On April 24 the General Aviation Manufacturer’s Association released its first quarter shipment figures and the picture was not pretty. Total shipments were down 16.4 percent from a year ago. Total billings down a whopping 33.2 percent – it’s enough to make you cry.
The 'decline… was not unanticipated-' said GAMA President Ed Bolen in the Association’s accompanying analysis of the numbers.
'Since 9-11 many general aviation manufacturers have had to lay off workers and slow or even temporarily halt production lines. These are very tough times-' he noted- perhaps stating the obvious.
And yet- as I pore over the numbers and look for aircraft sales trends that might point to directions for the future- not everything is negative. For those of you with an optimist’s leanings- there is evidence that the glass could still be more half-full than half-empty. Times may be tough- but there is at least one bright spot out there.
The most obvious reason for optimism can be found in Ed Bolen’s statement- immediately following his comment that times are tough. He then goes on to observe that 'the only segment of the airplane sales market that was able to hold its own in the first quarter was the single engine airplane for sale.'
For the record- single engine piston deliveries totaled 315 units in the first quarter of 2003- compared with 316 a year ago – a difference that is statistically insignificant. Still- that’s a whole lot better than the turboprop aircraft for sale segment- which was off more than 32 percent in the first quarter (46 in 2002 vs. 31 in 2003). Business jet sales deliveries were worse yet- down 42 percent (169 in 2002 vs. 98 in 2003).
How meaningful is this relative strength in the piston airplane for sale market? Financially- it’s certainly not significant. The piston airplanes sell for only a tiny fraction of the price of turboprops or jets- so their effect on the financial health of the industry as a whole is comparatively small. It is tempting- then- to discount the stable performance of the piston aircraft sales market… until you consider a very significant historical fact: Every aircraft sales recovery in general aviation since World War II has been led by a recovery in the light end of the market.
That’s right: When things start to get better- it shows up first in the single-engine airplane for sale market.
Does this mean a sales recovery is right around the corner? The major manufacturers don’t think so. When asked this question- spokespersons for both Cessna and Raytheon said their forecasts call for a tough airplane sales market both this year and next- with recovery not anticipated until 2005. Nevertheless- at least one leading indicator pointed in a positive direction last quarter. It will be interesting to see if the trend continues deeper into this year. If so- perhaps the recovery could develop sooner than forecast. Wouldn’t that be nice?
In the meantime- as we are riding out the storm- there may be some value in asking: 'Just how bad is it?' To put things in perspective- let’s look at the last time airplane sales were at these levels.
Total deliveries reported by GAMA for the first quarter of 2003 were 444 units- down from 531 units a year ago. These numbers include both airplanes manufactured in the United States as well as airplanes built elsewhere in the world. This distinction is important because GAMA only began including non-U.S.-built airplanes in their totals two years ago. To draw a valid comparison between the aircraft for sale market today and the market in prior years using GAMA statistics – which are the only meaningful ones that exist – you must first back out the non-U.S.-built airplanes.
Looking at just the U.S.-built units- we see that total shipments in the first quarter of 2003 added up to 395 aircraft- compared with 442 in 2002. How does this compare with years past? Well- 2002 was the worst first quarter for business aviation shipments since 1997. And what about 2003? It now owns the dubious title of 'worst first quarter since 1997.'
But 2003’s total of 395 airplanes is still 56 percent better than the total of 253 airplanes that were delivered in the first quarter of 1997. In other words- compared with 1997- this year’s airplanes for sale market in the first quarter is doing quite nicely. And 1997- you may recall- was actually considered to be a pretty good year. The industry was in the fourth year of an eight-year growth cycle in 1997 and things felt pretty prosperous.
So why does it feel so hard now- if we are doing 56 percent better than we were in 1997? There are a couple of reasons.
For one thing- the airplane sales market in 1997 was on the upswing. Corporate profits were strong- the stock market was booming- and for the first time in quite a while- order books for business jet sales
were showing backlogs extending years into the future. Today those backlogs are largely history; corporate profits are flat; the stock market has recorded three of the worst years in its history; and business aviation- as it usually does- has followed the economy into the doldrums.
Another reason things seem harder than 1997 is because- in the interim- we’ve adjusted for the good times. The companies all upped their production rates to meet increased demand- and then- when the demand fell off- the companies have had to downsize to remain financially viable. Downsizing is always a lot more painful than growth. Moreover- the manufacturers are still trying to locate the bottom in this market.
Nobody wants to start building product faster than they can sell it – that’s a sure path to financial ruin. So expect to see the manufacturers proceed with considerable caution as the airplane sales market begins to turn up. Expect to see demand start to outstrip production for a while as the manufacturers wait to be certain that recovery is truly upon us.
The simple fact is that our industry will recover with the rest of the economy – at least that has been the predictable pattern in the past. Now that the war with Iraq is behind us- and the U.S. stock market is beginning to show some positive signs- perhaps we can look hopefully for some indications of recovery in aviation.
The strength shown this past quarter in the single engine airplane for sale market could be such a sign. Or- it could be like the ‘false Spring days’ that occasionally grace northern climates in February – a hint of the warm weather to come- but with many weeks of wintery weather still ahead before the cold time will truly end. We can only look to next quarter’s GAMA numbers to see if the positive trend in single-engine deliveries will continue.