their 2008 total. And now- if the first quarter is a reliable indicator (which I personally doubt)- we could be headed for record bizliner sales this year. Maybe the fledgling bizliner segment- like the single-engine category- could turn out to be something of a bellwether for the rest of the industry- foretelling rising and falling fortunes ahead of the rest of the market. It’s possible. But much more likely is that the bizliner category just operates differently than the rest of the business jet industry.

Finally in the jet market is Emivest- nee Sino Swearingen. Emivest maintained its tradition of never having delivered an airplane in the first quarter of a year. The company says it does anticipate as many as three deliveries during the remainder of this year- however.

In summary- then- the higher-end of the jet market- from the super mid-size category up- is performing at a recovery-level pace. With a few exceptions- however- the rest of the jet market is not - and until that situation begins to turn around most of us are going to feel like we are still mired in the recession. It will be interesting to see if things start to look better in the next quarter.

THE TURBOPROP MARKET
Put bluntly: The turboprop market got hammered this quarter. Of nine companies reporting to GAMA- eight had results that were below last year’s first quarter totals. This is a major shift from the previous pattern- because throughout the downturn the turboprops had been doing significantly better than the other segments.

A year ago turboprop sales were still growing- if only slightly (3.4 percent over the previous year)- when the other categories were in serious decline. For all of 2009- turboprop deliveries were down just 17.6 percent- compared with jet sales which were off 37.8 percent and pistons which were down 58.7 percent. Now- for the first time- the turboprops were the biggest losers – down 32.6 percent while jet sales were lagging by 14.1 percent and piston sales down just 7.3 percent.

In all the turmoil of the turboprop market- a new leader emerged. Cessna became the largest seller of turboprops- at least for this quarter- unseating perennial market leader Hawker Beechcraft by what was actually a fairly wide margin. Cessna delivered 19 of its Caravan models compared with Hawker Beechcraft’s total of 13 King Airs. Cessna’s total was one fewer than the 20 it recorded during the same period last year.

The Hawker Beechcraft total was down 50 percent from a year ago- when it enjoyed 26 King Air deliveries. In fact- Hawker Beechcraft was lucky to hold onto the number two position – because third-placed Pilatus was just one unit behind- with 12 deliveries for the quarter.

This isn’t the first time Caravans have outsold King Airs for a single quarter. It last happened in the first quarter of 2003- and by an even wider margin than this year. That year Cessna delivered 13 Caravans in the first quarter- compared with just four King Airs for what was then Raytheon Aircraft. The King Air recaptured its traditional leadership of the turboprop segment in the following quarter with 20 units- compared with 15 for the Caravan and held on to outsell Cessna’s turboprop for the year by 80 to 57.

In fact- in the turboprop category no company has managed to outsell Hawker Beechcraft or its predecessor companies- Raytheon Aircraft and Beech Aircraft since the King Air series was introduced in 1964. Cessna nearly succeeded in winning the annual turboprop sales race in 2002- when it delivered 80- compared with 82 for Raytheon- but no other company has come close before or since. It will be interesting to see what the remainder of this year brings…

Elsewhere in turboprops- all the other manufacturers’ results were in single digits. Socata had seven- down from eight last year. Piper and Pacific Aerospace each had two and Piaggio had just one. Quest was the only turboprop maker with improved numbers- reporting four deliveries for the quarter- up from three last year.

THE PISTON MARKETS
In the piston market there is - I believe - some reason for optimism. For the first time in fully two years- at least some of the piston manufacturers have improved results over first quarter 2009.

In fact- of the 10 companies reporting piston sales- three have improved results and two equaled last year’s numbers. And while the overall trend of the piston market is still down slightly- it significantly out-performed the other categories. It’s been three years since there has been much positive news in the piston market- so any sign of improvement is most welcome.

PISTON SINGLES
As with the other segments- there is a new market leader in single-engine piston deliveries: Take a bow Cirrus. After chasing Cessna for years- Cirrus has finally pulled into the lead- but whether it can stay there will probably depend mostly on the general health of the overall piston market. If the market stays soft- Cirrus might hang on to finish the year in first place. If the market picks up- Cessna’s vaunted production capability will probably see it return to the piston leadership position it has enjoyed since resuming piston production in 1997.

As things stand today- Cirrus is comfortably in the lead- with 53 units- up 14 over a year ago. That’s a gain of 35.9 percent. Cessna is in second place with 30 units- down from 46 last year- or a drop of almost 34.8 percent.

In third place is Piper with 25 units – up more than 78 percent over the 14 it had in the first quarter of last year. If the market continues to perform unexpectedly- Piper’s single-engine piston delivery numbers could surpass Cessna’s – a scenario hardly anyone would have predicted.

Diamond is next in piston deliveries with a total of 21- which had to be a disappointment as it was down more than 41 percent from the 36 it recorded last year. Perhaps the most shocking number in the single-engine piston category comes from Hawker Beechcraft- which delivered just one Beechcraft Bonanza G36 during the quarter. This is the lowest Bonanza sales total for a quarter in the 63-year production history of the aircraft. The result leads one to worry about the future of this iconic product which has been in continuous production longer than any other aircraft in history.

The company says this quarter’s Bonanza delivery total is an anomaly. While it doesn’t publicly forecast production- it does say it expects this year’s market to be close to last year’s- when Bonanza sales totaled 36 units – a level that should sustain continued manufacturing.

Elsewhere in the single-engine piston market- the other positive story comes from Liberty- which doubled last year’s first quarter sales- from two units to four. In addition- holding their own against last year’s results were American Champion with eight units and Gippsland with three. Off last year’s pace were Maule- with one sale- down from four last year- and Mooney- which is no longer building airplanes but sold two units from completed inventory- down from three a year ago.

PISTON TWINS
As a final note to this very odd market- the piston twin segment actually improved more than 28 percent over last year – up from 14 units to 18. All three piston twin manufacturers showed slight gains- with Diamond up from nine units to 11- Piper up from two units to three and Hawker Beechcraft up from three units to four.

In a final bizarre turn- Hawker Beechcraft’s Baron 58 model- which is celebrating its 50th year of continuous production this year- outsold its single-engine brother- the Bonanza- by a margin of four units to one- marking the first quarter in history that Baron sales have ever exceeded Bonanza sales. Happy birthday Beech Baron!

HOW TO CONCLUDE THIS REPORT…?
In summary then- this is the strangest GAMA delivery report I can recall in a long time – and I’ve been studying them since 1979. It’s just full of unexpected turns and unusual results- with new market leaders emerging- and numerous classic products under-performing expectations. Nonetheless- there are signs that things might be turning around- both in the GAMA report and in the general economic news.

In the US- the stock market is up dramatically in the past year and there are signs the economy is turning around. Indicators such as rail shipments- which underlie other basic economic activities- are beginning to grow. In business aviation- used inventory is down and flight hours are up- both in Europe and US. Also in the US- the current Administration – although not well-liked by many in our industry – is proving to be a better friend to business aviation than many in the past.

It is supporting a bonus depreciation extension that GAMA wants very much- and has taken user fees off the table for the immediate future. In announcing the current delivery numbers- GAMA President and CEO Pete Bunce pronounced our industry “far from a recovery.” Perhaps that is so- but this incurable optimist sees signs suggesting recovery that might not be so far off after all...

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